SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                                                             -------------

                                  FORM 8-K

                               CURRENT REPORT
                   PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

      Date of report (Date of earliest event reported): April 30, 2001




                         ESC MEDICAL SYSTEMS, LTD.

           ------------------------------------------------------
             (Exact Name of Registrant as Specified in Charter)




               Israel                     000-27572            Not Applicable
               ------                     ---------            --------------
   (State or Other Jurisdiction of       (Commission           (IRS Employer
           Incorporation)                File Number)       Identification No.)




                    P.O. Box 240, Yokneam 20692, Israel
                    -----------------------------------
        (Address of principal executive offices, including zip code)


                  Registrant's telephone number, including area code:
                       011-972-4-959-9000

                               Not Applicable

       (Former Name or Former Address, if Changed Since Last Report)

Item 2.  Acquisition or Disposition of Assets

         On February 25, 2001, ESC Medical Systems, Ltd. ("ESC"), its
wholly-owned subsidiary, Energy Systems Holdings Inc. ("ESH"), and
Coherent, Inc. ("Coherent"), entered into an Asset Purchase Agreement,
dated as of February 25, 2001 (the "Asset Purchase Agreement"), pursuant to
which Coherent agreed to sell or cause to be sold to ESC and certain of its
subsidiaries (collectively, the "Buyer Group") substantially all of the
assets and liabilities of the Coherent Medical Group, Coherent's medical
products division (the "Acquisition"). On April 30, 2001, the Buyer Group
and Coherent and its subsidiaries completed the Acquisition (the
"Closing"). In addition, on April 30, 2001, the Asset Purchase Agreement
was amended by the parties thereto (the "First Amendment"). ESC issued a
press release relating to the Acquisition on April 30, 2001. A copy of the
press release is filed as Exhibit 99.1 hereto. The Asset Purchase Agreement
and an amendment thereto dated April 30, 2001 are filed as Exhibits 2.1 and
2.2 hereto, respectively.

         At the Closing, the Coherent entities received $100,000,000 in
cash (the "Cash Purchase Price"), 5,432,099 ESC ordinary shares (the
"Shares"), and an eighteen-month note bearing interest at the rate of 5%
per annum and in the principal amount of $12,900,000 (the "Note", together
with the Cash Purchase Price and the Shares, the "Closing Consideration").
The Asset Purchase Agreement also provides for a post-Closing earn-out
payment to Coherent of up to $25,000,000, subject to certain financial
conditions being met (the "Post-Closing Consideration"). The amount and
terms of the Closing Consideration and the Post-Closing Consideration were
determined by arms-length negotiations among the parties.

         Effective as of the Closing, Bernard Coullaird, Chairman and CEO
of Coherent, became a member of ESC's Board of Directors.

         To finance the Acquisition, ongoing working capital needs and, if
needed, the refinancing of ESC's 6% convertible subordinated notes due
September 1, 2002, ESC and certain of its subsidiaries entered into various
financing arrangements (the "Financing") with Bank Hapoalim B.M (the
"Bank"). The financing consists of: (a) a $100,000,000 six-year term loan,
(b) a $50,000,000 line of credit and (c) a letter of intent pursuant to
which the Bank agreed, subject to the terms and conditions set forth
therein, to provide up to $92,000,000 to refinance ESC's 6% convertible
subordinated notes due September 1, 2002. Each of the facilities is or will
be secured by substantially all of the assets of ESC, ESH and certain of
their material subsidiaries. In connection with the Financing, on April 30,
2001, ESC and the Bank also entered into, subject to shareholder approval,
a five year option agreement granting the Bank or any of its subsidiaries
the right to purchase from ESC up to 2,500,000 ESC ordinary shares at a
purchase price of US$20.25 per share, subject to certain adjustments.

         The assets acquired include, among other things, plant, equipment
and other physical property. It is ESC's current intention to continue to
use such assets for purposes similar to the purposes for which those assets
are currently being used.

         For more information concerning the Acquisition and the Financing,
please see the agreements which have been filed as exhibits or are
incorporated by reference into this report.

Item 7.  Financial Statements and Exhibits.

         (a) Financial Statements of Business Acquired.

         The financial statements required by Item 7 for this Form 8-K will
         be filed no later than July 13, 2001.

         (b) Pro Forma Financial Information.

         The pro forma financial information required by Item 7 for this
         Form 8-K will be filed no later than July 13, 2001.

         (c) Exhibits

Exhibit Number                         Description
2.1                                    Asset Purchase Agreement, which is
                                       incorporated by reference to Exhibit
                                       2.1 to the Current Report on Form
                                       8-K filed by ESC on February 25,
                                       2001.

2.2                                    First Amendment to the Asset
                                       Purchase Agreement, dated as of
                                       April 30, 2001, by and among ESC
                                       Medical Systems, Ltd., Energy
                                       Systems Holdings Inc. and Coherent,
                                       Inc.

10.1                                   Loan Agreement, dated as of April
                                       30, 2001, between Energy Systems
                                       Holdings Inc. and Bank Hapoalim
                                       B.M., an Israeli banking corporation
                                       acting through its New York branch.

10.2                                   Option Agreement, dated as of April
                                       30, 2001, between ESC Medical
                                       Systems, Ltd. and Bank Hapoalim B.M.
                                       and related letters dated April 30,
                                       2001.

10.3                                   Letter of Intent, dated as of April
                                       30, 2001, from Bank Hapoalim B.M.

10.4                                   Letters, dated April 24, 2001,
                                       regarding short term line of credit
                                       and related Agreement, dated as of
                                       April 30, 2001 between Bank Hapoalim
                                       B.M. and ESC Medical Systems, Ltd.

99.1                                   Press release dated April 30, 2001
                                       and titled "ESC Completes
                                       Acquisition of Coherent Medical".



SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.


                                                   ESC MEDICAL SYSTEMS LTD.

                                                   By:/s/Hadar Solomon
                                                   Name: Hadar Solomon
                                                   Title: General Counsel and
                                                          Corporate Secretary

Dated: May 15, 2001

                                                                Exhibit 2.2

                             FIRST AMENDMENT TO
                          ASSET PURCHASE AGREEMENT

         FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of April 30,
2001 (the "First Amendment"), by and among ESC MEDICAL SYSTEMS, LTD., a
corporation organized under the laws of the State of Israel ("Parent"),
ENERGY SYSTEMS HOLDINGS INC., a Delaware corporation (the "Buyer," and
collectively with Parent "Buyer Group"), and COHERENT, INC., a Delaware
corporation ("Seller"). Capitalized terms used and not otherwise defined in
this First Amendment shall have the meaning provided for such terms in the
Asset Purchase Agreement.

         WHEREAS, Parent, Buyer and Seller have entered into an Asset
Purchase Agreement, dated as of February 25, 2001 (the "Asset Purchase
Agreement");

         WHEREAS, the consummation of the transactions contemplated by the
Asset Purchase Agreement with respect to the operation of the Business by
Seller and its Subsidiaries in Japan and China is subject to regulatory
approvals and other requirements in such jurisdictions which may not be
obtained prior to the expected Closing Date;

         WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement that the transactions
contemplated by all Ancillary Agreements relating to the transfers of the
Assets by Non-U.S. Companies be consummated simultaneously with or
immediately prior to the Closing; and

         WHEREAS, the parties desire to consummate to the fullest extent
possible the transactions contemplated by the Asset Purchase Agreement on
the earliest possible date and provide each of Seller and Buyer Group with
economic and business benefits substantially comparable to those which
would have been available to each of Seller and Buyer Group if such
transactions had been fully consummated.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, intending to be legally bound
hereby, the parties agree as follows:

         1. The Asset Purchase Agreement is hereby amended to add a new
Section 1.10 to read in its entirety as follows:

                  "Section 1.10  Delayed Closings

                           (a) Buyer Group and Seller acknowledge that,
notwithstanding anything contained herein to the contrary, the transfer,
conveyance and delivery of the Japanese Regulatory Assets shall not occur
on the Closing Date and shall not be a condition to the Closing. The
parties will continue to use their reasonable best efforts to consummate
and to cause their respective subsidiaries to consummate the transfer of
the Japanese Regulatory Assets pursuant to the Asset Purchase Agreement,
attached hereto as Exhibit A (the "Japan Asset Purchase Agreement"), to
occur as promptly as practicable following the Closing.

                           (b) Buyer Group and Seller acknowledge that,
notwithstanding anything contained herein to the contrary, the transfer,
conveyance and delivery of the Local Transferred Assets (as defined in the
Asset Purchase Agreement attached hereto as Exhibit B (the "China Asset
Purchase Agreement")) shall not occur on the Closing Date and shall not be
a condition to the Closing. The parties will continue to use their
reasonable best efforts to consummate and to cause their subsidiaries to
consummate the transfer of the Local Transferred Assets to occur as
promptly as practicable following the Closing pursuant to the terms of
contemplated by the China Asset Purchase Agreement.

                           (c) The provisions of Section 1.6 shall be
applied on a basis as if all the closings referred to in the preceding
subsections (a) and (b) above had occurred simultaneously with the Closing.
Similarly, the number of shares of Parent Stock to be sold to Seller at the
Closing shall be determined as if all of the closings referred to in the
preceding subsections (a) and (b) had occurred simultaneously with the
Closing."

         2. All obligations of Seller pursuant to and in accordance with
the following Sections of the Asset Purchase Agreement shall remain in full
force and effect until the closing of the sale of the Assets contemplated
by the China Asset Purchase Agreement and the Japan Asset Purchase
Agreement: Section 5.1 (Conduct of Business), Section 5.2 (Access to
Information), Section 5.3 (Consents and Approvals), Section 5.4 (Reasonable
Efforts), Section 5.7 (Transfers Not Effected as of Closing), Section 5.8
(Retention), Section 5.9 (Prohibition on Solicitation and Hiring), Section
5.10 (No Negotiation) and Section 5.17 (Further Actions).

         3. The Asset Purchase Agreement is hereby amended to add a new
Section 1.11 to read in its entirety as follows:

                  "Section 1.11  Stock Transfer

                           (a) Buyer Group and Seller acknowledge that
notwithstanding anything contained herein to the contrary, Seller will
transfer, assign, convey and deliver to Laser Industries Ltd all the
outstanding shares of stock of (i) Coherent Star Medical Japan, Inc. (the
"Star Stock") and (ii) Coherent Medical Mexico S.A. de C.V. (the "Mexican
Stock") pursuant to and in accordance with the Stock Purchase Agreements
attached hereto as Exhibit C and Exhibit D, respectively. The Star Stock
and the Mexican Stock will for all purposes related to this Agreement, be
deemed an Asset.

                           (b) With respect to Coherent Star Medical Japan,
Inc. and Coherent Medical Mexico S.A. de C.V., Seller agrees to indemnify
and hold harmless Buyer Group from and against any and all liabilities for
Taxes arising in respect of taxable periods ending on or before the Closing
or, with respect to taxable periods that begin before but end after the
Closing, any Taxes attributable to the portion of such taxable period that
begins before and ends on the Closing."

         4. Section 6.1(f) of the Asset Purchase Agreement is hereby
amended in its entirety to read as follows:

                  "(f) The transactions contemplated by each of the
         Ancillary Agreements relating to the transfer of the Assets by
         Non-U.S. Companies, other than with respect to the China Asset
         Purchase Agreement and the Japan Asset Purchase Agreement, shall
         be or have been consummated simultaneously with or immediately
         prior to the Closing."

         5. Section 6.1 of the Asset Purchase Agreement is hereby amended
to include a new Section 6.1 (g) to read in its entirety as follows:

                  "(g) Each of Parent and the relevant Parent Subsidiaries
         and Seller and the Relevant Subsidiaries of Seller shall have
         executed and delivered the Japan Asset Purchase Agreement in the
         form attached hereto as Exhibit A and the China Asset Purchase
         Agreement in the form attached as Exhibit B and any attachments
         and Exhibits thereto".

         6. Section 9.7 of the Asset Purchase Agreement shall be amended to
include the following:

                  "(i)

                   (j) As used in this Agreement, "Japanese Regulatory
Assets" shall have the meaning set forth in the Japan Purchase Agreement.

         7. Seller and Buyer Group agree that, notwithstanding anything to
the contrary set forth in any Non-U.S. Agreement with respect to Transfer
Taxes (including but not limited to VAT), as between Seller and Buyer
Group, the provisions of Section 7.6 of the Asset Purchase Agreement will
prevail.

         8. The Asset Purchase Agreement is hereby amended to add a new
Section 5.26 to read in its entirety as follows:

         "Section 5.26. Consumption Tax Covenant

         On or before December 31, 2001, Buyer shall register as, and make
an election to become, a consumption tax payer in JapanExcept as
specifically amended in this First Amendment, the Asset Purchase Agreement
shall remain in full force and effect as originally constituted and the
undersigned shall remain obligated pursuant to the terms thereunder.

         9. This First Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York (regardless of the laws
that might otherwise govern under applicable principles of conflict of laws
thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.

         10. This First Amendment may be executed simultaneously in
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties have caused this First Amendment
to be executed as of the date first written above.




                                            ESC MEDICAL SYSTEMS, LTD.


                                            By: /s/ Yacha Sutton
                                                ----------------------------
                                            Name: Yacha Sutton
                                            Title:   Chief Executive Officer


                                            ENERGY SYSTEMS HOLDINGS INC.


                                            By: /s/ Yacha Sutton
                                                ----------------------------
                                            Name:    Yacha Sutton
                                            Title:   Director


                                            COHERENT, INC.


                                            By: /s/ Bernard Couillaud
                                            Name:    Bernard Couillaud
                                            Title: President and Chief
                                                   Executive Officer



                                                               Exhibit 10.1


                               LOAN AGREEMENT


         THIS LOAN AGREEMENT, dated as of April 30, 2001, between ENERGY
SYSTEMS HOLDINGS INC., a Delaware corporation (the "Borrower"), and BANK
HAPOALIM B.M., an Israeli banking corporation acting through its New York
Branches (the "Bank").

         In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:

1.       DEFINITIONS.

         1.1. Certain General Definitions. For all purposes of this
Agreement and the other Loan Documents, unless the context otherwise
requires:

         "Agreement" means this Loan Agreement, including all Exhibits and
Schedules hereto, as the same may be amended or otherwise modified from
time to time, and the terms "herein," "hereof," "hereunder" and like terms
shall be taken as referring to this Agreement in its entirety and shall not
be limited to any particular section or provision thereof.

         "Asset Purchase Agreement" means that certain Asset Purchase
Agreement dated as of February 25, 2001 and amended as of April 30, 2001,
between the Parent, the Borrower and the Seller, pursuant to which the
Borrower is to acquire the CMG Division.

         "Asset Purchase Agreement Pledge" means the Parent Asset Purchase
Agreement Pledge to be executed and delivered by the Parent, substantially
in the form of Exhibit B-1, as the same may be amended, supplemented or
otherwise modified from time to time.

         "Bank's Group" shall have the meaning provided therefor in Section
12.11(b) hereof.

         "Borrower Security Agreement" means the Borrower Security
Agreement to be executed and delivered by the Borrower, substantially in
the form of Exhibit B-2, as the same may be amended, supplemented or
otherwise modified from time to time.

         "Business Day" means a day on which (i) dealings in Dollar
deposits are carried on in the London Interbank Eurodollar market and (if
payment is required to be made on such day) on which banks are open for
business in London and in New York, and (ii) the Bank's New York Branches
shall be open for ordinary business. In the Bank's discretion, the New York
Branches may be closed on any Saturday, Sunday, legal holiday or other day
on which it is lawfully permitted to close.

         "Claimed Amount" shall have the meaning provided therefor in
Section 2.6(d) hereof.

         "Closing Date" means the date on which all of the conditions
specified in Section 8 have been satisfied.

         "CMG Division" means the Medical Division of the Seller, as more
specifically described in the Asset Purchase Agreement.

         "Collateral" means (a) all assets of the Parent (including but not
limited to the following tangible and intangible assets: receivables,
inventory, intangible assets, fixed assets, equipment, investments), now
owned or hereafter acquired, upon which a Lien is purported to be created
by the Parent Security Agreement, (b) all assets of the Borrower (including
but not limited to the following tangible and intangible assets:
receivables, inventory, intangible assets, fixed assets, equipment,
investments), now owned or hereafter acquired, upon which a Lien is
purported to be created by the Borrower Security Agreement, (c) all assets
of ESC Inc. (including but not limited to the following tangible and
intangible assets: receivables, inventory, intangible assets, fixed assets,
equipment, investments), now owned or hereafter acquired, upon which a Lien
is purported to be created by the ESC Inc. Security Agreement, (d) all
assets of the Italian Subsidiary and of the UK Subsidiary (including but
not limited to the following tangible and intangible assets: receivables,
inventory, intangible assets, fixed assets, equipment, investments), now
owned or hereafter acquired, upon which a Lien is purported to be created
by such Material Subsidiary's Material Subsidiary Security Agreement, (e)
the Parent Guarantee, (f) all of the shares of the Japanese Subsidiary held
by the Parent upon which a Lien is purported to be created by the Japanese
Pledge Agreement, (g) all of the shares of the German Subsidiary held by
the Parent upon which a Lien is purported to be created by the German
Subsidiary Security Agreement, (h) all of the shares of the Dutch
Subsidiary held by the Parent upon which a Lien is purported to be created
by the Dutch Subsidiary Security Agreement, (h) all of the shares of the
Luxembourg Subsidiary held by the Parent upon which a Lien is purported to
be created by the Luxembourg Subsidiary Security Agreement, and (i) the
Asset Purchase Agreement Pledge.

         "Control" means the power to direct or cause the direction of the
management and policies of a Person, either alone or in conjunction with
others and whether through the ownership of voting securities, by contract
or otherwise.

         "Default" means any condition, event or act which, with notice or
lapse of time, or both, would constitute an Event of Default.

         "Default Interest" shall have the meaning provided therefor in
Section 5.2 (a) hereof.

         "Deferred Payment" means a payment in the aggregate amount of
$12,904,000 to be made by the Parent to the Seller in connection with the
purchase of the CMG Division and to be evidenced by the Deferred Payment
Note.

         "Deferred Payment Note" means the promissory note evidencing the
Deferred Payment, made by the Parent in favor of the Seller, to be
delivered at the Closing (as defined in the Asset Purchase Agreement).

         "Disbursement Request" shall have the meaning provided therefor in
Section 2.1 hereof.

         "Dollars" and "$" means dollars in lawful currency of the United
States.

         "Dutch Subsidiary" means Lumenis Holdings (Holland) B.V., a
Subsidiary of the Parent.

         "Dutch Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the Dutch Subsidiary held by the Parent, to be executed and delivered by
the Parent, in form and substance satisfactory to the Bank.

         "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including the rules and regulations
promulgated thereunder.

         "ESC Financial Statements" shall have the meaning provided
therefor in Section 7.6 hereof.

         "ESC Inc." means ESC Medical Systems Inc., a Massachusetts
corporation and a Subsidiary of the Borrower.

         "ESC Inc. Guarantee" means the Guarantee to be executed and
delivered by ESC Inc., substantially in the form of Exhibit C-1, as the
same may be amended, supplemented or otherwise modified from time to time.

         "ESC Inc. Security Agreement" means the Subsidiary Security
Agreement to be executed and delivered by ESC Inc., substantially in the
form of Exhibit C, as the same may be amended, supplemented or otherwise
modified from time to time.

         "Event of Default" shall have the meaning provided therefor in
Section 11.1 hereof.

         "German Subsidiary" means ESC Medical Systems GmbH, a Subsidiary
of the Parent.

         "German Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the German Subsidiary held by the Parent, to be executed and delivered by
the Parent, in form and substance satisfactory to the Bank.

         "Governmental Person" means any United States, Israeli, or other
national, state or local government, political subdivision, or
governmental, quasi-governmental, judicial, public or statutory
instrumentality, agency, authority, body or entity including the Federal
Deposit Insurance Corporation, any central bank or any comparable
authority.

         "Governmental Rule" means any law, rule, regulation, ordinance,
order, code, interpretation, judgment, decree, directive, guideline, policy
or similar form of decision of any Governmental Person.

         "Indebtedness" of any Person means indebtedness incurred by that
Person to banks or financial institutions.

         "Interest Payment Date" means the last day of each Interest
Period.

         "Interest Period" means (i) the period commencing on the Closing
Date and ending three (3) months thereafter, and thereafter (or at the
option of the Bank, the period commencing on the Closing Date and ending on
the last Business Day of the third month following the Closing Date), (ii)
each period commencing on the last day of the preceding Interest Period and
ending three (3) months thereafter; provided, however, that (X) if any
Interest Period would otherwise end on a day which is not a Business Day,
the termination thereof shall be postponed to the next succeeding Business
Day, unless such Business Day falls in the next calendar month, in which
case such Interest Period shall end on the immediately preceding day which
is a Business Day, (Y) if any Interest Period begins on a day for which
there is no numerically corresponding day in the appropriate subsequent
month at the end of such Interest Period, then such Interest Period shall
end on the last Business Day of such appropriate subsequent calendar month,
and (Z) any Interest Period that would otherwise extend beyond the Maturity
Date shall end on the Maturity Date.

         "Italian Subsidiary" means ESC Medical srl, a Subsidiary of the
Parent.

         "Italian Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the assets of
the Italian Subsidiary, to be executed and delivered by the Parent, in form
and substance satisfactory to the Bank.

         "Japanese Subsidiary" means ESC Sharplan Co. Ltd., a Subsidiary of
the Parent.

         "Japanese Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the Japanese Subsidiary held by the Parent, to be executed and delivered by
the Parent, in form and substance satisfactory to the Bank.

         "Lender" shall have the meaning provided therefor in Section
2.6(b) hereof.

         "LIBOR" means the rate of interest (expressed as any annual rate)
determined by the Bank to be the arithmetic mean (rounded up, if necessary
to the nearest whole multiple of 1/8%) of the (i) rates for Dollar deposits
offered to the Bank that appear on the LIBOR 1 page of the Reuters Screen,
or any other Reuters Screen used by the Bank for determining such rates,
for Dollars as of 11:00 a.m. London time, two (2) Business Days prior to
the commencement of the respective Interest Period (or as of 11:00 a.m.
London time on the Closing Date, with respect to the Interest Period
commencing on the Closing Date), for an amount equal (or approximating as
close as possible) to the principal amount of the Loan outstanding from
time to time and for the respective Interest Period, or (ii) if Clause (i)
above is inapplicable, the rates of interest communicated to, and at the
request of, the Bank, by or on behalf of the principal London offices of
the Reference Banks or any two of them, as being the rates at which they
would offer to the Bank deposits in Dollars in the London Interbank
Eurodollar Market, for the respective Interest Period as of 11:00 a.m.
London time, two (2) Banking Days prior to the commencement of that
respective Interest Period, or (iii) if Clause (i) or (ii) above is
inapplicable or unavailable, then the rates of interest communicated to,
and at the request of, the Bank, by at least two (2) other banks in London
Interbank Eurodollar Market, as being the rates at which such banks would
offer the Bank deposits in Dollars as of 11:00 a.m., London time, two (2)
Business Days prior to the commencement of that respective Interest Period
for an amount equal (or approximating as close as possible) to the
principal amount of the Loan outstanding from time to time and for the
respective Interest Period.

         "Lien" means any floating or fixed charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or
in property or other assets of a Person, whether absolute or conditional,
voluntary or involuntary, whether created pursuant to agreement, arising by
force of statute, by judicial proceedings or otherwise.

         "Loan" shall have the meaning provided therefor in Section 2.1
hereof.

         "Loan Documents" means this Agreement, the Note, the Borrower
Security Agreement, the ESC Inc. Security Agreement, the Parent Security
Agreement, each Material Subsidiary Security Agreement, the Parent
Guarantee, the ESC Inc. Guarantee and the Option - Agreement.

         "Luxembourg Subsidiary" means Lumenis Luxembourg shrl, a
Subsidiary of the Parent.

         "Luxembourg Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the Luxembourg Subsidiary held by a Subsidiary of the Parent, to be
executed and delivered by the Parent, in form and substance satisfactory to
the Bank.

         "Margin" means 1.75 % per annum.

         "Material Subsidiaries" means the Dutch Subsidiary, the German
Subsidiary, the Italian Subsidiary, the Japanese Subsidiary and the U.K.
Subsidiary.

         "Material Subsidiary Security Agreements" means the collective
reference to (a) the Dutch Subsidiary Security Agreement (b) the German
Subsidiary Security Agreement, (c) the Italian Subsidiary Security
Agreement, (d) the Japanese Subsidiary Security Agreement, (e) the
Luxembourg Subsidiary Security Agreement and (f) the U.K. Subsidiary
Security Agreement.

         "Maturity Date" means April 30, 2007.

         "New York Branches" means the New York branches of the Bank.

         "NIS" means new Israeli shekels.

         "Note" means the Borrower's promissory note, substantially in the
form of Exhibit A hereto, with appropriate insertions.

         "Option Agreement" means the Option Agreement to be executed and
delivered by the Parent in favor of the Bank, substantially in the form of
Exhibit F, as the same may be amended, supplemented or otherwise modified
from time to time.

         "Option Shares" shall have the meaning set forth in the Option
Agreement.

         "Parent" means ESC Medical Systems Ltd., an Israeli corporation.

         "Parent Guarantee" means the Parent Guarantee to be executed and
delivered by the Parent, substantially in the form of Exhibit E, as the
same may be amended, supplemented or otherwise modified from time to time.

         "Parent Security Agreement" means the Parent Security Agreement to
be executed and delivered by the Parent, substantially in the form of
Exhibit D, as the same may be amended, supplemented or otherwise modified
from time to time.

         "PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.

         "Permitted Encumbrances" means (i) Liens for current taxes not yet
due or taxes being contested in good faith, (ii) Liens created by operation
of law, or incurred in the ordinary course of business and securing
payments not delinquent or payments which are being contested in good
faith, (iii) leases or the rights, if any, of third-party suppliers or
other vendors having possession of equipment, (iv) imperfections of title,
easements and zoning restrictions, if any, (v) judgments Liens, in respect
of judgments that do not constitute an Event of Default hereunder, (vi)
Liens permitted under the Asset Purchase Agreement, and (vii) Liens on
assets purchased subsequent to the Closing Date other than with financing
obtained from the Bank, and (xii) Liens in favor of the Bank.

         "Permitted Restructure" means any transaction, merger,
consolidation or disposition of assets or shares, with respect to the
Parent or any of its Subsidiaries, unless resulting in (i) any Person
holding more than 50% of the voting rights of the Parent, or (ii) the
disposition of assets, other than to Parent or Parent's Subsidiaries,
exceeding (a) $5 million (US$5,000,000) of assets purchased under the Asset
Purchase Agreement or (b) $10 million (US$10,000,000) of other assets of
Parent existing as the Closing Date.

         "Person" means any individual, partnership, limited liability
company, joint venture, corporation (including, without limitation, the
Parent, the Borrower or any Subsidiary), trust, estate, unincorporated
organization or association or Governmental Person. If any Person is a
corporation, unless otherwise provided, the use of the term "Person" to
refer to that corporation means that corporation as a single entity and not
as consolidated with its Subsidiaries.

         "Plan" means an employee benefit plan or other plan, including
both single-employer and multi-employer plans, maintained for employees of
the Borrower or any Subsidiary thereof or any controlled group of trades or
businesses under common control, as defined respectively in Sections 1563
and 414(c) of the Internal Revenue Code of 1986, as amended, of which the
Borrower or any Subsidiary thereof is or becomes a part, and covered by
Title IV of ERISA.

         "Prepayment Date" shall have the meaning provided therefor in
Section 2.3(a) hereof.

         "Reference Bank" means Barclays Bank PLC, National Westminster
Bank PLC and Bankers Trust Company (in its name or as Deutsche Bank)

         "Reportable Event" shall have the meaning set forth in Section
4043(b) of Title IV of ERISA.

         "Seller" means Coherent Inc., a Delaware corporation.

         "Seller's Shares" means 5,432,099 ordinary shares, par value NIS
0.1 per share, of the Parent to be issued to the Seller pursuant to the
Asset Purchase Agreement.

         "Short Term Credit Loan" means the loan issued by the Bank to the
Parent pursuant to that certain Short Term Credit Letter in the principal
amount of $50,000,000.

         "Short Term Loan Credit Letter" means the Short Term Loan Credit
Letter dated April 24, 2001, between the Parent and the Bank.

         "Subsidiary" means, when used with reference to any corporation,
any corporation of which at least a majority of the outstanding stock,
having by the terms thereof ordinary voting power to elect a majority of
the Board of Directors of such corporation, is at the time directly or
indirectly owned by such first-mentioned corporation.

         "Substitute Basis" shall have the meaning provided therefor in
Section 2.3(d)(2) hereof.

         "Tax Credit" shall have the meaning provided therefor in Section
2.6(c) hereof.

         "Taxes" shall have the same meaning provided therefor in Section
2.6 hereof.

         "Transaction" means the acquisition by the Borrower of
substantially all of the assets and liabilities primarily related to the
business of the CMG Division pursuant to the terms and conditions of the
Asset Purchase Agreement, in exchange for certain consideration, including
the $100,000,000 cash payment to be made on the Closing Date, which cash
payment shall include the proceeds of the Loan.

         "Transfer" shall have the meaning provided therefor in Section
12.11(a).

         "Transferee" shall have the meaning provided therefor in Section
12.11(c).

         "Transferred Item" shall have the meaning provided therefor in
Section 12.11(a).

         "Treasury Obligation" means a note, bill or bond issued by the
United States Treasury Department as a full faith and credit general
obligation of the United States.

         "U.K. Subsidiary" means Spectron (U.K.) Ltd., an English company,
a Subsidiary of the Parent.

         "U.K. Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the assets of
the U.K. Subsidiary, to be executed and delivered by the Parent, in form
and substance satisfactory to the Bank.

         "Uniform Commercial Code" means the Uniform Commercial Code in
effect from time to time in any state to the extent the same is applicable
by law to any portion of the Collateral.

         "United States" when used in a geographical sense, means all of
the States of the United States of America and the District of Columbia
and, so long as they continue as possessions or territories of the United
States, Puerto Rico and the Virgin Islands.

1.2. Use of Accounting Terms. Accounting terms used herein shall be
construed, calculations hereunder shall be made and financial data required
hereunder shall be prepared, both as to classification of items and as to
amounts, in accordance with generally accepted accounting principles in
effect in the United States as of the date thereof consistently applied,
which principles shall be consistent with those used in the preparation of
the most recent reviewed financial statements of such Person delivered to
the Bank. All statements relating to earnings and expenses shall set forth
separately or otherwise identify all extraordinary and nonrecurring items.

2.       THE LOAN

2.1. Loan. The Bank agrees, subject to and upon the terms and conditions
herein set forth, to make a loan (the "Loan"), as a single drawing, to the
Borrower on the Closing Date in the principal amount of One Hundred Million
Dollars ($100,000,000). Amounts prepaid on the Loan cannot be reborrowed.
The Borrower shall give the Bank a written request for disbursement in the
form of Exhibit H attached hereto (the "Disbursement Request") not later
than by 11:00 a.m., New York, New York time, two (2) Business Days prior to
the Closing Date. The Bank will make the amount of the Loan available to
the Borrower by transferring such amount to the Borrower's account
maintained with the Bank.

     2.2. Repayment of the Loan.

         (a) The Borrower shall repay the Loan to the Bank commencing on
October 30, 2002, in consecutive semi-annual installments on the last day
of the first and third Interest Period occurring in each calendar year
(i.e. on April 30 and October 30) commencing on October 30, 2002, with each
such semi-annual installment in an amount equal to $10,000,000.

         (b) The Borrower shall repay to the Bank any outstanding balance
of the Loan on the Maturity Date.

     2.3. Voluntary and Mandatory Prepayments.

(a) Upon not less than fourteen (14) days prior written notice to the Bank,
the Borrower may from time to time prepay the outstanding principal amount
of the Note, in part or in full, on the last Business Day of any Interest
Period ("Prepayment Date"); provided that each such prepayment shall be not
less than an amount of Five Million Dollars ($5,000,000) or any integral
multiple thereof. Upon not less than two (2) Business Days prior written
notice to the Bank, the Borrower may from time to time prepay the
outstanding principal amount of the Note, in part or in full, on any
Business Day, in accordance with Section 10.3 hereof.

         (b) Any such prepayments of the principal of the Note, whether
partial or full, shall be accompanied by the payment of any accrued
interest on the principal amount so prepaid and any other payment or charge
required by the Note.

         (c) This Agreement has been made in accordance with legal,
regulatory, fiscal and monetary measures currently in force and in
accordance with current market provisions. If any law, regulation,
directive or treaty or any change therein or in the interpretation or
application thereof, having a general applicability and made by any
Governmental Rule after the date hereof, shall make it unlawful for the
Bank to maintain the Loan or to claim or receive any amount otherwise
payable under the Note or this Agreement, the Bank shall so notify the
Borrower. In the case of any such notice, the Borrower shall prepay the
outstanding principal amount of the Note in full, together with all accrued
interest, on the next Interest Payment Date, if the Bank may lawfully
receive such prepayment on such day, or on such earlier date on which the
Bank may lawfully receive such payment, if payment on such earlier date is
reasonably required as a result of such impending illegality, but in any
event not earlier than within thirty (30) days.

         (d)      (1) If at any time subsequent to the date hereof by
                  reason of changes affecting the Eurodollar Interbank
                  Market, the Bank is unable, due to circumstances beyond
                  its control, to determine LIBOR, or there shall be no
                  objective possibility for the Bank to refinance itself in
                  Dollars in respect of the Loan, then and in any such
                  event the Bank shall give notice to the Borrower to that
                  effect.

         (2)      The Bank shall then offer the Borrower an alternative
                  basis (the "Substitute Basis") for the continuation of
                  the Loan. The Substitute Basis may include alternative
                  interest periods, alternative currencies or alternative
                  rates of interest taking into account the scope of the
                  Loan. The Substitute Basis shall be binding upon the
                  Borrower and shall take effect in accordance with its
                  terms from the date specified in the Bank's notice.

         (3)      If the Borrower determines that it does not wish to
                  continue to the Loan under the Substitute Basis, then it
                  shall so notify the Bank within ten (10) days of receipt
                  of the Bank's notice specifying such Substitute Basis,
                  whereupon the Loan, together with interest accrued and
                  accruing thereon at the rate prevailing during the last
                  Interest Period in respect of which LIBOR and the rate of
                  interest has been determined, shall become immediately
                  due and owing and payable.

         (4)      The Bank represents and warrants that it is not aware of
                  any circumstances or threats at the date hereof which
                  might cause the making or the continuation of the Loan by
                  the Bank to become impracticable or unlawful or which
                  makes the Bank unable to determine the LIBOR or to
                  refinance itself in Dollars.

         (e) Except as set forth in clause (a) through (d) above, and 2.4
and 2.5 below, the Note may not otherwise be prepaid in whole or in part.

     2.4. Compensation for Broken Funding. If the Loan or any part thereof
or any interest thereon is for any reason whatsoever repaid, paid or
recovered by the Bank under any security or otherwise, on any day other
than the agreed dates of payment, then the Borrower shall upon demand pay
to the Bank such amount or amounts as may be necessary to compensate the
Bank for any loss incurred by it on account of funds borrowed in order to
make, fund or maintain the Loan with respect to which repayment, payment or
recovery is made and/or any loss of profit caused thereby. The Bank shall
however exercise its best endeavors to mitigate such losses. For the
avoidance of doubt, if the Borrower effects payments or prepayments in full
compliance with the provisions of Sections 2.2, 2.3 or 2.5 hereunder, the
Borrower shall not be required to pay any amount under this Section.

     2.5. Increased Costs. If, after the date of this Agreement, the
adoption of any applicable Governmental Rule, any change in any applicable
Governmental Rule, any change in the interpretation or administration of
any applicable Governmental Rule by any Governmental Person charged with
the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of
any such Governmental Person of general applicability shall subject the
Bank to any tax, duty or other charge with respect to all or any portion of
the Loan or shall change the basis of taxation of payments to the Bank of
any amounts due under this Agreement, or the Note (except for changes which
affect franchise taxes or taxes measured by or imposed on the overall net
income of the Bank or any of its offices imposed by the tax laws of any
jurisdiction in the world); or shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit, capital adequacy
requirement, capital equivalency, ratio of assets to liabilities or any
other capital substitute or similar requirement against assets of, deposits
with or for the account of, credit extended by, letters of credit issued
and maintained by, or collateral subject to a lien in favor of the Bank, or
shall impose on the Bank any other condition affecting all or any portion
of the Loan; and the result of any of the foregoing is to increase the cost
to or to impose a cost on the Bank of making or maintaining all or any
portion of the Loan, or to reduce the amount of any sum received or
receivable by the Bank under this Agreement or the Note, or (in the case of
a capital adequacy or similar requirement) to reduce the rate of return on
the Bank's capital as a consequence of maintaining all or any portion of
the Loan to a level below that which could have been achieved but for the
imposition of such requirement (taking into consideration the Bank's
capital adequacy policies), then, within thirty (30) days after demand by
the Bank, the Borrower shall pay the Bank for its own account such
additional amount or amounts as will compensate the Bank for such increased
cost or reduction actually incurred. The Bank will promptly notify the
Borrower of any event of which it has knowledge, occurring after the date
of this Agreement, which will entitle the Bank to compensation pursuant to
this Section 2.5, and deliver to the Borrower a certificate of the Bank
claiming compensation for itself under this Section 2.5, setting forth the
additional amount or amounts to be paid to the Bank and certifying in
reasonable detail any event by reason of which it is entitled to make a
claim pursuant to this Section.. The Bank shall however exercise its best
endeavors to mitigate such increased costs. The Bank represents that it is
not aware of any such circumstances or threats on the date hereof, which
might give rise to a claim for increased cost hereunder.

         Without derogating from the provisions of Section 2.3 hereof, the
Borrower may, after receipt of the demand referred to in this section,
notify the Bank that it will prepay, on the last day of the Interest Period
the outstanding balance of the Loan, together with accrued interest thereon
and all other amounts owing to the Bank hereunder.

     2.6. Net Payments.

         (a) Subject to the provisions of Section 2.6(b), all payments to
the Bank under this Agreement or the Note shall all payments to the Bank
under this Agreement or the Note shall be made without setoff or
counterclaim and shall be increased by such amounts as may be necessary in
order that all such payments (after deduction or withholding for or on
account of any present or future taxes, levies, imposts, duties, or other
charges of whatsoever nature imposed by any government, any political
subdivision or any taxing authority, other than any franchise tax or other
tax owed and measured by the overall net income of the Bank or any of its
offices pursuant to the tax laws of any jurisdiction in the world
(collectively, the "Taxes")) shall not be less than the amounts otherwise
specified to be paid under this Agreement or the Note.

         (b) The Bank or any transferee which becomes a party hereto
pursuant to Section 12.11 (the Bank and such transferee each, a "Lender")
shall:

             (1) no later than the Closing Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 12.11 hereof after
the Closing Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower two accurate, complete and signed originals of U.S.
Internal Revenue Service Form W-8BEN or Form W-8 ECI or successor form, as
applicable, in each case indicating that such Lender is, on the date of
delivery thereof, entitled to receive payments of principal, interest and
fees for the account of its lending office under this Agreement free from
withholding of United States Federal income tax;

             (2) if at any time such Lender changes its lending office or
offices or selects an additional lending office, at the same time or
reasonably promptly thereafter, deliver to the Borrower in replacement for,
or in addition to, the forms previously delivered by it hereunder, two
accurate, complete and signed originals of such Form W-8BEN or Form W-8 ECI
or successor form, as applicable, in each case indicating that such Lender
is, on the date of delivery thereof, entitled to receive payments of
principal, interest and fees for the account of such changed or additional
lending office under this Agreement free from withholding of United States
Federal income tax; and

             (3) promptly upon the Borrower's reasonable request to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's exemption from Tax for
withholding Tax purposes.

For any period with respect to which a Lender has failed to provide the
Borrower with the appropriate form described in this Section 2.6(b) within
thirty (30) days of Borrower's reasonable request therefor, and such
failure shall continue unremedied for a period of fifteen (15) days after
the date upon which the Borrower gives notice to the Lender thereof, such
Lender shall not be entitled to payment from the Borrower of the increased
amounts pursuant to Section 2.6(a) or indemnification by the Borrower
pursuant to this Section 2.6 to the extent that such payment or
indemnification obligation would have been reduced if the applicable form
had been delivered to the Borrower; provided that nothing in this sentence
shall relieve the Borrower of its obligation to pay any additional amounts
pursuant to this Section 2.6 in the event that, as a result of any change
in any applicable law, treaty or Governmental Rule, regulation or order, or
any change in the interpretation, administration or application thereof,
such Lender is no longer properly entitled to deliver forms, certificates
or other evidence at a subsequent date establishing the fact that such
Lender is not subject to withholding as described herein; so long as, for
all periods prior to the date of such change, if such Lender shall have
satisfied the requirements of clauses 2.6(b)(1) or 2.6(b)(2), as
applicable; provided however, that should such Lender become subject to
Taxes because of its failure to deliver a form required hereunder, the
Borrower shall take such steps as the Lender shall reasonably request to
assist such Lender to recover such Taxes. Any Lender that is organized in a
jurisdiction other than the United States, a state thereof or the District
of Columbia claiming any indemnity payment or additional amounts payable
pursuant to this Section 2.6 shall use reasonable efforts to file any
certificate or document reasonably requested in writing by the Borrower or
to change the jurisdiction of its applicable lending office (consistent
with its internal policies and legal and regulatory restrictions, and so
long as such efforts would not be disadvantageous to it as determined in
its good faith discretion), if the making of such a filing or change would
avoid the need for or reduce the amount of any such indemnity payment or
additional amounts which may thereafter accrue.

         (c) If the Borrower is required under any law to deduct or
withhold any Tax from any payments hereunder, the Borrower may, after
effecting such payment on account of such Tax and after increasing the
payments of interest to the Bank, so that the Bank shall receive the full
amount payable hereunder as if no such deduction or withholding on account
of Taxes had been made, deliver to the Bank the original receipt or
receipts issued in the name of the Bank by the appropriate tax authority
certifying payment of such Taxes.

The Bank shall endeavor and exercise reasonable efforts to apply such
deduction or withholding against Taxes payable by it to the relevant income
tax authorities, or otherwise receive benefits from said income tax
authorities by way of any tax credit, tax deduction, tax refund or similar
benefit which may be available to the Bank in respect of the amount so
deducted or withheld by the Borrower ("Tax Credit").

         (d) Upon filing the Bank's annual tax returns with respect to any
tax year, the Bank shall claim a Tax Credit in respect of the amount of
Taxes specified in the tax receipts supplied by the Borrower to the Bank in
such year in accordance with the provisions of Section 2.6(c) (hereinafter,
"Claimed Amount").

         The Bank shall then enter into its books a liability (in Dollars)
towards the Borrower for the Claimed Amount, which shall however give no
claim whatsoever to the Borrower against the Bank, except as specifically
stipulated hereinafter.

         The Bank shall be fully discharged from such liability upon paying
to the Borrower the amount due (if any) in accordance with the provisions
of Section 2.6(e) hereinafter regardless of the fact that any such amount
(if any) may be smaller than the Claimed Amount and consequently smaller
than such liability.

         (e) In the event that in any final tax assessment issued by the
income tax authorities in respect of any tax year of the Bank for which the
Borrower made any deduction or withholding on account of Taxes and
delivered to the Bank appropriate tax receipts in respect thereof in
accordance with the provisions of Section 2.6(c), the Bank shall actually
receive a Tax Credit in respect of such tax receipt(s), the Bank shall
deliver to the Borrower within 60 (sixty) days from receipt of such final
tax assessment a certificate of the Comptroller of the Bank specifying the
percentage of the actual benefit to the Bank in respect of such tax
receipts (which certificate shall be deemed correct in all its details and
shall be final, conclusive and binding upon the Bank and the Borrower), and
shall pay to the Borrower such percentage of the tax receipt(s).

For the purposes hereof a tax assessment shall be deemed final only upon
expiration of the period during which the relevant tax authority has the
authority to open and or review the assessment under the applicable law.

         (f) The Borrower shall not be entitled to be advised of and/or
take part and/or interfere in any way whatsoever in the manner chosen by
the Bank to prepare its tax returns, determine its policies regarding Taxes
and handle all its taxing affairs in general (including - inter alia, in
any and all kind of negotiations with the Israeli tax authorities).

Furthermore, the Borrower shall have no claim whatsoever against the Bank
in connection with any decision, act or omission chosen, taken or omitted
by the Bank in connection with any of the foregoing all executed by the
Bank in good faith.

         (g) The Borrower shall have no claim against the Bank in
connection with any such Taxes paid, withheld or deducted, except as
otherwise specifically stipulated in this Section.

     2.7. Security for the Loan. The Loan shall be secured by a first
priority Lien on the Collateral. Notwithstanding the aforesaid and the
provisions of Sections 8.1, 8.5, 8.6 and 8.7 hereto, the Borrower may
postpone delivery of the documents pertaining to the Material Subsidiaries,
and shall procure for such delivery by not later than 60 (sixty) days after
the Closing Date.

3.       USE OF PROCEEDS.

         The proceeds of the Loan shall be utilized by the Borrower to
partially finance the Transaction and to pay transaction fees and expenses
related thereto.

4.       NOTE EVIDENCING BORROWINGS.

         The Loan shall be evidenced by the Note. All repayments of
principal by the Borrower shall be reflected by the Bank in its records and
on the schedule attached to the Note, which records or schedule shall be
rebuttal presumptive evidence of the entries made therein or thereon.

5.       INTEREST

         5.1. Interest.

             (a) The unpaid principal amount of the Loan shall bear
interest at a rate per annum equal to LIBOR plus the Margin for each
Interest Period.

             (b) Interest on the Loan shall accrue from and including the
date of the Closing Date to but excluding the date of any repayment
thereof, and shall be payable on each applicable Interest Payment Date, on
the date of any prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.

             (c) All computations of interest hereunder shall be made on
the actual number of days elapsed over a year of 360 days.

     5.2. Default Rate.

             (a) The Borrower shall pay default interest ("Default
Interest") on sums not paid on the due date under this Agreement or the
Borrower Security Agreement (or, in the event sums are payable on demand,
if not paid within seven (7) Business Days of the date of demand) from such
due date (or the date of demand) and up to the date of actual payment (as
well as after judgment) at a rate equal to two percent (2%) per annum above
the aggregate of the Margin and LIBOR.

             (b) Default Interest shall be due and payable on demand and
calculated on the basis of the actual number of days elapsed divided by 360
days.

     5.3. Generally. Interest shall be payable on the unpaid principal
balance of the Loan evidenced by the Note on each Interest Payment Date and
at any time that any part of such principal is due or is paid, or any time
that the Note is paid in full. Such interest shall be calculated on a daily
basis on the outstanding principal balance of the Loan at LIBOR plus the
Margin or the Default Rate, as the case may be, divided by 360 on the
actual days elapsed from the date hereof, or from the date the entire
principal balance of the Note shall have become due and payable, or from
the stated date of maturity, as appropriate, until paid. Any payment by
other than immediately available funds shall be subject to collection.
Interest shall continue to accrue until the funds by which payment of
principal is made are available to the Bank for its use. Interest shall
never exceed the maximum lawful rate of interest applicable to the Note.

6.       PAYMENTS, OFFSETS AND REDUCTION.

     6.1. Place of Payment. All payments hereunder (including payments with
respect to the Note) shall be made without set-off, counterclaim or
deduction and shall be made in immediately available funds by the Borrower
to the Bank, prior to 3:00 p.m., New York time, at its offices at 1177
Avenue of the Americas, New York, New York, 10036 or at such other place as
may be designated by the Bank to the Borrower in writing. Any payment
received after 3:00 p.m., New York time, shall be deemed received on the
next Business Day. If any payment of principal of or interest on the Note
or any other amount under the Note or this Agreement falls due on a day
that is not a Business Day, it shall be payable on the next succeeding
Business Day (unless such day would be a day in the next calendar month,
and in such case payment shall be due on the immediately preceding Business
Day), and the resulting additional or decreased time (if any) shall be
included in or deducted from the computation of interest.

     6.2. Set-Off. In addition to and not in limitation of all rights of
set-off that the Bank may have under applicable law, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter
maintained or held at any of the Bank's offices worldwide and in any
currency, shall be subject to being set off against any sum not paid on its
due date or within seven (7) days from demand by the Borrower to the Bank
arising under this Agreement or the other Loan Documents, and in
furtherance thereof, the Bank may at any time and from time to time after
an Event of Default shall have occurred and be continuing at its option and
without prior notice to the Borrower, except as may be required by law,
appropriate and apply toward the payment of any of such obligations of the
Borrower to the Bank, for sums not paid on its due date or within seven (7)
days from demand all or any part of the balances of each such balance,
credit, deposit, account, or money maintained or held at the Bank. The Bank
shall notify the Borrower forthwith upon the exercise of any right of
set-off giving details in relation thereto.

7.       REPRESENTATIONS AND WARRANTIES.

     To induce the Bank to enter into this Agreement and to make the Loan
hereunder, the Borrower represents, warrants and covenants to the Bank
that:

     7.1. Corporate Existence. Each of the Borrower and its Subsidiaries is
a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its formation and has the corporate power
and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage. Each of the
Borrower and its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to qualify would
have a material adverse effect on its business.

     7.2. Control and Holdings. All of the capital stock of the Borrower is
beneficially owned by the Parent. All of the capital ----------------------
stock of each Subsidiary of the Borrower is beneficially owned by the
Borrower or a Subsidiary of the Borrower. Schedule I is a ----------
complete listing of all direct and indirect Subsidiaries of the Borrower.

     7.3. Authorization and Execution. The Borrower and ESC Inc. has the
corporate power and authority to execute, deliver and carry out the terms
and provisions of the Loan Documents executed by it. The execution,
delivery and performance by the Borrower and ESC Inc. of the Loan Documents
to which it is a party and the borrowing hereunder have been duly
authorized by all requisite corporate action. This Agreement, the Note and
the Borrower Security Agreement, when executed and delivered by the
Borrower pursuant hereto, will be legal, valid and binding obligations of
the Borrower, enforceable against the Borrower, in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by the
application by a court of equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The ESC
Inc. Security Agreement, when executed and delivered by ESC Inc. pursuant
hereto, will be legal, valid and binding obligations of ESC Inc.,
enforceable against ESC Inc., 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 and by the application by a court of equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

     7.4. Compliance with Other Instruments. Each of the Borrower and its
Subsidiaries is not in default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any evidence of Indebtedness of the Borrower or such
Subsidiary, or contained in any material instrument under or pursuant to
which any such evidence of Indebtedness has been issued or made and
delivered. Neither the execution and delivery of the Loan Documents, nor
the consummation of the transactions herein contemplated, including but not
limited to the use of the proceeds of the Loan for the purposes set forth
herein, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Certificate of Incorporation or By-laws or
other organizational charter and instruments of the Borrower or such
Subsidiary, or of any material agreement or instrument to which the
Borrower or such Subsidiary is now a party or otherwise bound or to which
the Borrower's or such Subsidiary's properties or other assets is subject,
or of any law, statute, rule or regulation or any order or decree of any
court or governmental instrumentality, or of any arbitration award,
franchise or permit, or constitute a default thereunder, or if any action
was required under such instrumentality, award, franchise or permit, it
will not have a material adverse effect on the Borrower, or result in the
creation or imposition of any Lien upon any of the properties or other
assets of the Borrower or such Subsidiary, except as herein contemplated.

     7.5. Consents. No consent or approval of, or exemption by, any Person,
and no waiver of any right by any Person is required to authorize or
permit, or is otherwise required in connection with, the execution,
delivery and performance of the Loan Documents, or with respect to the
required use by the Borrower of the proceeds of the Loan, except those
which shall have been obtained on or prior to the date hereof.

     7.6. Financial Statements.

     (a) The Borrower has heretofore furnished to the Bank copies of the
unqualified audited consolidated financial statements of the Parent and its
consolidated Subsidiaries as of December 31, 2000 and for the year then
ended and consolidating financial statements for each of the Borrower, ESC
Inc. and each Material Subsidiary for such period (collectively, the "ESC
Financial Statements"). The ESC Financial Statements present fairly the
financial position of the Parent, its consolidated Subsidiaries, the
Borrower, ESC Inc. and each Material Subsidiary on the date of the balance
sheet included therein and the results of the operations of the Parent, its
consolidated Subsidiaries, the Borrower, ESC Inc. and each Material
Subsidiary for the period involved, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (subject to, in the case of the interim ESC
Financial Statements, normal year-end audit adjustments not material in
amount).

     7.7. No Material Changes. There has been no material adverse change in
the business, properties or other assets or in the condition, financial or
otherwise, of the Borrower, the Parent, ESC Inc. or any Material Subsidiary
since the date of the most recent balance sheets included in the ESC
Financial Statements.

     7.8. Litigation. There are no actions, suits, investigations or
proceedings pending or, to the knowledge of the Borrower threatened in
writing against the Borrower and its Subsidiaries at law or in equity or
before or by any governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or before any arbitrator of any
kind, which involve the possibility of any material liability or of any
material adverse effect on the business, operations, prospects, properties
or other assets or in the condition, financial or otherwise, of the Parent
and its Subsidiaries taken as a whole, except as disclosed under the Assets
Purchase Agreement and in Parent's filings with the Securities and Exchange
Commission.

7.9. Compliance with Law. The Borrower and its Subsidiaries are in
compliance, in all material respects, with all applicable requirements of
law and all applicable rules and regulations of each Federal, state,
municipal or other governmental department, agency or authority, domestic
or foreign, the noncompliance with which would have a material adverse
effect on the business, affairs, or financial condition of the Borrower and
its Subsidiaries, as the case may be.

     7.10. Investment Company. Neither the Borrower nor its Subsidiaries is
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, or the
regulations under such act.

     7.11. Regulation U. None of the proceeds of the Loan will be used,
directly or indirectly, for any purpose that will violate, or cause the
Bank to be in violation of, or that will require the Bank to file or obtain
any forms or notices or applications of any kind so as not to be in
violation of, Regulation U (12 CFR, Part 221) of the Board of Governors of
the Federal Reserve System. Neither the Borrower nor any agent acting on
its behalf has taken or will take any action which might cause this
Agreement or the Note or the making of the Loan to violate Regulation U or
any other regulation of the Board of Governors of the Federal Reserve
System.

     7.12. ERISA. Each single-employer Plan has been maintained and funded,
in all material respects, in accordance with its terms and with all
provisions of ERISA applicable thereto, and the Borrower and its
Subsidiaries have each taken all actions required to be taken by them to
cause each multi-employer Plan to be maintained and funded, in all material
respects, in accordance with its terms and with all provisions of ERISA
applicable thereto; no Reportable Event has occurred and is continuing with
respect to any single-employer Plan or, to the Borrower's knowledge, any
multi-employer Plan; and no liability to PBGC has been incurred by the
Borrower or any Subsidiary thereof with respect to any single-employer Plan
or, to the Borrower's knowledge, any multi-employer Plan, other than for
premiums due and payable.

     7.13. Indebtedness; Liens. The Borrower (a) does not have any
outstanding Indebtedness other than the Loan made hereunder, and (b) has
not granted a Lien in favor of any Person other than the Liens granted to
the Bank pursuant to the Borrower Security Agreement and Permitted
Encumbrances.

8.       CONDITIONS PRECEDENT TO THE LOAN.

         The obligation of the Bank to make the Loan to the Borrower
hereunder is subject to the satisfaction, on or before the making of the
Loan, of each of the following conditions precedent which are solely for
the benefit of the Bank:

     8.1. Loan Documents. The Bank shall have received (i) this Agreement,
the Note and the Borrower Security Agreement, executed and delivered by a
duly authorized officer of the Borrower; (ii) the ESC Inc. Security
Agreement and ESC Inc. Guarantee, executed and delivered by a duly
authorized officer of ESC Inc.; (iii) the Parent Security Agreement and the
Asset Purchase Agreement Pledge, executed and delivered by a duly
authorized officer of the Parent; (iv) the Parent Guarantee, executed and
delivered by a duly authorized officer of the Parent; (v) the Material
Subsidiary Security Agreement of each of Material Subsidiary executed by a
duly authorized signatory thereof; and (vi) the Option Agreement, executed
and delivered by a duly authorized officer of the Parent.

     8.2. Closing Certificate of Borrower. The Bank shall have received a
certificate of a Director of the Borrower, dated the Closing Date; (i)
attaching the certified Certificate of Incorporation and By-Laws of the
Borrower; (ii) attaching the resolutions of the Board of Directors of the
Borrower with respect to the transactions contemplated hereby; (iii)
certifying that such resolutions have not been amended, modified, revoked
or rescinded as of the date of such certificate; and (iv) certifying as to
the incumbency and signature of the officers of the Borrower executing any
Loan Document; such certificate (and the attachments thereto) shall be in
form and substance satisfactory to the Bank.

     8.3. Closing Certificate of Parent. The Bank shall have received a
certificate of the Secretary of the Parent, dated the Closing Date, (i)
attaching the certified Articles of Association and By-Laws of the Parent;
(ii) attaching the resolutions of the Board of Directors of the Parent with
respect to the transactions contemplated hereby; and (iii) certifying that
such resolutions have not been amended, modified, revoked or rescinded as
of the date of such certificate; such certificate (and the attachments
thereto) shall be in form and substance satisfactory to the Bank.

     8.4. Closing Certificate of ESC Inc. The Bank shall have received a
certificate of the Chief Operating Officer, Chief Executive Officer,
Executive Vice President or any Director of ESC Inc., dated the Closing
Date, (i) attaching the certified Certificate of Incorporation and By-Laws
of ESC Inc.; (ii) attaching the resolutions of the Board of Directors of
ESC Inc. with respect to the transactions contemplated hereby; (iii)
certifying that such resolutions have not been amended, modified, revoked
or rescinded as of the date of such certificate; and (iv) certifying as to
the incumbency and signature of the officers of ESC Inc. executing any Loan
Document; such certificate (and the attachments thereto) shall be in form
and substance satisfactory to the Bank.

     8.5. Legal Opinions. The Bank shall have received (a) an executed
legal opinion of Skadden, Arps Slate, Meagher & Flom LLP, special New York
counsel to the Borrower and ESC, Inc., (b) an executed legal opinion of the
General Counsel of the Parent with respect to certain matters related to
the Parent, Borrower and ESC Inc. The Bank shall have received an executed
legal opinion of local counsel to the Parent and each Material Subsidiary
in form and substance satisfactory to the Bank.

     8.6. Actions to Perfect Liens. The Bank shall have received evidence
in form and substance satisfactory to it that all filings, recordings,
registrations and other actions, necessary or, in the opinion of the Bank,
desirable to perfect the Liens created by the ESC Inc. Security Agreement,
the Parent Security Agreement and each Material Subsidiary Security
Agreement have been made.

     8.7. Lien Searches. The Bank shall have received the results of a
recent search by a Person reasonably satisfactory to the Bank, of the
Uniform Commercial Code, judgment and tax lien filings which may have been
filed with respect to personal property of the Borrower and ESC Inc. and
the results of such search shall be reasonably satisfactory to the Bank.
The Bank shall have received the results of a recent search by a Person
reasonably satisfactory to the Bank, with respect to lien filing for
property of any Material Subsidiary, and the results of such search shall
be reasonably satisfactory to the Bank.

     8.8. Asset Purchase Agreement. The Bank shall have received, in form
and substance satisfactory to it, a fully executed copy of the Asset
Purchase Agreement, including all schedules and exhibits thereto.

     8.9. Disbursement Request. The Bank shall have received a Disbursement
Request dated as of the Closing Date.

     8.10. Deferred Payment Note. The Bank shall have received evidence
satisfactory to it that the Parent shall have executed and delivered the
Deferred Payment Note to the Seller.

     8.11. Seller Shares. The Bank shall have received evidence
satisfactory to it that the Parent shall have issued the Seller Shares.

     8.12. Acquisition of the CMG Division. The Bank shall have received
evidence satisfactory to it that the acquisition of the CMG Division has
been completed in accordance with the terms and conditions of the Assets
Purchase Agreement contemporaneously with the making of the Loan.

     8.13. Fees. The Bank shall have received, for its own account, all
accrued fees and expenses owing hereunder or in connection herewith
(including, without limitation, accrued fees and disbursements of counsel
to the Bank), to the extent that such fees and expenses are due and payable
to the Bank.

     8.14. Option. The Parent shall have executed and delivered the Option
Agreement.

9.       AFFIRMATIVE COVENANTS.

         The Borrower covenants and agrees that from and after the date
hereof until all sums due and to become due hereunder or under any other
Loan Document have been paid or repaid in full, unless the Bank shall
otherwise consent in a writing delivered to the Borrower:

     9.1. Pay Principal and Interest. The Borrower will punctually pay or
cause to be paid the principal and interest to become due in respect of the
Note according to the terms hereof and thereof.

     9.2. Maintenance of Office. The Borrower will cause ESC Inc. to
maintain an office in Norwood, Massachusetts (or such other place in the
United States as the Borrower may designate in writing to the Bank or to
any subsequent holder of the Note), where notices and demands to or upon
the Borrower in respect of the Note and the Borrower Security Agreement may
be given or made.

     9.3. Keep Books. The Borrower will and will cause each of its Material
Subsidiaries to keep proper books of record and account in which true,
correct and complete entries will be made of the respective transactions of
the Borrower or such Person in accordance with United States or Israeli or
any other jurisdiction generally accepted accounting principles, as
applicable.

     9.4. Payment of Taxes; Corporate Existence; Maintenance of Properties.
The Borrower will and will cause each of its Subsidiaries to:

          (a) Pay and discharge promptly all taxes (including, without
limitation, all payroll withholdings), assessments and governmental charges
or levies imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed, or upon any part thereof, before the
same shall become in default, as well as all claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon its
property; provided, however, that it shall not be required to pay any such
tax, assessment, charge, levy or claim or discharge any such Lien if the
validity thereof shall be contested in good faith by appropriate
proceedings and if it shall have set aside on its books such reserves, if
any, as may be required in accordance with generally accepted accounting
principles with respect to the tax, assessment, charge, levy or claim so
contested;

          (b) Conduct its business according to good business practices;
keep in full force and effect the corporate existence, and material rights,
licenses, permits and franchises of the Borrower and each Material
Subsidiary and comply in all material respects with all of the laws, rules
and regulations governing its business; and make all such reports and pay
all such franchise and other taxes and license fees and do all such other
things as may be lawfully required, to maintain the material rights,
licenses, powers and franchises of the Borrower and each Material
Subsidiary under the laws of the United States and of the States or
jurisdictions in which it is organized or does business.

     9.5. Financial Statements and Reports. The Borrower will furnish to
the Bank in duplicate:

          (a) As soon as practicable and when available, and in any event
within 90 days after the end of each fiscal year of the Parent (and the
Borrower, ESC Inc. and each Material Subsidiary, as applicable), annual
unqualified audited consolidated balance sheets of the Parent and its
Subsidiaries as at the end of such year and consolidating balance sheets of
the Parent and each of the Borrower, ESC Inc. and each Material Subsidiary
for such period and related consolidated statements of income, retained
earnings and cash flows of the Parent and its Subsidiaries for such year
and consolidating statements of income, retained earnings and cash flows of
the Parent and each of the Borrower, ESC Inc. and each Material Subsidiary
for such period, setting forth in comparative form the corresponding
figures for the preceding fiscal year, audited by independent certified
public accountants of recognized standing selected by the Parent (and the
Borrower, ESC Inc. and each Material Subsidiary, as applicable), and
acceptable to the Bank;

          (b) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of the Parent (other
than the 4th quarter), a consolidated balance sheet, related consolidated
statements of income, retained earnings and cash flows of the Parent and
its Subsidiaries showing its financial condition as of the last day of such
fiscal quarter and the results of operations for such fiscal quarter,
certified by the chief financial officer of the Parent as to (i) fair
presentation of the financial position and the results of operations of the
Parent and its Subsidiaries and (ii) having been prepared in accordance
with generally accepted accounting principles consistently applied;

          (c) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of the Borrower (other
than the 4th quarter), a consolidating balance sheet, related consolidating
statements of income, retained earnings and cash flows of the Borrower
showing its financial condition as of the last day of such fiscal quarter
and the results of operations for such fiscal quarter, certified by the
chief financial officer of the Borrower as to (i) fair presentation of the
financial position and the results of operations of the Borrower and (ii)
having been prepared in accordance with generally accepted accounting
principles consistently applied;

          (d) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of ESC Inc. (other than
the 4th quarter), a consolidating balance sheet, related consolidating
statements of income, retained earnings and cash flows of ESC Inc. showing
its financial condition as of the last day of such fiscal quarter and the
results of operations for such fiscal quarter, certified by the chief
financial officer of ESC Inc. as to (i) fair presentation of the financial
position and the results of operations of ESC Inc. and (ii) having been
prepared in accordance with generally accepted accounting principles
consistently applied;

          (e) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of each Material
Subsidiary (other than the 4th quarter), a consolidating balance sheet,
related consolidating statements of income, retained earnings and cash
flows of such Material Subsidiary showing its financial condition as of the
last day of such fiscal quarter and the results of operations for such
fiscal quarter, certified by the chief financial officer of such Material
Subsidiary as to (i) fair presentation of the financial position and the
results of operations of such Material Subsidiary and (ii) having been
prepared in accordance with generally accepted accounting principles
consistently applied;

          (f) Promptly following the occurrence thereof, notice of any
material adverse change in the business, affairs or financial condition of
the Parent or any of its Material Subsidiaries;

          (g) Promptly following the occurrence thereof, notice of any
Default hereunder or of any default under any other Loan Document;

          (h) Such other information as to the financial condition,
operations, business, properties and other assets of the Parent and its
Subsidiaries as the Bank may from time to time reasonably request; and

          (i) The Borrower shall cause all audited financial statements
required to be delivered to the Bank pursuant to this Section 9.5 to be
delivered to the Bank by the independent certified public accountant who
performed the audit.

     9.6. ERISA Compliance. The Borrower will comply, in all material
respects, and cause each of its Subsidiaries to comply, in all material
respects, with the provisions of ERISA, if applicable, with respect to each
of its or their respective Plans and as soon as possible after the Borrower
knows or has reason to know that any Reportable Event with respect to any
Plan has occurred, furnish to the Bank a statement signed by its chief
executive officer or its chief financial officer setting forth details as
to such Reportable Event and the action, if any, which the Borrower or its
Subsidiary proposes to take with respect thereto, together with a copy of
the notice of such Reportable Event furnished to PBGC.

10.  NEGATIVE COVENANTS.

     The Borrower covenants and agrees that from and after the date hereof
until all sums due and to become due hereunder or under any other Loan
Document have been paid or repaid in full, unless the Bank shall otherwise
consent in a writing delivered to the Borrower, the Borrower shall not:

     10.1. Restrictions on Dividends, Distributions and Redemptions. Pay
dividends or make any other distribution pari passu to its shareholders
(other than to Parent or to Parent's Subsidiaries), unless such
distribution is an issue of bonus shares and/or other equitable securities
made pari passu to all shareholders, or redeem any shares of its capital
stock, or cause or permit any of its Subsidiaries to redeem any shares of
its capital stock, during the period beginning on the date hereof and
ending on the Maturity Date (or on such earlier or later date on which all
principal of and interest on the Note and all other amounts due to the Bank
under the Loan Documents have been paid in full), or cause or permit any of
its Subsidiaries to redeem any shares of its capital stock. The foregoing
restriction shall not apply to the extent Parent's equity shall exceed
$200,000,000.

     10.2. Use of Proceeds of Loan. Use any part of the proceeds of the
Loan for any purpose other than those specified in Section 3 hereof.

     10.3. Disposal of Property. Wind up, liquidate or dissolve, sell,
exchange, lease, transfer or otherwise dispose of all or substantially all
of (or agree to do any of the foregoing or permit ESC Inc. or any Material
Subsidiary to do or to agree to do any of the foregoing), its properties or
other assets, other than in transactions with the Parent or the
Subsidiaries or pursuant to a Permitted Restructure; provided, however,
that in the event assets in an aggregate of US$5 million (5,000,000) shall
be so transferred to any Subsidiary of Parent, such Subsidiary shall be
deemed a Material Subsidiary hereunder and shall execute and deliver to the
Bank a security agreement evidencing the charge of all of its assets or
create such charge over its shares held by the Parent in form and substance
satisfactory to the Bank. The foregoing restriction shall not apply in the
event that 100% of the cash proceeds of the sale of assets (net of
withholding) would be used to prepay the Loan.

     10.4. Liens. Contract, create, assume, incur or suffer to be created,
assumed or incurred and shall not permit any Subsidiary to contract,
create, assume, incur or suffer to be created, assumed or incurred, any
Lien upon, or pledge of, any property or other assets of the Borrower or
such Subsidiary, which will secure any other Indebtedness other than (i)
Liens created pursuant hereto, and (ii) Permitted Encumbrances.

     10.5. Indebtedness. Assume, incur or suffer to exist or permit any
Subsidiary to assume, incur or suffer to exist any Indebtedness other than
the Loan.

11.  DEFAULTS AND REMEDIES.

     11.1. Events of Default. In the case of the occurrence of, and during
the continuance of, any of the following events for any reason whatsoever,
and whether such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of
any governmental body or otherwise (each herein sometimes called an "Event
of Default"):

           (a) Any representation or warranty made herein or in any
certificate hereafter delivered to the Bank pursuant to this Agreement, the
Note or any other Loan Document shall prove to have been false or
misleading in any material respect when made; provided, however, that with
respect to circumstances that do not affect the validity, legality or
enforceability of this Agreement, the circumstances to which such
representation or warranty relates, if capable of being corrected so that
such representation or warranty shall become correct again, shall not have
been corrected until the earlier of 7 (seven) days from receipt of the
Bank's notice or 7 (seven) days from the date upon the Borrower has become
aware thereof; or

(b) Any default shall occur in the payment of principal of or interest on
the Note or any other amount under this Agreement, as and when the same
shall become due and payable, whether at the due date thereof, by
acceleration, mandatory prepayment or otherwise, and such default is not
remedied until the later of 30 (thirty) days from the due date of the
respective sum or 7 (seven) days from the date of Borrower's receipt of the
Bank's notice to that effect; or

           (c) Any default shall occur in the due observance or performance
by the Borrower, the Parent, ESC Inc. or any Material Subsidiary of any
other covenant, agreement or condition contained herein or in the Note, or
any other Loan Document to be performed by the Borrower or such Person, and
such default, if capable of being cured, is not remedied until the later of
45 (forty five) days from the due date of the respective default or 14
(fourteen) days from the date of Borrower's receipt of the Bank's notice to
that effect; or

           (d) (i) The Borrower, or the Parent or ESC Inc. or any Material
Subsidiary shall suspend or discontinue its business other than pursuant to
a Permitted Restructure, or (ii) the Borrower or ESC Inc. or any Material
Subsidiary shall call a meeting of its creditors for the purpose of
postponing or adjusting its liabilities or seeking an arrangement with its
creditors, shall make an assignment for the benefit of creditors or a
composition with creditors, shall be unable or admit in writing its
inability to pay its debts generally as they mature, shall generally not
pay its debts when they are due, shall file a petition in bankruptcy, shall
become insolvent (howsoever such insolvency may be evidenced), shall suffer
an order for relief to be entered against it under any bankruptcy law which
shall remain undismissed or unstayed for a period of 60 (sixty) days or
more, shall petition or apply to any tribunal for the appointment of any
receiver, custodian, liquidator or trustee of or for it or any substantial
part of its property or other assets or shall commence any proceeding
relating to it under any bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or there
shall be commenced against the Borrower or ESC Inc. or any Material
Subsidiary any such proceeding which shall remain undismissed or unstayed
for a period of 60 (sixty) days or more; or the Borrower or any of its
Subsidiaries shall take any action for the purpose of effecting any of the
foregoing; or

           (e) Any order, judgment or decree shall be entered in any ex
parte proceeding against the Borrower or the Parent or ESC Inc. or any
Material Subsidiary decreeing the dissolution of the Borrower or any of its
Subsidiaries and such order, judgment or decree shall remain undischarged
or unstayed for a period in excess of 60 (sixty) days; or

           (f) Any Loan Document shall become invalid or unenforceable, in
whole or in part, and such unenforceability persists for a period of 30
(thirty) days, or any default or event of default shall have occurred
thereunder and such default persists for more than the period of grace, if
any, specified therefor; or (A) the Borrower Security Agreement, ESC Inc.
Security Agreement, the Parent Security Agreement or any Material
Subsidiary Security Agreement shall cease for any reason to be in full
force and effect, or the Borrower, ESC Inc., the Parent or applicable
Material Subsidiary shall so assert, (B) the Lien created by the Borrower
Security Agreement, ESC Inc. Security Agreement, the Parent Security
Agreement or any Material Subsidiary Security Agreement shall cease to be
enforceable and of the same effect and priority purported to be created
thereby, or (C) the Parent Guarantee or ESC Guarantee shall cease for any
reason to be in full force and effect or the Parent or ESC Inc., as
applicable, shall so assert, and as long as event is continuing; or

           (g) Any default (unless duly waived in writing by the obligee)
shall occur with respect to any permitted Indebtedness (other than the
Indebtedness evidenced by the Note) of the Borrower or the Parent and its
Subsidiaries (including any Indebtedness of the Parent under the Short Term
Loan Credit Letter), for or relating to borrowed money (including, without
limitation, for the deferred purchase price of property or for the payment
of rent under any lease), or under any agreement under which any evidence
of Indebtedness may be issued by the Borrower and such default shall
continue for more than the period of grace, if any, specified therein, if
the effect of such default is to accelerate the maturity of such
Indebtedness or to permit the holder thereof, or any trustee, to cause the
same to become due prior to its stated maturity or if any such Indebtedness
shall not be paid when due (after giving effect to any grace period and
other than Indebtedness contested in good faith), and as long as such
default is continuing and involves liability in excess of US$500,000; or

           (h) Final judgment for the payment of money in excess of
$500,000 (to the extent not covered by insurance or bond) shall be rendered
by a court of record against the Borrower or the Parent or ESC Inc. or any
Material Subsidiary, and the Borrower or the Parent or ESC Inc. or the
Material Subsidiary shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution
thereof within 30 (thirty) days from the date of entry thereof and within
such period of 30 (thirty) days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or

           (i) Any Reportable Event which the Bank determines in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan shall have occurred and be continuing 30 (thirty) days
after notice to such effect shall be given to the Borrower by the Bank, or
any Plan shall be terminated, or a trustee shall be appointed by an
appropriate United States District Court to administer any Plan, or PBGC
shall institute proceedings to terminate any Plan or appoint a trustee to
administer any Plan, or the Borrower or any of its Subsidiaries shall
completely or partially withdraw from any multi-employer Plan or appoint a
trustee to administer any such Plan or shall cease operation at any
facility where such cessation could reasonably be expected to result in a
separation from employment of more than 20% of the total number of
employees who are participants under a Plan; and in each case such event or
condition, together with all such other events or conditions, if any, would
subject the Borrower or any of its Subsidiaries to any tax, penalty or
other liability aggregating in excess of $250,000, provided, however, that
in determining whether such taxes, penalties or other liabilities exceed
such limitation, there shall be excluded therefrom any tax, penalty or
other liability which (i) within 30 (thirty) days of being imposed, is paid
or satisfied, or (ii) is being contested in good faith and by appropriate
proceedings, with respect to which adequate reserves have been set aside by
the Borrower and its Subsidiaries in conformity with generally accepted
accounting principles and with respect to which none of the property or
assets of the Borrower or any of its Subsidiaries has become or is about to
become subject to any Lien; or

           (j) The Parent, Borrower or any of its Subsidiaries shall be in
default under any other obligation to Bank Hapoalim B.M., including its New
York Branches, and such default persists for more than the period of grace,
if any, specified therefor, and as long as such default is continuing; or

           (k) The Parent shall no longer Control the Borrower, or shall
cease to own a majority of the issued and outstanding common stock of the
Borrower; or the Borrower shall no longer Control ESC Inc, or shall cease
to own a majority of the issued and outstanding common stock of ESC Inc.,
except as s result of a Permitted Restructure; or

           (l) The Borrower or any of its Subsidiaries thereof shall become
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, or the
regulations under such Act; or

           (m) The Parent shall breach or a default shall occur and be
continuing under the Asset Purchase Agreement, except for any breach or
default that would not have a material impact on the ability of the
Borrower to perform its obligations hereunder or under the Borrower
Security Agreement, of the Parent to perform its obligations under the
Parent Guarantee and the Parent Security Agreement, of ESC Inc. to perform
its obligations under the ESC Inc. Guarantee and the ESC Inc. Security
Agreement and of any Material Subsidiary to perform its obligations under
its Material Subsidiary Security Agreement, and such breach or default
persists for more than the period of grace, if any, specified therefor, and
as long as such breach or default is continuing; or

           (n) The Bank shall fail to receive, after notice of exercise and
absent default on its behalf, the Option Shares (as defined in the Option
Agreement) in accordance with the terms and conditions of the Option
Agreement;

then, if any Event of Default described in subsection (d) above shall have
occurred the Note shall immediately become due and payable, and if any
Event of Default described in any other subsection of this Section 11.1
shall have occurred, and at any time thereafter, if any such event shall
then be continuing, the Bank may, by written notice to the Borrower,
declare the principal of and accrued interest on the Note, and any other
amounts owed under this Agreement, the Note or any Loan Document, to be due
and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived.

     11.2. Suits for Enforcement. If any one or more of such Events of
Default shall occur and be continuing, the holder of the Note may proceed,
to the extent permitted by law, to protect and enforce such holder's rights
either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, condition or agreement contained in
the Loan Documents or in aid of the exercise of any power granted in the
Loan Documents, or proceed to enforce the payment of the Note or to enforce
any other legal or equitable right of the holder of the Note.

     11.3. Remedies Cumulative. No right or remedy herein or in any other
agreement or instrument conferred upon the Bank or the holder of the Note
is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and shall be in addition to
every other right and remedy given hereunder or under any Loan Document or
now or hereafter existing at law or in equity or by statute or otherwise.
Without limiting the generality of the foregoing, if the Note or any of the
other obligations of the Borrower to the Bank shall not be paid when due,
whether at the stated maturity thereof, by acceleration or otherwise, the
Bank shall not be required to resort to any particular security, right or
remedy or to proceed in any particular order of priority, and the Bank
shall have the right at any time and from time to time, in any manner and
in any order, to enforce its security interests, liens, rights and
remedies, or any of them, as it deems appropriate in the circumstances and
apply the proceeds of its collateral to such obligations of the Borrower as
it determines in its sole discretion.

12.  MISCELLANEOUS.

     12.1. Notices. All notices, requests and other communications to any
party under this Agreement and the other Loan Documents shall be in writing
and shall be given to such party, by mail, telecopy, telex, personal
delivery or other customary means of delivery, addressed to it as set forth
below or such other address or telex number as such party may in the future
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective if given by telex, when such
telex is transmitted to the telex number specified below and the
appropriate answerback is received, if given by mail, two days after such
communication is deposited in the United States mails and sent by certified
or registered mail, return receipt requested, with first class postage
prepaid, addressed as aforesaid or if given by telecopy, personal delivery
or any other means, when received at the address specified below.

                    Party               Address

           If to the Borrower:          Energy Systems Holdings Inc.
                                        100 Morse Street,
                                        Norwood Massachusetts 02062
                                        Attention:  Louis Scafuri
                                        Telephone:  (781) 769-2970
                                        Telecopier: (781) 769-2970

           and with a copy to:          Skadden Arps, Slate, Meagher & Flom LLP
                                        Four Times Square
                                        New York, NY, 10036-6522
                                        Attention:  David Friedman
                                        Telephone:  (212) 735-3000
                                        Telecopier: (212) 735-2000

           If to the Bank:              Bank Hapoalim B.M.
                                        New York Branches
                                        1177 Avenue of the Americas
                                        New York, New York 10036
                                        Attention:  Eli Eisdorfer
                                        Telephone:  (212) 782-2165
                                        Telecopier:  (212) 782-2170

           with a copy to:              Bank Hapoalim B.M.
                                        New York Branches
                                        1177 Avenue of the Americas
                                        New York, New York 10036
                                        Attention:  Lawrence Lefkowitz, Esq.
                                        Telephone:  (212) 782-2130
                                        Telecopier:  (212) 782-2141

           and with a copy to:          Shaw Pittman
                                        1675 Broadway
                                        New York, New York 10019-5820
                                        Attention:  John C. Simons, Esq.
                                        Telecopy:  (212) 603-6801
                                        Phone:  (212) 603-6848

     12.2. Survival of Representations; Successors and Assigns. All
covenants, agreements, representations and warranties made herein and in
any certificate delivered pursuant hereto shall survive the making by the
Bank of the Loan contemplated herein and the execution and delivery to the
Bank of the Note evidencing the Loan regardless of any investigation made
by the Bank and of the Bank's access to any information and shall continue
in full force and effect until all sums due and to become due hereunder or
under any other Loan Document have been paid or repaid in full. Whenever in
this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party,
subject to the provisions hereof. All covenants, agreements,
representations and warranties by the Borrower which are contained or
incorporated in this Agreement or in any other Loan Document shall inure to
the benefit of the successors and assigns of the Bank and any holder of the
Note. Except for the parties hereto and their respective successors and
assigns, no other Person shall be entitled to the benefits of this
Agreement or to rely thereon.

     12.3. Effect of Delay. No failure or delay on the part of the Bank in
exercising any right, power or privilege hereunder or under the Note, nor
any course of dealing between the Borrower and the Bank, shall operate as a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise or the exercise of any other right, power or
privilege.

     12.4. Expenses. The Borrower agrees (a) to pay or reimburse the Bank
for all of its out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of any amendment, supplement or
modification to, this Agreement, the other Loan Documents, and any other
documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Bank, and (b) to pay or reimburse the Bank
for all its out-of-pocket costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the
other Loan Documents and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Bank.

     12.5. Modifications and Waivers. No modification or waiver of any
provisions of this Agreement or of any other agreement or instrument made
or issued pursuant hereto or contemplated hereby, nor consent to any
departure by the Borrower therefrom, shall in any event be effective,
irrespective of any course of dealing between the parties, unless the same
shall be in a writing executed by the Bank, and then such waiver or consent
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
thereby entitle the Borrower to any other or further notice or demand in
the same, similar or other circumstances. Any transaction or matter
excepted from the operation of any Section of this Agreement shall
nevertheless be subject to the prohibitions and limitations contained
elsewhere in this Agreement, unless expressly stated otherwise.

     12.6. Set-Off of Accounts. The balance of every account of the
Borrower with the Bank existing from time to time at any of the Bank's
offices worldwide and in any currency, shall be subject to being setoff
against any sum not paid on its due date or within 7 (seven) days from
demand by the Borrower to the Bank arising under this Agreement or other
Loan Documents, and the Bank may at any time and from time to time after an
Event of Default shall have occurred and be continuing at its option and
without prior notice to the Borrower, except as may be required by law,
appropriate and apply toward the payment of any of such obligations of the
Borrower to the Bank for sum not paid on its due date or within 7 (seven)
days from demand all or any part of the balance of each such account with
the Bank. The Bank shall notify the Borrower forthwith upon the exercise of
any right of set-off giving details in relation thereto.

     12.7. Counterparts. This Agreement may be executed in any number of
counterparts and by telecopier, each of which shall ------------ constitute
an original, and all of which taken together shall constitute one and the
same agreement.

     12.8. Construction and Jurisdiction. This Agreement, the Note or the
Borrower Security Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly within such State. Any action or
proceeding in connection with this Agreement, the Note, the Borrower
Security Agreement, or Security Agreement may be brought in a court of
record of the State of New York, County of New York or any federal court
located therein, the parties hereby consenting to the jurisdiction thereof,
and service of process may be made upon any party by mailing a copy thereof
to such party, by registered mail, at its address to be used for the giving
of notices under this Agreement. IN ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT, THE NOTE OR THE BORROWER SECURITY AGREEMENT, THE PARTIES
MUTUALLY WAIVE TRIAL BY JURY AND ANY CLAIM THAT NEW YORK COUNTY IS AN
INCONVENIENT FORUM.

     12.9. Headings. Section headings are for convenience only and shall
not affect the interpretation or construction of this -------- Agreement,
the Note, the Borrower Security Agreement, the ESC Inc. Security Agreement,
the Parent Security Agreement, the Parent Guarantee, the Material
Subsidiary Security Agreements, the Option Agreement or any other Loan
Document.

     12.10. Release of Collateral. Promptly after the Borrower shall have
repaid the Loan in full and shall have paid and repaid to the Bank any and
all of the sums due to the Bank hereunder and under all other Loan
Documents, and provided any and all of the sums due to the Bank under
documents signed between the Borrower and/or Parent and the Bank shall have
been paid to the Bank in full, the Bank shall release the Liens over the
Collateral. Notwithstanding the above, the Bank will release the Liens over
the Collateral before any and all amounts were so paid immediately at the
request of the Borrower and/or Parent, provided the Borrower and/or Parent
have deposited with the Bank and charged and pledged in favor of the Bank
sums equal to the outstanding balance of any and all amount due to the Bank
together with all sums accrued and/or to be accrued thereon until applied
to the payment or prepayment, as requested by the Borrower and/or the
Parent, of the said sums, according to documents signed between the
Borrower and/or Parent and the Bank.

     12.11. Transfers and Booking of Loan.

            (a) (i) Without limiting any of the Bank's rights hereunder,
the Bank may, after the Loan is made hereunder, book the Loan, or any
portion thereof, in any of its branches anywhere in the world, or
negotiate, assign, grant security interests in, delegate or otherwise
transfer (each of the foregoing acts, a "Transfer") all of, or sell one or
more participations in any portion of, any or all of the following: the
Note, and the Bank's rights and related obligations under this Agreement
and the other Loan Documents (any of the foregoing which is subject to a
Transfer, a "Transferred Item"); provided, however, that at no time shall
the Borrower be required, as a result of any such Transfer or
participation, to (x) give notices required by this Agreement to more than
one Person and that one Person's designated department, employees and/or
counsel, or (y) obtain any consent or approval required under this
Agreement from more than one Person, or (z) be subject to any additional
taxes, fees, costs or expenses (including withholding taxes), and further
provided that such "Person" shall be a member of the Bank's Group.

     The "Bank's Group" means any company which the Bank possesses 51% or
more of its outstanding share capital, provided, that such Transferee is a
bank or other financial institution that is not a competitor of the
Borrower.

         (b) In the event the Bank Transfers any Transferred Item, then to
the extent provided by the Bank with respect to such Transfer, the Person
to whom such Transfer is made (the "Transferee") shall have, and may
exercise and enjoy, the rights, powers, privileges and remedies of the Bank
with respect to such Transferred Item. The Bank shall, after any Transfer,
and to the extent of such Transfer, be forever relieved and fully
discharged from all liability and responsibility, if any, that it may
thereafter have to the Borrower with respect thereto, but not with respect
to matters occurring prior to such Transfer. The Bank shall retain all its
rights and powers with respect to any Transferred Item to the extent not so
Transferred. The foregoing shall not apply unless the Bank shall notify the
Borrower of such a Transfer promptly upon the execution of the Transfer and
the Transferee shall assure to the Borrower that it has assumed the
liability and responsibility from which the Bank is so discharged.

         (c) The provisions of Section 12.6 (regarding setoff rights) shall
apply to any account of the Borrower with, and any claim of the Borrower
against, any Transferee to the extent of such Transfer which shall have
purchased the Loan or any portion thereof and shall become a "Bank"
hereunder. This subsection (c) of Section 12.11 shall not limit any other
rights of the Bank or such Transferee whether arising under this Section
12.11, or otherwise hereunder or under applicable law.

         (d) The Bank is authorized to disclose any information it may have
or acquire about the Borrower and its Subsidiaries to any prospective or
actual Transferee, provided, that such Transferee is a bank or other
financial institution that is not a competitor of the Borrower.

       [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]






         IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be duly executed and delivered in the City of New York by
their duly authorized officers, all as of the date first above written.



                               ENERGY SYSTEMS HOLDINGS INC.


                               By: /s/ Sagi Genger
                                  ------------------------------------
                             Name: Sagi Genger
                              Title: Director


                               BANK HAPOALIM B.M.
                               AN ISRAELI BANK ACTING THROUGH
                               ITS NEW YORK BRANCHES


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


                               By: /s/ Maxine Levy
                                  ------------------------------------
                             Name: Maxine Levy
                               Title: Vice President



                                 SCHEDULES

Schedule I:    Subsidiaries of the Borrower





                                  EXHIBITS


Exhibit A          Form of Note
Exhibit B-1        Form of Parent Asset Purchase Agreement Pledge
Exhibit B-2        Form of Borrower Security Agreement
Exhibit C          Form of ESC Inc. Security Agreement
Exhibit C-1        Form of ESC Inc. Guarantee
Exhibit D          Form of Parent Security Agreement
Exhibit E          Form of Parent Guarantee
Exhibit F          Form of Option Agreement
Exhibit G          Form of Opinion of Borrower's Counsel
Exhibit H          Form of Disbursement Request




                                                                 Schedule I
                                                                 ----------


                        SUBSIDIARIES OF THE BORROWER

ESC Medical Systems Inc.
Laser Corporation
Laser Sales Corporation
Applied Optromics Corp.
Sharplan Lasers, Inc.
Sharplan 2000, Inc.
Sahar Technologies, Inc.



                                                               Exhibit 10.2

                              OPTION AGREEMENT

         THIS OPTION AGREEMENT (this "Agreement"), dated as of April 30,
2001 is made and entered into by and between ESC MEDICAL SYSTEMS LTD., a
company incorporated under the laws of the State of Israel ("ESC"), and
BANK HAPOALIM B.M., an Israeli banking corporation (the "Bank").

                                  RECITALS

         WHEREAS, ESC has requested, and may request from time to time
after the date hereof, the Bank to make loans and other extensions of
credit to ESC and/or to one or more subsidiaries of ESC (collectively, the
"Loans"); and

         WHEREAS, in order to induce the Bank to make the Loans to ESC
and/or to one or more such subsidiaries of ESC, ESC has agreed to execute
and deliver this Agreement to the Bank;

         NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, ESC and the Bank hereby agree as
follows:

     1. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:

         "Closing Price" means, as of any day, the last traded price
regular way reported on the NASDAQ National Market System for a share of
ESC Stock on such day.

         "ESC Stock" means the ordinary shares, par value NIS 0.1 per
share, issued by ESC.

         "Governmental Authority" shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision.

         "Lien" shall mean, with respect to any Person, any mortgage, lien,
pledge, hypothecation, charge, security interest or other encumbrance, or
any interest or title of any vendor, lessor, lender or other secured party
to or of such Person under any conditional sale or other title retention
agreement or a capital lease, upon or with respect to any property or asset
of such Person (including without limitation in the case of shares of
stock, shareholder agreements, voting trust agreements and all similar
arrangements).

         "Person" shall mean any individual or general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
estate, business trust, co-operative, association, unincorporated
organization, Governmental Authority or other entity, and where the context
so admits, the legal representatives, successors in interest and permitted
assigns of such Person.

         "Public Offering" means any public offering pursuant to an
effective registration statement under the United States Securities Act of
1933, as amended, or any other securities law of any other jurisdiction,
covering the offering and sale of shares of ESC Stock for the account of
ESC (other than a registration statement effected solely to implement an
employee benefit plan, a transaction in which Rule 145 of the United States
Securities and Exchange Commission is applicable or any other form or type
of registration in which ESC Stock cannot be included pursuant to United
States Securities and Exchange Commission rules and practice).

         "Unrealized Shares" means, as of any date during the Exercise
Period, the number of Option Shares equal to (i) 2,000,000, less (ii) the
number of Realization Shares purchased from time to time by the Optionee
pursuant to Paragraph 7(a) and/or Paragraph 7(b).

         2. Grant of Option. Upon the terms and subject to the conditions
set forth herein, ESC hereby grants to the Bank or to any of its
subsidiaries (the Bank or any such subsidiary, the "Optionee"), the
irrevocable right and option (the "Option") to purchase from ESC up to
2,500,000 shares of ESC Stock (the "Option Shares"), at a price per share
equal to the Purchase Price (as defined below). Subject to Paragraph 7, the
decision to elect to exercise the Option shall be in the sole discretion of
the Optionee, and the Optionee shall incur no liability whatsoever to any
Person for any failure to exercise the Option.

         3. Purchase Price. The purchase price (the "Purchase Price") for
the Option Shares shall be US$20.25 (Twenty and 25/100 United States
Dollars) per Option Share, subject to adjustment as set forth herein.
Notwithstanding the foregoing, if ESC undergoes a Public Offering at any
time during the Exercise Period (as defined below), the Purchase Price for
the Option Shares exercised and acquired in such Public Offering shall be
at a price per Option Share equal to the lower of (i) eighty-five percent
(85%) of the price per share paid by the purchasers of the ESC Stock in
such Public Offering, or (ii) US$20.25 (Twenty and 25/100 United States
Dollars) (subject to adjustment).

         4. Exercise Period. Subject to Paragraph 7, this Option may be
exercised, in part or in whole, during the period beginning on the date of
this Option and ending on the fifth anniversary of the date hereof (the
"Exercise Period"). Without derogating from Paragraph 7 below, at the end
of the Exercise Period, the Option shall expire with respect to any Option
Shares not then exercised and acquired.

         5. Adjustment of Purchase Price and Number of Option Shares. The
number and kind of securities purchasable initially upon the exercise of
this Option and the Purchase Price shall be subject to adjustment from time
to time upon the occurrence of certain events, as follows:

            (a) Adjustment for Share Splits and Combinations. If ESC at any
time or from time to time effects a subdivision of the outstanding shares
of ESC Stock, the number of shares of ESC Stock issuable upon exercise of
this Option immediately before the subdivision shall be proportionately
increased, and conversely, if ESC at any time or from time to time combines
the outstanding shares of ESC Stock, the number of shares of ESC Stock
issuable upon exercise of this Option immediately before the combination
shall be proportionately decreased. Any adjustment under this Paragraph
5(a) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

            (b) Adjustment for Certain Dividends and Distributions. In the
event ESC at any time, or from time to time makes or fixes a record date
for the determination of holders of shares of ESC Stock entitled to receive
a dividend or other distribution payable in additional shares of ESC Stock,
then and in each such event the number of shares of ESC Stock issuable upon
exercise of this Option shall be increased as of the time of such issuance
or, in the event such a record date is fixed, as of the close of business
on such record date, by multiplying the number of shares of ESC Stock
issuable upon exercise of this Option by a fraction: (i) the numerator of
which shall be the total number of shares of ESC Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of ESC Stock
issuable in payment of such dividend or distribution, and (ii) the
denominator of which is the total number of shares of ESC Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; provided, however, that if such record date
is fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed thereof, the number of shares of ESC Stock
issuable upon exercise of this Option shall be recomputed accordingly as of
the close of business on such record date and thereafter the number of
shares of ESC Stock issuable upon exercise of this Option shall be adjusted
pursuant to this Paragraph 5(b) as of the time of actual payment of such
dividends or distributions.

            (c) Adjustments for Other Dividends and Distributions. In the
event ESC at any time or from time to time makes or fixes a record date for
the determination of holders of shares of ESC Stock entitled to receive a
dividend or other distribution payable in securities of ESC other than
shares of ESC Stock, then in each such event provision shall be made so
that the Optionee shall receive upon exercise of this Option, in addition
to the number of shares of ESC Stock receivable thereupon, the amount of
securities of ESC that the Optionee would have received had this Option
been exercised for shares of ESC Stock immediately prior to such event (or
the record date for such event) and had the Optionee thereafter, during the
period from the date of such event to and including the date of exercise,
retained such securities receivable by it as aforesaid during such period,
subject to all other adjustments called for during such period under this
Paragraph 5 and ESC's Articles of Association with respect to the rights of
the Optionee.

            (d) Adjustment for Reclassification, Exchange and Substitution.
If the shares of ESC Stock issuable upon the exercise of this Option are
changed into the same or a different number of shares of any class or
classes of shares, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or shares
dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Paragraph), then and in any such event the
Optionee shall have the right thereafter to exercise this Option into the
kind and amount of shares and other securities receivable upon such
recapitalization, reclassification or other change, by holders of the
number of shares of ESC Stock for which this Option might have been
exercised immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein and under
ESC's Articles of Association.

            (e) Reorganization, Mergers, Consolidations or Sales of Assets.
If at any time from time to time there is a capital reorganization of the
shares of ESC Stock (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere
in this Paragraph) or a merger or consolidation of ESC with or into another
corporation, or the sale of all or substantially all of ESC's properties
and assets to any other Person, then, as a part of such reorganization,
merger, consolidation or sale, provision shall be made so that the Optionee
shall thereafter be entitled to receive upon exercise of this Option, the
number of shares or other securities or property of ESC, or of the
successor corporation resulting from such merger or consolidation or sale,
to which a holder of shares of ESC Stock deliverable upon conversion would
have been entitled on such capital reorganization, merger, consolidation or
sale. In any such case (except to the extent any cash or property is
received in such transaction), appropriate adjustment shall be made in the
application of the provisions of this subparagraph and ESC's Articles of
Association with respect to the rights of the Optionee after the
reorganization, merger, consolidation or sale to the end that the
provisions of this subparagraph and ESC's Articles of Association
(including adjustment of the number of shares of ESC Stock issuable upon
exercise of this Option) shall be applicable after that event and be as
nearly equivalent to the provisions hereof as may be practicable.

            (f) Other Transactions. In the event that ESC shall issue
shares to its shareholders as a result of a split-off, spin-off or the
like, then ESC shall complete such issuance or other action if, as part
thereof, allowance is made to protect the economic interest of the Optionee
either by increasing the number of Option Shares and/or by reducing
proportionately the Purchase Price of the Option Shares and/or by procuring
that the Optionee shall be entitled, on economically proportionate terms,
to acquire additional shares of the spun-off or split-off entities.

            (g) Notice of Capital Changes. If at any time ESC shall offer
for subscription pro rata to the holders of shares of ESC Stock any
additional shares of any class, other rights or any equity security of any
kind, or there shall be any capital reorganization or reclassification of
the capital shares of ESC Stock or the consolidation or merger of ESC with,
or sale of all or substantially all of its assets to another company or
there shall be a voluntary or involuntary dissolution, liquidation or
winding up of ESC, or other transaction described in this Paragraph 5,
then, in any one or more of said cases, ESC shall give the Optionee, by
registered or certified mail, postage prepaid, a written notice containing
a brief description of the proposed action and stating the date on which
(i) a record is to be taken for the purpose of such subscription or other
rights, or (ii) such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is to take place, as
the case may be. Such notice shall also specify the date as of which the
holders of record of shares of ESC Stock shall participate in such
subscription rights, or shall be entitled to exchange their shares of ESC
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least fourteen (14) days prior to the action in question, and not
less than fourteen (14) days prior to the record date in respect thereto.

            (h) Adjustment of Purchase Price. Upon each adjustment in the
number of shares of ESC Stock purchasable hereunder, the purchase price per
share shall be proportionately increased or decreased, as the case may be,
in a manner that is the inverse of the manner in which the number of shares
of ESC Stock purchasable hereunder shall be adjusted. In the event that ESC
shall hereafter issue any additional shares of ESC Stock or any securities
convertible into or exchangeable for ESC Stock or any warrants, options or
other rights to acquire shares of ESC Stock or such convertible securities,
pursuant to Paragraph 5(c) hereof, then the Purchase Price for the Option
Shares purchasable hereunder shall, at the sole option of the Optionee and
in lieu of any adjustment pursuant to such Paragraph, be reduced by an
amount equal to the Fair Market Value of such stock, securities, warrants,
options or rights as of the date of such initial issuance thereof, without
giving effect to any withholding or other taxes, charges, imposts or
duties. In the event that ESC shall hereafter pays any dividend or makes
any distribution payable in additional shares of ESC Stock pursuant to
Paragraph 5(b) hereof, then the Purchase Price for the Option Shares
purchasable hereunder shall, at the sole option of the Optionee and in lieu
of any adjustment in the number of Option Shares purchasable hereunder
pursuant to such Paragraph, be reduced by an amount equal to the amount of
all such payments and dividends, without giving effect to any withholding
or other taxes, charges, imposts or duties.

            (i) Notice of Adjustments. Whenever the Purchase Price or the
number of shares of ESC Stock purchasable hereunder shall be adjusted
pursuant to Paragraph 5 hereof, ESC shall prepare a certificate signed by
the chief financial officer of ESC setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Purchase Price and the number
of shares of ESC Stock purchasable hereunder after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by
first class mail, postage prepaid) to the Optionee.

            (j) Adjustment Proportionate; Rounding Upward. Any adjustment
under this Paragraph 5 in the number of Option Shares shall apply
proportionately to only the unexercised portion of the Option. If fractions
of a share would result from any such adjustment, the aggregate shares
adjustment shall be revised to the next higher whole number of shares.

     6.  Method of Exercising Option and Payment of Purchase Price.

         The Option may be exercised, in whole or in part on any number of
occasions during the Exercise Period, by the delivery by the Optionee to
ESC at its principal office of the attached Notice of Exercise. The Notice
of Exercise must be accompanied by payment in full of the aggregate
Purchase Price for the Option Shares being purchased upon such exercise.
Payment for such Option Shares shall be made in U.S. dollars by check
payable to the order of ESC or by wire transfer to an account designated by
ESC. With respect to each such exercise of this Option, simultaneous with
Optionee's payment of the Purchase Price for the number of Option Shares
indicated in the related Notice of Exercise, ESC shall issue and deliver to
Optionee a certificate or certificates evidencing such Option Shares
registered in the name of Optionee or its designee. Upon receipt by ESC of
this Option at its office in proper form for exercise, Optionee shall be
deemed to be the holder of record of the Option Shares transferable upon
such exercise. If this Option should be exercised in part only, ESC shall
concurrently with the delivery of the certificates for purchased Option
Shares, execute and deliver to the Optionee a new Option, on the same terms
and conditions as this Option, evidencing the rights of the Optionee
thereof to purchase the balance of the Option Shares.

     7.  Right of Realization by ESC.

         (a) ESC shall have the right to demand during the Exercise Period
that the Optionee exercise the Option and purchase 2,000,000 Option Shares
(the "Realization Shares") at the Purchase Price, if during the Exercise
Period, (i) ESC gives the Optionee not less than 10 days prior written
notice of its intention to undergo a Public Offering or a private placement
in which (Y) the consideration to be received by ESC in such Public
Offering or in a private placement, provided that ESC will notify the Bank
of the identity of the purchasers in such private offering (the
"Consideration") will be not less than US$40,000,000 (Forty Million United
States Dollars), and (Z) the price for each share of ESC Stock to be
purchased in such Public Offering or private placement will be not less
than US$20.25 (Twenty and 25/100 United States Dollars), and (ii) the
Closing Price for a share of ESC Stock is not less than US$23.00
(Twenty-Three and 00/100 United States Dollars) prior and on the date of
such demand.

         If the Optionee does not exercise and purchase the Realization
Shares, or any part thereof, in accordance with ESC's demand made pursuant
to Paragraph 7(a) above, then the number of Option Shares and Unrealized
Shares to which the Optionee can exercise and purchase under the Option
shall thereafter be reduced by an amount equal to 50% (the "Ratio") of the
balance obtained between (i) the Realization Shares and (ii) the number of
Realization Shares actually purchased by the Optionee in accordance with
ESC's demand made pursuant to Paragraph 7(a) above; provided, however, if
the actual stated Consideration in any Public Offering or private placement
is less than US$40,000,000 (Forty Million United States Dollars), then the
Ratio shall be adjusted to a percentage equal to the product of (Y) the
Ratio, multiplied by, (Z) a fraction, the numerator of which is the actual
stated Consideration and the denominator of which is US$40,000,000 (Forty
Million United States Dollars). Notwithstanding anything in this Paragraph
7(a) to the contrary, if ESC does not actually commence or undergo the
Public Offering or the private placement contemplated in Paragraph 7(a)
within sixty (60) days from the date of its demand pursuant to such
Paragraph, then this Paragraph 7(a) shall not apply and there will be no
reduction of the number of Unrealized Shares to which the Optionee can
exercise and purchase under the Option.

         (b) If during the Exercise Period, the Closing Price of a share of
ESC Stock is above US$26.00 (Twenty-Six and 00/100 United States Dollars)
during the period of twenty-two (22) consecutive trading days (not to
include a deviation of two (2) trading days during such 22-day period) (the
"Computation Period"), then ESC shall have the right to demand during the
Exercise Period that the Optionee exercise the Option and purchase the
Unrealized Shares at the Purchase Price within thirty (30) business days
after such demand is made on the Optionee (the "Realization Period"). If
the Optionee does not exercise and purchase the Unrealized Shares, or any
part thereof, in accordance with ESC's demand made pursuant to this
Paragraph 7(b), during the Realization Period, then the number of Option
Shares and Unrealized Shares to which the Optionee can exercise and
purchase under the Option shall thereafter be reduced by an amount equal to
50% of the Unrealized Shares.

         (c) If during the Computation Period, the Closing Price of a share
of ESC Stock is above US$30.00 (Thirty and 00/100 United States Dollars),
then ESC shall have the right to demand that the Optionee exercise the
Option and purchase all Unrealized Shares at the Purchase Price during the
Realization Period. If the Optionee does not exercise and purchase the
Unrealized Shares, or any part thereof, in accordance with ESC's demand
made pursuant to this Paragraph 7(c) during the Realization Period, then
the number of Option Shares and Unrealized Shares to which the Optionee can
exercise and purchase under the Option shall thereafter be reduced by an
amount equal to the balance between (i) the Unrealized Shares, and (ii) the
number of Realization Shares actually purchased by the Optionee in
accordance with ESC's demand made pursuant to this Paragraph 7(c).

         (d) Notwithstanding anything in this Agreement to the contrary,
500,000 of the Option Shares shall be exercised according to the Optionee's
sole discretion during the Exercise Period, and such Option Shares shall
not be deemed to be "Realization Shares" and shall not be subject to any
right of ESC to demand that the Optionee exercise the Option and purchase
such shares.

     8. Investment Representation. Optionee, and each of its subsidiaries
who is issued Option Shares pursuant to this Agreement, represent that (i)
it is an "accredited investor," as that term is defined in Rule 501(a) of
Regulation D under the United States Securities Act of 1933, as amended, or
any successor federal statute (the "Securities Act"), and (ii) any and all
Option Shares purchased hereunder shall be acquired for investment only and
without a view to the resale or distribution thereof, except in any case
pursuant to the registration of such Option or Option Shares under the
Securities Act or pursuant to a valid exemption from such registration
requirement. If the Option Shares are not so registered, certificates for
the Option Shares shall bear the legend set forth in Paragraph 12 hereof.

     9.  Exchange, Transfer, Assignment or Loss of Option.

         (a) For purposes of this Agreement, "Transfer", as to this Option,
the Option Shares or any shares of ESC Stock, means any transfer, sale,
exchange, assignment, the creation of any Lien, option or right to
purchase, and any other disposition of any kind, whether voluntary or
involuntary, affecting title to, possession of or voting rights with
respect thereto. Optionee and each of its subsidiaries who is issued Option
Shares pursuant to this Agreement acknowledges that the Option and the
Option Shares issuable upon exercise thereof have not been registered under
the Securities Act, and agree that it will not Transfer any this Option or
the Option Shares except upon the terms and conditions specified herein,
and that it will cause any transferee thereof to agree to take and hold the
same subject to the terms and conditions specified herein, provided that,
Optionee or any holder of the Option Shares may sell Option Shares
purchased upon exercise of this Option in one or more private transactions
not requiring registration under the Securities Act. Prior to any Transfer
of any Option Shares (other than a Transfer among Optionee and/or any of
its affiliates), the holder thereof shall give written notice to ESC of
such holder's intention to effect such Transfer and the identity of the
proposed transferee. Each holder wishing to effect such a Transfer of the
Option Shares shall also furnish to ESC an agreement by the transferee
thereof that it is taking and holding the same subject to the terms and
conditions specified herein and, unless the transferee is an affiliate of
such holder, a written opinion of such holder's counsel, in form reasonably
satisfactory to ESC, to the effect that the proposed Transfer may be
effected without registration under the Securities Act. The restrictions
set forth in Paragraphs 8, 9 and 12 shall terminate and cease to be
effective with respect to any Option Shares that are registered under the
Securities Act or upon receipt by ESC of an opinion of counsel, reasonably
satisfactory to ESC, to the effect that compliance with such restrictions
is not necessary in order to comply with the Securities Act with respect to
the Transfer of the Option Shares.

         (b) Subject to the restrictions set forth herein, this Option is
exchangeable, without expense, at the option of the Optionee, upon
presentation and surrender hereof to ESC or at the office of its stock
transfer agent, if any, for other options of different denominations
entitling the holder thereof to purchase in the aggregate the same number
of Option Shares purchasable hereunder; provided, that the foregoing shall
not apply to Unrealized Shares. Upon surrender of this Option to ESC at its
principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, ESC shall, without charge, execute and deliver a new
Option in the name of the assignee named in such instrument of assignment
and this Option shall promptly be canceled; provided, however, that this
Option may not be transferred except to members of the Bank's Group. The
term "Option" as used herein includes any Options into which this Option
may be divided or exchanged. Upon receipt by ESC of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Option, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Option, if
mutilated, ESC will execute and deliver a new Option of like tenor and
date.

     10. Representations, Warranties and Covenants of ESC.

         (a)   ESC hereby represents and warrants to Optionee that:

          (i)  There has been reserved, and ESC shall at all times keep
               reserved so long as the Option remains outstanding, out of
               its authorized ESC Stock, such number of shares of ESC Stock
               as shall be subject to purchase under the Option, and ESC
               will supply every transfer agent for ESC Stock and other
               securities of ESC issuable upon exercise of the Option with
               duly executed stock and other certificates, as appropriate,
               for such purpose;

          (ii) Upon delivery of, and payment for the Option Shares as
               contemplated by this Agreement, the Optionee will acquire
               duly authorized, validly issued, fully paid and
               nonassessable Option Shares;

     11. Legend. Except as provided in Paragraph 9(a) hereof, each stock
certificate evidencing the Option Shares issued to the Optionee or to any
other Person in connection with a transfer pursuant to this Agreement shall
include the following legend:

     "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
     "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE
     OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
     HYPOTHECATED UNLESS AND UNTIL REGISTERED OR QUALIFIED UNDER THE
     SECURITIES ACT AND UNDER SUCH LAWS, OR UNLESS AN EXEMPTION FROM
     REGISTRATION AND QUALIFICATION IS AVAILABLE. THE SALE, PLEDGE,
     HYPOTHECATION OR TRANSFER OF THE SHARES REPRESENTED BY THIS
     CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN OPTION
     AGREEMENT DATED APRIL 30, 2001 TO WHICH THE ISSUER IS SUBJECT. A COPY
     OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
     SECRETARY OF THE ISSUER."

     12. Fractional Interest. No fractional shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional
shares ESC shall round up the number of Option Shares to be issued.

     13. No Rights in Option Shares. Optionee shall have none of the rights
of a shareholder with respect to the Option Shares unless and until the
Option Shares are issued to it upon exercise of the Option.

     14. Registration Rights. If ESC effects a registration with respect to
the public resale by shareholders of any ESC Stock under the Securities
Act, or any other relevant securities laws of any other jurisdiction, the
Optionee shall have the right to have included in such registered offering
the Option Shares, on a pro rata basis with the other selling shareholders
participating in such registered offering, in proportion to the respective
holdings of Optionee and all such other selling shareholders.

     15. Expenses. ESC shall pay Israeli Stamp Duty, if any, on the issue
of the Option Shares, and will notify the Israeli Companies Registrar of
such issue within the time period required by law. The Stamp Duty on this
Option, if any, will be paid in full by ESC.

     16. Notices. All notices, requests and other communications to any
party under this Option shall be in writing and shall be given to such
party, by mail, telecopy, telex, personal delivery or other customary means
of delivery, addressed to it as set forth below or such other address or
telex number as such party may in the future specify for such purpose by
notice to the other party. Each such notice, request or communication shall
be effective if given by telex, when such telex is transmitted to the telex
number specified below and the appropriate answerback is received, if given
by mail, two days after such communication is deposited in the United
States mails and sent by certified or registered mail, return receipt
requested, with first class postage prepaid, addressed as aforesaid or if
given by telecopy, personal delivery or any other means, when received at
the address specified below.

                   Party                Address


          If to ESC:                    ESC Medical Systems Ltd.
                                        Yokneam Industrial Park,
                                        P.O.B. 240, Yokneam 20692
                                        Attention:  President
                                        Telephone:  04-9599000
                                        Telecopier:  04-9599070


          With a copy to:               Zellermayer, Pelossof & Co.
                                        Rubinstein House
                                        20 Lincoln Street
                                        Tel Aviv 67134
                                        Attention:  Revital Kerem, Advocate
                                        Telephone:  03-6255555
                                        Telecopier:  03-6255500


          If to the Optionee:           Bank Hapoalim B.M.
                                        63 Yehuda Halevy St
                                        Tel Aviv
                                        Attention:  Mr. Mr. Ya'akov Elinav
                                        Telephone:  03-5674791
                                        Telecopier:  03-5676008


          with a copy to:               Shaw Pittman
                                        335 Madison Ave., 26th floor
                                        New York, New York  10017-4605
                                        Attention:  John C. Simons, Esq.
                                        Telephone:  (212) 603-6848
                                        Telecopier:  (212) 603-6801

         Notice to any other Optionee shall be sent to the address
indicated on the applicable Assignment Form.

     17. Governing Law/Submission to Jurisdiction.

         (a) This Agreement shall be governed by the laws of the State of
Israel. For the purposes of this Agreement ESC hereby irrevocably submits
to the exclusive jurisdiction of the competent courts in Tel-Aviv - Jaffa,
Israel.

         (b) ESC agrees that any summons, notice or judgment or other legal
process or document in connection with any proceedings referred to in
sub-clause (a) hereof may be serviced upon by delivering same to ESC at its
address set forth in Paragraph 16 and a copy to Zellermayer, Pelossof &
Co., Advocates, 20 Lincoln Street, Tel Aviv, Israel 67134.

     18. Miscellaneous. This Agreement cannot be changed or terminated
orally. This Agreement contains the entire agreement between the parties
relating to the subject matter hereof. The paragraph headings herein are
intended for reference only and shall not affect the interpretation hereof.
This Agreement may be executed in any number of counterparts and by
telecopier, each of which shall constitute an original, and all of which
taken together shall constitute one and the same agreement. Except as
specifically stated herein as constituting an explicit waiver or
modification of any provision of a loan agreement or other document
evidencing indebtedness owing from ESC to the Optionee, nothing contained
herein shall constitute a waiver or modification by the Optionee of any of
the covenants, representations or agreements under such loan or other
document. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.

     19. Successors and Assigns. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors
and permitted assigns.

     20. Availability of Public Information. With a view to making
available to the Optionee and any subsequent holder of the Option Shares
the benefits of certain rules and regulations of the United States
Securities Exchange Commission (the "SEC") (including, without limitation,
Rules 144 and 144A under the Securities Act), which may permit the sale of
the Option Shares to the public or certain other institutions without
registration, ESC agrees to take any and all such actions as may be
required of it to make available to the Optionee and such subsequent
holders such benefits, including, without limitation, to:

         (i)   make and keep public information available, as those terms
               are understood and defined in Rule 144 under the Securities
               Act or any successor provision thereto from and after the
               date ESC first becomes subject to the provisions of Section
               13 or 15(d) of the United States Securities Exchange Act of
               1934, as amended, or any successor federal statute (the
               "Exchange Act"); and

         (ii)  file with the SEC in a timely manner all reports and other
               documents required of ESC under the Securities Act and the
               Exchange Act from and after the date ESC first becomes
               subject to the provisions of Section 13 or 15(d) of the
               Exchange Act; and

         (iii) so long as the Optionee or any affiliate of the Optionee
               owns any Option or Option Shares, furnish to the Optionee
               forthwith upon request a written statement by ESC as to
               compliance with the reporting requirements of Rule 144 or
               any successor provision thereto, and of the Securities Act
               and the Exchange Act, a copy of the most recent annual or
               quarterly report of ESC filed with the SEC, in each case
               from and after the date ESC first becomes subject to the
               provisions of Section 13 or 15(d) of the Exchange Act, and
               such other reports and documents of ESC and other
               information in the possession of or reasonably obtainable by
               ESC as the Optionee and its affiliates and subsequent
               holders of the Option Shares may reasonably request in
               availing itself of any rule or regulation of the SEC
               allowing the Optionee and its affiliates and subsequent
               holders of the Option Shares to sell any such securities
               without registration.

     21. Shareholder Approval. This Option shall not be effective as long
and until the grant of the Option was approved by the shareholders of the
Company.


         IN WITNESS WHEREOF, the parties have executed this Option
Agreement as of the day and year first above written.



                                            BANK HAPOALIM B.M.

                                            By: /s/ L. Landau
                                            ------------------------

                                            By: /s/ L. Ben Ami
                                            ------------------------


                                            ESC MEDICAL SYSTEMS LTD.

                                            By : /s/ Yacha Sutton
                                            ------------------------




                             NOTICE OF EXERCISE



To:

1.       The undersigned hereby elects to purchase _________ Option Shares,
         pursuant to the terms of the attached Option, and tenders herewith
         payment of the purchase price for such shares in full.

2.       In exercising this Option, the undersigned hereby confirms and
         acknowledges that the Option Shares are being acquired solely for
         the account of the undersigned (and not as a nominee for any other
         party) for investment, and that the undersigned will not offer,
         sell or otherwise dispose of any such Option Shares except under
         circumstances that will not result in a violation of the United
         States Securities Act of 1933, as amended, or any state securities
         laws.

3.       Please issue a certificate representing said Option Shares in the
         name of the undersigned and deliver such certificate to the
         undersigned.

4.       Please issue a new Option for the unexercised portion of the
         attached Option in the name of the undersigned and deliver such
         new Option to the undersigned.





----------------------              -------------------------
      (Date)                              (Print Name)


                                     -------------------------
                                          (Signature)




                              ASSIGNMENT FORM


                  FOR VALUE RECEIVED,                 hereby sells, assigns
and transfers unto
                                      ---------------


Name
    ------------------------------------------------------------


(Please typewrite or print in block letters)


Address
       ---------------------------------------------------------


and the above transferee hereby acquires and assumes the right to purchase
Option Shares represented by this Option to the extent of ______ Option
Shares as to which such right is exercisable and agrees to be bound by the
terms and conditions of the Option Agreement, and do hereby confirm that
the above transferee is a subsidiary of Bank Hapoalim B.M.


Date



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

Transferor Signature


--------------------
Transferee Signature


                          ESC MEDICAL SYSTEMS LTD.

                                                       Date: April 30, 2001

To:  Bank Hapoalim B.M.

Re:      Option Agreement

Whereas           we will grant an option to purchase from us up to
                  2,500,000 ordinary shares of our share capital, all
                  according to the terms and conditions of the option
                  agreement a copy of which is attached to this letter and
                  forms an integral part of it (the "Option" or "Option
                  Agreement")

and               Whereas we have informed you that in order to furnish you
                  the Option duly executed we have to obtain our general
                  assembly's approval (the "Approval").

and               Whereas we have undertaken to grant you the Option duly
                  executed within 70 (seventy) days of the drawdown of a
                  loan (the "Interim Period") in the sum of $ 100,000,000
                  (One Hundred Million U.S. Dollars) which you have granted
                  us in order to finance the acquisition of the CMG
                  division from Coherent Inc (the: "Loan" or the "Loan
                  Agreement").

and               Whereas it was agreed between us that if we shall not
                  obtain the Approval during the Interim Period, we shall
                  provide you with an alternative financial compensation in
                  connection with the Loan, satisfactory to you.

Now Therefore we hereby undertake that if we shall not grant you the Option
duly executed during the Interim Period we shall compensate you as follows:

(i)  The Interest on the Loan will be LIBOR plus 8% p.a. as of the Closing
     Date as such term is defined in the Loan Agreement.

(ii) The facility fee according to our facility fee letter as of this date
     addressed to you will be $2,700,000 (Two Million and Seven Hundred
     Thousand United States Dollars) and will be paid within 3 days from
     the end of the Interim Period.

The Loan Agreement will be amended as to reflect the above amendments and
we undertake to sign all documents concerning the above amendments in
connection with the said amendments. We shall bear all fees and expenses
incurred by you in connection with the above amendments.

If we will notify you within the Interim Period that related documentation
is under SEC review, the Interim Period shall be extended by additional 30
days.

Subject to the above, all terms of the Loan Agreement and/or any other
document we have signed in your favor will remain in full force.

                             Very truly yours,



                              /s/ Yacha Sutton
                              ------------------------

                              ESC Medical Systems Ltd.






                          ESC MEDICAL SYSTEMS LTD.

                                                       Date: April 30, 2001

To

Bank Hapoalim B.M.



                            Re: Option Agreement



                  Attached herewith is the Option Agreement and the
Compensation Letter signed by ourselves. (The Option Agreement and the
Compensation Letter are attached to this letter and marked "A" and "B"
respectively).

Please note that the Option Agreement is subject to our shareholders
approval.

If will not notify you within 70 days from the date of this letter that
such approval was granted and that the Option Agreement is valid and was
duly executed in your favor then the Compensation Letter shall apply
according to the terms and conditions specified in such letter. If we will
notify you within the said 70 days period that related documentation is
under SEC review, such 70 days period shall be extended by additional 30
days.

Except for the above all our rights according to the documents we have
and/or will sign in your favor.



                             Very truly yours,



                              /s/ Yacha Sutton
                              ------------------------
                              ESC Medical Systems Ltd.





Date: April 30, 2001




ESC Medical Systems Ltd.
Yokneam Industrial Park,
P.O.B. 240, Yokneam 20692

Attention:  President

Dear Sirs,

         Reference is made to the Option Agreement dated as of April 30,
2001 (the "Option Agreement"), by and between ESC Medical Systems Ltd.
("ESC") and Bank Hapoalim B.M. (the "Bank"), pursuant to which the Bank has
the irrevocable right and option to purchase from ESC up to 2,500,000
ordinary shares, par value NIS 0.1 per share, issued by ESC, upon the terms
and conditions specified therein. All capitalized terms used and not
defined herein shall have the meanings given to such terms in the Option
Agreement.

         Notwithstanding anything in the Option Agreement to the contrary,
during the period (the "Period") that (i) any portion of the Option remains
unexercised during the Exercise Period, or (ii) the Bank or any affiliate
of the Bank is the legal or beneficial owner or holder of any class of
voting securities of ESC, the Bank undertakes as follows:

         (a) The Bank, and each affiliate of the Bank who acquires any
class of voting securities of ESC, will at all times be a passive investor
and will neither have nor seek the ability to influence management of ESC
during the Period.

         (b) At no time during the Period will the Bank or any affiliate of
the Bank have the ability after purchase or acquisition of any ordinary
shares of ESC (whether pursuant to the Option Agreement or otherwise) or
any other class of voting securities of ESC, to vote more than 4.99% of any
class of voting securities of ESC. Contemporaneous with the execution and
delivery of the Option Agreement and this letter agreement, the Bank shall
execute and deliver to ESC an Irrevocable Proxy for Excess Shares (the
"Proxy"), substantially in the form of Schedule 1 attached hereto, pursuant
to which the Bank will grant to ESC an irrevocable proxy during the Period
for each class of voting securities of ESC acquired by the Bank or any
affiliate of the Bank in excess of 4.99% of such class of voting securities
(the "Excess Shares") in order that the Excess Shares will be voted solely
at the discretion of ESC's management.

         (c) At all times during the Period, the Bank and/or any affiliated
permitted transferee will seek to dispose of any acquired Excess Shares in
an orderly fashion as quickly as reasonably possible taking into account
the marketability and pricing of the shares and any applicable holding
periods and/or other transfer restrictions imposed on the Bank or such
transferee pursuant to the Option Agreement or any applicable United States
securities laws and regulations.

         If you are in agreement with the foregoing, please so indicate by
signing in the space provided on the enclosed copy of this letter, and then
return such signed copy to the Bank.

                                 Sincerely,

                                  BANK HAPOALIM B.M.


                                  By: /s/ L. Landau
                                  ------------------------


                                  By: /s/ L. Ben Ami
                                  ------------------------


ACCEPTED AND AGREED TO as of the date first above written:

ESC MEDICAL SYSTEMS LTD.


By: /s/ Sagi Genger
   ------------------------



                                 SCHEDULE 1
Date: April 30, 2001


ESC Medical Systems Ltd.
Yokneam Industrial Park,
P.O.B. 240, Yokneam 20692
Attention:  President

                  Re: Irrevocable Proxy for Excess Shares

Dear Sirs,

         Reference is made to (i) the Option Agreement dated as of April
30, 2001 (the "Option Agreement"), by and between ESC Medical Systems Ltd.
("ESC") and Bank Hapoalim B.M. (the "Bank"), pursuant to which the Bank has
the irrevocable right and option to purchase from ESC up to 2,500,000
ordinary shares, par value NIS 0.1 per share, issued by ESC, upon the terms
and conditions specified therein, and (ii) the letter agreement dated April
30, 2001, between the Bank and ESC entered into in connection with the
Option Agreement. All capitalized terms used and not defined herein shall
have the meanings given to such terms in the Option Agreement.

         The Bank hereby appoints ESC as its proxy during the Period to
attend and to vote on its behalf at any meeting of ESC, and on any
adjournment thereof, with respect to each class of voting securities of ESC
acquired or purchased by the Bank or any affiliate of the Bank in excess of
4.99% of such class of voting securities (the "Excess Shares"). During the
Period, the Excess Shares shall be voted solely at the discretion of ESC's
management. The term "Period" means the period during which (i) any portion
of the Option remains unexercised during the Exercise Period, or (ii) the
Bank or any affiliate of the Bank is the legal or beneficial owner or
holder of any class of voting securities of ESC.

         This proxy is irrevocable and may not be canceled by the Bank.
This proxy will automatically expire and be of no further force and effect
upon termination or lapse of the Period. This proxy also will automatically
expire and be of no further force and effect as to any Excess Shares
immediately upon the sale or transfer of such Excess Shares to any third
party who is not an affiliate of the Bank in accordaance with the Option
Agreement and/or applicable United States securities laws and regulations.

                                     Sincerely yours,
                                     BANK HAPOALIM B.M.

                                     By:_______________________
                                           Name:
                                           Title:

                                     By:_______________________
                                           Name:
                                           Title:


                                                       Date: April 30, 2001

Bank Hapoalim B.M
Head Office
45 Rothschild Boulevard
Tel-Aviv


To:      ESC Medical Systems Ltd. (the "Company")

Re:      Intention Letter for Granting Credit

1. As per your request we confirm that we will provide you a loan (the
"Loan") for the purpose specified in this letter subject to the following
conditions:

     (a) Purpose: To finance the acquisition of the outstanding 6%
     Convertible Subordinated Notes issued by the Company on September 10,
     1997.(the "Notes")

     (b) Amount: US$ 91,200,000 (Ninety One Million and Two Hundred
     Thousand United States Dollars).

     (c) Commitment Fee: 1% (one percent) p.a. to be paid in advance during
     the Availability Period for every 12 months period or any part
     thereof, on the Amount. It is agreed that if the said commitment will
     be cancelled before the end of the Availability Period then the
     Commitment Fee will be computed until the date of the cancellation and
     monies paid in excess of the above computation will be returned to the
     Company.

     (d) Availability Period: Until September 1 2002.

     (e) Term: 4 years from drawdown.

     (f) Interest:

          (i) LIBOR plus 2.25% p.a. during the first year from drawdown.

          (ii) (ii)LIBOR plus 2.75% p.a. during the second year from
     drawdown.

          (iii) (LIBOR plus 3.5% p.a. during the third and fourth year from
     drawdown.

     (g) Repayment: principal - in one lump sum at the end of the term.
     Interest - every 3 (three) months.

     (h) Additional Conditions:

     (i) the Loan will be made available provided that the ratio between
     the total debt to the Bank according to the consolidated financial
     statements of the Company plus the total debt on account of the Notes
     divided by the EBITDA will be equal or less than 3 (three).

     (ii) You will sign all documents for the drawdown and the conditions
     specified in this letter according to our practices concerning the
     Loan.

     (iii) All collaterals created in the Bank's favor in connection with a
     certain loan agreement signed between the Bank and Energy Systems
     Holdings Inc on April 30, 2001 and a certain short term loan agreement
     signed between the Bank and the Company on April 24, 2001 shall serve
     also as collaterals for the repayment of the Loan.

     (iv) You will be given the credit only if there is no legal (or any
     other) hindrance.

     (v) You will not be in any breach of any of your obligations according
     to the documents you have signed or will sign in our favour.

     (vi) You will reimburse the Bank with all actual out of pocket costs
     and expenses of the Bank in connection with the preparation, drafting
     and execution of all documents in connection with the Loan, including
     but not limited to legal costs and all stamp-duties.

     (vii) the Bank shall be entitled to convert the Loan or any part of it
     into additional shares of the Company as long as the Loan is
     outstanding, at a price of US$ 20.25 (Twenty United States Dollars and
     twenty five cents) per share. Notwithstanding the above if the Company
     will request to prepay the Loan, the Bank shall have the right within
     30 days from receiving such prepayment notice to exercise its
     conversion rights as aforesaid.

2. Nothing in the above shall derogate from our rights according to the
documents you have and\or will sign in our favor.


                             Very truly yours,



                             Bank Hapoalim B.M.

                               /s/ L. Landau
                                 L. Landau

                               /s/ L. Ben Ami
                                 L. Ben Ami



We the undersigned agree to the above:

/s/ Sagi Genger

ESC Medical Systems Ltd.

                                                               Exhibit 10.4

                                                             April 24, 2001

Bank Hapoalim B.M.
Head Office
Corporate Banking Division
41-45 Rothschild Boulevard
Tel Aviv


To:  ESC Medical Systems Ltd.

Re:      STATUS OF SHORT TERM CREDIT LINE

         We hereby confirm that we are providing you with a short term
credit line (hereinafter: the "Credit Line") up to the sum of $50,000,000
(Fifty Million United States Dollars) for the period commencing on the date
of this letter and ending 12 (twelve) months from the date of this letter
(the " First Period") and up to $20,000,000 (Twenty Million United States
Dollars) for the period which begins at the end of the First Period and
ends 24 (twenty four) months from the date of this letter (the "Expiry
Date"), subject to all terms and conditions stated herein.

         The credit granted according to the Credit Line bears interest of
LIBOR plus 1% (One percent) p.a.

         a) In respect of the allocation of the Credit Line you will pay
the Bank a fee at the rate of 0.25% (One Quarter of One percent) per annum
(hereinafter: "the Commitment Fee") on the unutilized part of the Credit
Line.

         b) The Commitment Fee will be paid in advance on the date of the
allocation of the Credit Line for the period commencing on the date of this
letter and ending on the end of the next calendar quarter and thereafter
quarterly on the first day of each quarter or on the nearest date to such
date with value of the first day of that quarter until the Expiry Date on
the unutilized part of the Credit Line on the date of such computation.

         Commencing from the end of the First Period and so long as the
Credit Line is in force you will maintain in your consolidated financial
statements a financial ratio in which the ratio between inventory plus all
debts owned to you by your clients for sales made in your ordinary course
of business to the utilized sum of the Credit Line will not be less than
2.5 (two point five).

         The terms set out above will be construed in accordance with U.S. GAAP.

         The Credit Line shall be available to ESC until the Expiry Date
subject to the terms hereof, unless and to the extent ESC shall notify the
Bank of its desire to terminate the commitment of the Bank hereunder.

         In any case of contradiction between the above and the provisions
of the Application to Open an Account and General Conditions for Operating
the Account, then the provisions of this letter shall govern.

         All our rights according to documents signed by you in our favour
are fully reserved and are in no way affected by this letter.

                             Very truly yours,



                              BANK HAPOALIM B.M.

                               /s/ L. Landau
                                 L. Landau

                               /s/ L. Ben Ami
                                 L. Ben Ami

We agree to the above

/s/ Sagi Genger

ESC Medical Systems Ltd

                                                       Date: April 24, 2001

Account no 11145, Branch no 700
Bank Hapoalim B.M.
Haifa Central Branch.


Re:      Short Term Credit Line - Additional Terms



Dear Sirs,

         Reference is made to the Short Term Credit Line Letter dated April
24, 2001(the"Letter").

         Capitalized terms used herein and not defined herein shall have
the meanings given to such terms in the Letter.

1.       Interest

         (a)      LIBOR - For the purpose of the Credit Line, "LIBOR"
                  (London Interbank Offered Rate) - means the rate of
                  Interest determined by the Bank as being the highest
                  interest rate (rounded upwards to the nearest 1/8 of one
                  percent) at which deposits in the currency of the
                  Overdraft are offered to the Bank in the London Interbank
                  Market or in any other Interbank Market in Europe for
                  periods of one day ("Overnight").

         (b)      Interest Payment Dates

                  (i)  The Interest (excluding Interest on Excesses as
                       hereinafter defined) will be paid by us to the Bank
                       in the currency of the Overdraft as set out below:

                  (ii) Monthly - (hereinafter: the "Interest Period") on
                       the first day of the next calendar month following
                       the termination of each Interest Period or on the
                       nearest date possible after the first day of such
                       calendar month, with value of the first day of the
                       month.

                  (iii) The Interest in respect of the first Interest
                       Period will be repaid by us to the Bank in the
                       currency of the Overdraft on the first day of the
                       next calendar month following the date monies are
                       first drawn on account of the Overdraft Facility or
                       on the nearest date after the first day of such
                       calendar month, with value of the first day of the
                       month.

         We declare that we are aware that the first Interest Period may be
shorter than the other Interest Periods.

         (c)   Manner of Calculating the Interest

               (i)  The Interest shall be calculated by the Bank and paid
                    by us or compounded with the amount due from us in
                    connection with Credit Line at the beginning of each
                    calendar month, for the month or period that has
                    passed.

               (ii) The Interest will be computed on the basis of daily or
          other balances at the discretion of the Bank and the number of
          days that have actually elapsed divided by 360.

2.       Debit on a day not being a business day

(i)                        If the Expiry Date of the Credit Line falls on a
                           day which is not a business day (as hereinafter
                           defined), the Facility will terminate on the
                           first succeeding business day and bear interest
                           at the rate required according to paragraph 3
                           above, subject as provided in any law.

(ii)                       It is stated that the debit in respect of the
                           Interest, Interest on Excesses, the Overdraft
                           Fee or any other sum that we owe or will be
                           liable to pay under this document and/or the
                           Letter will be made on the date prescribed for
                           the discharge of the debit under this
                           Application and/or the above Conditions
                           (hereinafter: "the Debit Date") or on the
                           nearest date as possible after the Debit Date
                           with value of the Debit Date (without taking
                           into account the fact that any Debit Date falls
                           on a business day).

     (b) The term "Business Day" - means a day on which banks in Tel-Aviv,
     London and the country in which the currency of the Overdraft is legal
     tender are open to the public and on which the Bank's branches in
     Israel - or most of them - are open for business to the public.

     This document constitutes an integral part of the Letter.

                                                          Yours faithfully,



                                                           /s/ Yacha Sutton



                                                  ESC Medical Systems, Ltd.


                                 AGREEMENT

 This Agreement is dated as of the 30 day of April, 2001 and made between:

                             Bank Hapoalim B.M

                                ("The Bank")

                                    and

                          ESC Medical Systems Ltd.

         a company registered under the laws of the State of Israel

                             ("the Borrower").

         Whereas the Borrower and\or any of its Subsidiaries has received
and intends to receive, from time to time, from the Bank the Loan, the
Short Term Credit Line and the Additional Financing (hereinafter, jointly
and severally - "the Banking Services");

         Whereas in order to induce the Bank to grant the Banking Services
to the Borrower and\or any of its Subsidiaries, the Borrower is prepared to
undertake the conditions hereinafter set forth in connection with the
Banking Services, as long as the Banking Services are not paid up in full
and\or if the Bank is committed to provide any of the Banking Services to
the Borrower or any of its Subsidiaries.

         Now, therefore, it is hereby agreed and declared between the
parties as follows:

1.       Interpretation

          (a)  This Agreement forms an integral part of the Borrower's
               application to open an account and the general conditions
               for operating an account which have been signed by the
               Borrower in the Bank ("the Application to Open an Account").

          (b)       (i) The provisions of Sections 2.7 (Security), 2.5
                    (Increased Costs), 5.2 (Default Rate), 6.2 (Set-off),
                    12.5 (Modifications and Waivers), 12.10 (Release of
                    Collateral) and 12.11 (Transfer of Booking of Loans) of
                    the Loan Agreement are hereby incorporated herein,
                    mutatis mutandis.

               (ii) The provisions of Section 2.3(c) and 2.3(d) of the Loan
                    Agreement shall apply, mutatis mutandis, to the Short
                    Term Credit Loan and the Additional Financing.

               (iii) The provisions of Section 2.4 of the Loan Agreement
                    shall apply, mutatis mutandis, to the Additional
                    Financing.

          (c)  Unless otherwise agreed the Borrower's obligations in this
               Agreement are in addition to those contained in the
               Application to open an account and nothing in this Agreement
               shall derogate from any of the Bank's rights under the
               Application to open an account.

          (d)  In the case of any contradiction between the provisions of
               this Agreement and the provisions of the Application to open
               an account the provisions of this Agreement shall govern.

          (e)  The Preamble to this Agreement constitutes an inseparable
               part hereof.

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

          (g)  Use of Accounting Terms. Accounting terms used herein shall
               be construed, calculations hereunder shall be made and
               financial data required hereunder shall be prepared, both as
               to classification of items and as to amounts, in accordance
               with generally accepted accounting principles in effect in
               the United States as of the date thereof consistently
               applied, which principles shall be consistent with those
               used in the preparation of the most recent reviewed
               financial statements of such Person delivered to the Bank.
               All statements relating to earnings and expenses shall set
               forth separately or otherwise identify all extraordinary and
               nonrecurring items.

2.       Definitions

         "Additional Financing" - means a certain commitment of the Bank to
provide the Borrower credit in order to repay 6% Convertible Subordinated
Notes issued by the Borrower on September 10, 1997 up to the sum of US$
93,000,000 (Ninety Three Million United States Dollars).

         "Indebtedness" of any Person means indebtedness incurred by that
Person to banks or financial institutions.

         "Lien" means any floating or fixed charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or
in property or other assets of a Person, whether absolute or conditional,
voluntary or involuntary, whether created pursuant to agreement, arising by
force of statute, by judicial proceedings or otherwise.

         "Loan" or "Loan Agreement" means - the Loan Agreement between the
Bank and Energy Systems Holdings Inc, dated April 30, 2001.

         "Material Subsidiary" means Energy Systems Holdings Inc., ESC Inc.
and any Subsidiary which is a "Material Subsidiary" under the Loan
Agreement.

         "Permitted Encumbrances" means [(i) Liens for current taxes not
yet due or taxes being contested in good faith, (ii) Liens created by
operation of law, [or incurred in the ordinary course of business and
securing payments not delinquent or payments which are being contested in
good faith] (iii) leases or the rights, if any, of third-party suppliers or
other vendors having possession of equipment, (iv) imperfections of title,
easements and zoning restrictions, if any, (v) judgments Liens, in respect
of judgments that do not constitute an Event of Default hereunder, (vi)
Liens permitted under the Asset Purchase Agreement, (vii) Liens in favor of
the Bank , and (viii) Liens on assets purchased subsequent to the Closing
Date other than with financing obtained from the Bank.

         "Permitted Restructure" means any transaction, merger,
consolidation or disposition of assets or shares, with respect to the
Borrower or any of its Subsidiaries, unless resulting in (i) any Person
holding more than 50% of the voting rights of the Borrower, or (ii) the
disposition of assets, other than to Borrower's Subsidiaries, exceeding (a)
US$5,000,000 (Five Million United States Dollars) of assets purchased under
the Asset Purchase Agreement as such term is defined in the Loan Agreement
or (b) US$10,000,000 (Ten Million United States Dollars) of other assets of
Borrower existing at the Closing Date as such term is defined in the Loan
Agreement.

         "Short Term Credit Loan" means a short term credit loan granted by
the Bank to the Borrower pursuant to a certain Short Term Credit Letter
signed on April 24, 2001 in the principal amount of $50,000,000 (Fifty
Million United States Dollars).

         "Subsidiary" means, when used with reference to any corporation,
any corporation of which at least a majority of the outstanding stock,
having by the terms thereof ordinary voting power to elect a majority of
the Board of Directors of such corporation, is at the time directly or
indirectly owned by such first-mentioned corporation.

3.       Representations and Warranties

         The Borrower represents and warrants to the Bank in relation to
the Borrower and its Subsidiaries that:

         Corporate Existence - Each of the Borrower and its Subsidiaries is
a duly organised and validly existing corporation in good standing under
the laws of the jurisdiction of its formation and has the corporate power
and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage. Each of the
Borrower and its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to qualifywould
have a material adverse effect on its business.

         Legal Capacity - the Borrower has the full power and corporate
authority and legal right to enter into, exercise its rights and perform
its obligations under this Agreement;

         Execution - the execution, delivery and performance by the
Borrower of its obligations assumed by it under this Agreement will not (i)
violate any existing law, regulation or authorisation to which the Borrower
is subject, (ii) result in any breach of or default under any material
agreement or other instrument to which the Borrower is now a party or is
subject, or if any breach or default has occurred under such agreement or
instrument, it will not have a material adverse effect on the Borrower or
(iii) violate any provision of the Borrower's Memorandum and Articles of
Association or other constituent documents;

4.       Undertakings

         The Borrower undertakes that from and after the date hereof until
the payment in full of all sums due in connection with the Banking Services
and provided that no commitment of the Bank under the Banking Services
exists, then unless the Bank shall otherwise consent in writing delivered
to the Borrower, the Borrower shall:

          (a)  Compliance with good business practices - Conduct its
               business according to good business practices; keep in full
               force and effect its corporate existence, and material
               rights, licenses, permits and franchises and comply in all
               material respects with all of the laws, rules and
               regulations governing its business; and make all such
               reports and pay all such franchise and other taxes and
               license fees and do all such other things as may be lawfully
               required, to maintain its material rights, licenses, powers
               and franchises under the any laws applicable or
               jurisdictions in which it is organised or does business.

          (b)  Restrictions on Dividends, Distributions and Redemption. Not
               pay dividends or make any other distribution pari passu to
               its shareholders, unless such distribution is an issue of
               bonus shares and/or other equitable securities made pari
               passu to all shareholders, or redeem any shares of its
               capital stock, or cause or permit any of its Subsidiaries to
               redeem any shares of its capital stock, or cause or permit
               any of its Subsidiaries to redeem any shares of its capital
               stock. The foregoing restriction shall not apply to the
               extent Borrower's equity shall exceed US$200,000,000 (Two
               Hundred Million United States Dollars).

          (c)  Disposal of Property. Not wind up, liquidate or dissolve,
               sell, exchange, lease, transfer or otherwise dispose of all
               or substantially all of (or agree to do any of the foregoing
               or permit any Material Subsidiaries to do or to agree to do
               any of the foregoing), its properties or other assets, other
               than in transaction with any of its Subsidiaries or pursuant
               to a Permitted Restructure; provided, however, that in the
               event assets in an aggregate of US$5,000,000 (Five Million
               United States Dollars) shall be so transferred to any
               Subsidiary of Borrower, such Subsidiary shall be deemed a
               Material Subsidiary hereunder and shall execute and deliver
               to the Bank a security agreement evidencing the charge of
               all of its assets or create such charge over its shares held
               by the Borrower in form and substance satisfactory to the
               Bank. The foregoing restriction shall not apply in the event
               that the cash proceeds of the sale of assets (net of
               withholding) would be used to prepay the Loan or the
               Additional Financing.



          (d)  Liens. Not contract, create, assume, incur or suffer to be
               created, assumed or incurred and shall not permit any
               Subsidiary to contract, create, assume, incur or suffer to
               be created, assumed or incurred, any Lien upon, or pledge
               of, any property or other assets of the Borrower or such
               Subsidiary, which will secure any other Indebtedness other
               than Liens created to the benefit of the Bank and Permitted
               Encumbrances.

          (e)  Indebtedness. Not assume, incur or suffer to exist or permit
               any Subsidiary to assume, incur or suffer to exist any
               Indebtedness other than to the Bank or in connection with
               assets purchased subsequent to Sub-Section (j) below or
               purchased after the Additional Financing was granted or the
               commitment to grant it expired which are subject to a
               Permitted Encumbrance other than with financing obtained
               from the Bank.

          (f)  Deposits - The Borrower and its Subsidiaries (excluding
               Subsidiaries holding solely assets purchased according to
               Sub Section (j) below or or purchased after the Additional
               Financing was granted or the commitment to grant it expired
               which are subject to a Permitted Encumbrance other than with
               financing obtained from the Bank) will deposit in the Bank
               all Cash and Cash Equivalents which appear in their
               financial statements except for such amounts needed by such
               Subsidiaries in their ordinary course of business.

          (g)  New Material Subsidiary - at any time any Subsidiary which
               at the date of this agreement is not a Material Subsidiary
               becomes a Material Subsidiary after the date of this
               Agreement, in accordance with the provisions of Section 4(c)
               hereof, then the Borrower shall cause that such Material
               Subsidiary to create in favor of the Bank a first ranking
               charge over all its assets or create such charge over its
               shares held by the Borrower to secure the repayment of all
               amounts due under the Banking Services.

          (h)  If Opusdent Ltd. will issue additional shares to the
               Borrower and\or any of its Subsidiaries (in addition to the
               100,000 ordinary shares issued until the date of this
               agreement) (the "Additional Shares") then the Borrower
               and\or such Subsidiary will pledge in favor of the Bank such
               Additional Shares in order to secure the repayment of the
               Banking Services, provided that such Additional Shares were
               issued against an outstanding debt of Opusdent to the
               Borrower as described in the Borrower's letter to the Bank
               as of this date. Such pledge shall be in form and substance
               to the full satisfaction of the Bank. The Borrower shall not
               approve any issuance of shares by Opusdent to the Borrower
               and/or any of its Subsidiaries as long as there is any
               outstanding debt of Opusdent to the Borrower, other than in
               consideration of such debt, in whole or in part.

          (i)  Purchase of Assets - not to purchase any assets until the
               granting of the Additional Financing unless such purchase is
               made against allotment of shares in the Borrower.


<PAGE>
          (j)  Financial Statements and Reports. The Borrower will furnish
               to the Bank in duplicate:

               (i)  As soon as practicable and when available, and in any
                    event within 90 days after the end of each fiscal year
                    of the Borrower and each Material Subsidiary, annual
                    audited consolidated balance sheets of the Borrower and
                    its Subsidiaries as at the end of such year and
                    consolidating audited balance sheets of the Borrower
                    and each Material Subsidiary for such period and
                    related consolidated statements of income, retained
                    earnings and cash flows of the Borrower and its
                    Subsidiaries for such year and consolidating statements
                    of income, retained earnings and cash flows of the
                    Borrower and each Material Subsidiary for such period,
                    setting forth in comparative form the corresponding
                    figures for the preceding fiscal year, audited by
                    independent certified public accountants of recognised
                    standing selected by the Borrower (and each Material
                    Subsidiary, as applicable), and acceptable to the Bank;

               (ii) As soon as practicable and when available, and in any
                    event within 45 days after the end of each fiscal
                    quarter of the Borrower (other than the 4th quarter), a
                    consolidated balance sheet, related consolidated
                    statements of income, retained earnings and cash flows
                    of the Borrower and its Subsidiaries showing its
                    financial condition as of the last day of such fiscal
                    quarter and the results of operations for such fiscal
                    quarter, certified by the chief financial officer of
                    the Borrower as to (i) fair presentation of the
                    financial position and the results of operations of the
                    Borrower and its Subsidiaries and (ii) having been
                    prepared in accordance with generally accepted
                    accounting principles consistently applied;

               (iii) As soon as practicable and when available, and in any
                    event within 45 days after the end of each fiscal
                    quarter of each Material Subsidiary (other than the 4th
                    quarter), a consolidating balance sheet, related
                    consolidating statements of income, retained earnings
                    and cash flows of such Material Subsidiary showing its
                    financial condition as of the last day of such fiscal
                    quarter and the results of operations for such fiscal
                    quarter, certified by the chief financial officer of
                    such Material Subsidiary as to (i) fair presentation of
                    the financial position and the results of operations of
                    such Material Subsidiary and (ii) having been prepared
                    in accordance with generally accepted accounting
                    principles consistently applied;

               (iv) Promptly following the occurrence thereof, notice of
                    any material adverse change in the business, affairs or
                    financial condition of the Borrower or any of its
                    Material Subsidiaries;

               (v)  Such other information as to the financial condition,
                    operations, business, properties and other assets of
                    the Borrower and its Subsidiaries as the Bank may from
                    time to time reasonably request.

5.       Events of Default

         Notwithstanding the provisions under the Application to open an
Account, an Event of Default in respect of any of the Banking Services
shall occur if:

          (a) Any default shall occur in the payment of principal of or
          interest on the amount due under any agreement of the Banking
          Services, as and when the same shall become due and payable,
          whether at the due date thereof, by acceleration, mandatory
          prepayment or otherwise, and such default is not remedied until
          the later of 30 (thirty) days from the due date of the respective
          sum or 7 (seven) days from the date of Borrower's receipt of the
          Bank's notice to that effect; or

          (b) Any default shall occur in the due observance or performance
          by the Borrower or any Material Subsidiary of any other covenant,
          agreement or condition contained herein or in any other document
          for the Banking Services and such default, if capable of being
          cured, is not remedied until the later of 45 (forty five) days
          from the due date of the respective default or 14 (fourteen) days
          from the date of Borrower's receipt of the Bank's notice to that
          effect; or

          (c) Any representation or warranty made herein or under any
          document for the Banking Services shall prove to have been false
          or misleading in any material respect when made; provided,
          however, that with respect to circumstances that do not affect
          the validity, legality or enforceability of the relevant document
          for the Banking Services, the circumstances to which such
          representation or warranty relates, if capable of being corrected
          so that such representation or warranty shall become correct
          again, shall not have been corrected until the earlier of 7
          (seven) days from receipt of the Bank's notice or 7 (seven) days
          from the date upon the Borrower has become aware thereof; or

          (d) Any order, judgment or decree shall be entered in any ex
          parte proceeding against the Borrower or any Material Subsidiary
          decreeing the dissolution of the Borrower or such Material
          Subsidiary and such order, judgment or decree shall remain
          undischarged or unstayed for a period in excess of 60 days; or

          (e) Final judgment for the payment of money in excess of $500,000
          (to the extent not covered by insurance or bond) shall be
          rendered by a court of record against the and the Borrower or any
          of its Material Subsidiaries, and the Borrower or any such
          Material Subsidiary shall not discharge the same or provide for
          its discharge in accordance with its terms, or procure a stay of
          execution thereof within 30 days from the date of entry thereof
          and within such period of 30 days, or such longer period during
          which execution of such judgment shall have been stayed, appeal
          therefrom and cause the execution thereof to be stayed during
          such appeal; or

          (f) The Borrower or any Material Subsidiary shall suspend or
          discontinue its business other than pursuant to a Permitted
          Restructure, or (ii) the Borrower or any Material Subsidiary
          shall call a meeting of its creditors for the purpose of
          postponing or adjusting its liabilities or seeking an arrangement
          with its creditors, shall make an assignment for the benefit of
          creditors or a composition with creditors, shall be unable or
          admit in writing its inability to pay its debts generally as they
          mature, shall generally not pay its debts when they are due,
          shall file a petition in bankruptcy, shall become insolvent
          (howsoever such insolvency may be evidenced), shall suffer an
          order for relief to be entered against it under any bankruptcy
          law which shall remain undismissed or unstayed for a period of 60
          days or more, shall petition or apply to any tribunal for the
          appointment of any receiver, custodian, liquidator or trustee of
          or for it or any substantial part of its property or other assets
          or shall commence any proceeding relating to it under any
          bankruptcy, reorganization, arrangement, readjustment of debt,
          receivership, dissolution or liquidation law or statute of any
          jurisdiction, whether now or hereafter in effect; or there shall
          be commenced against the Borrower or any Material Subsidiary, any
          such proceeding which shall remain undismissed or unstayed for a
          period of 60 days or more; or the Borrower or any of its
          Subsidiaries shall take any action for the purpose of effecting
          any of the foregoing; or

          (g) the Bank in its sole discretion considers that a material
          adverse change in the financial or business condition of the
          Borrower shall have occurred;

          (h) Any of the documents for the Banking Services shall become
          invalid or unenforceable, in whole or in part, and such
          unenforceability persists for a period of 30 (thirty) days, or
          any default or event of default shall have occurred thereunder,
          and such default persists for more than the period of grace, if
          any, specified therefor;

          (i) The Borrower or any of its Subsidiaries shall be in default
          under any other obligation to Bank Hapoalim B.M., including its
          New York Branches, and such default persists for more than the
          period of grace, if any, specified therefor, and as long as such
          default is continuing.

6.       Disclosure of Information

          (a) Any branch of the bank administering the loan may disclose to
          the Head Office of the Bank, or to any assignee thereof, or to
          the Bank of Israel, the Examiner of Bank, the Controller of
          Foreign Exchange or any person acting under their authority or to
          any other regulatory authority having jurisdiction over the Bank
          or over the Head Office of the Bank or to the Head Office of the
          Bank for delivery by the latter to any such regulatory
          authorities, such information about the Borrower or the Loan as
          may be required by such regulatory authorities or as the branch
          or the Head Office of the Bank may deem appropriate; provided
          that upon the disclosure of information to any person who/which
          is not a regulatory authority, such person will confirm to the
          bank that such information will be treated in confidence.

7.       Notices

          (a) Each communication to be made under this agreement shall be
          made in writing and, unless otherwise stated, may be made also by
          telex or facsimile transmission.

          (b) Each communication or document to be made or delivered by one
          person to another pursuant to this Agreement shall (unless that
          other party has by fifteen (15) days' written notice specified
          another address) be made or delivered to that party, addressed as
          follows:

               (i) if to the Borrower at:

               Yokneam Industrial Park,
               P.O.B. 240, Yokneam 20692
               Israel
               Fax No: 04-9599070

              (ii) if to the Bank at:-

               Bank Hapoalim B.M
               41 Rothschild Blvd
               Tel Aviv
               Fax no. 03-5675699
               Att: Mrs. Lea Landau

and shall be deemed to have been made or delivered the next banking day
after dispatch (in the case of any communication made by telex or any form
of facsimile transmission) or (in the case of any communication made by
letter) the next banking day after being physically left at that address.

8.       Governing Law and Jurisdiction

               (a) This Agreement shall be governed by and construed in
               accordance with the laws of the State of Israel.

               (b) For the purpose of this Agreement the exclusive place of
               jurisdiction shall be the competent courts of law in Tel
               Aviv-Jaffa.

9.       Special Conditions

         Notwithstanding Section 6 of the Companies Law 5759-1999 ,the Bank
hereby agrees that in any Event of Default (as such term is defined under
this Agreement) it shall have no claim , demand or any recourse to the
assets and rights of any of the shareholders of the Borrower.

         In Witness Whereof the Borrower and the Bank have caused this
Agreement to be duly executed and delivered in Tel Aviv., as of the date
first above written.


    /s/ Sagi Genger                                         /s/ L. Landau

                                                             /s/ L. Ben Ami

    ESC Medical Systems Ltd.                             Bank Hapoalim B.M.

                                                               Exhibit 99.1

               ESC Completes Acquisition of Coherent Medical

         YOKNEAM, Israel, April 30 /PRNewswire/ -- ESC Medical Systems
Ltd(NASDAQ: ESCM - news) announced today that it closed the previously
announced transaction to acquire the assets and assume the liabilities of
Coherent Medical Group from Coherent, Inc. (NASDAQ: COHR - news). ESC
results for the second quarter ended June 30, 2001, will reflect the
Coherent Medical Group results as of May 1. With the close of this
transaction we are the global leader in cutting- edge laser and light based
technologies for medical and aesthetic applications," said Yacha Sutton
President and CEO of ESC Medical Systems Ltd. "This acquisition elevates
our capabilities in the aesthetic, surgical and ophthalmic marketplace. Our
management and employees are focused on delivering on the potential of the
combination".

         ESC Shareholders will vote on a board proposal to change the
corporate name to "Lumenis" at the upcoming shareholders meeting.

         ESC Medical Systems develops, manufactures and markets medical
devices utilizing state-of the art proprietary intense pulsed light source
and laser technology. Its systems are used in a variety of aesthetic,
surgical and medical applications, including the non-invasive treatment of
veins and other benign vascular lesions, pigmented lesions, hair removal
and skin rejuvenation, as well as ENT, OB/GYN and neurosurgery. For more
information about the Company, and its products log on to
http://www.lumenis.com or http://www.escmed.com .

         Founded in 1966, Coherent, Inc, is a Standard & Poor's SmallCap
600 company and a world leader in providing photonics based solutions to
the commercial, scientific,medical, and telecom markets. For more
information about Coherent, visit the Company's Web site at
http://www.coherentinc.com for product and financial updates.

         ESC cautions that certain forward looking statements contained in
this announcement or other statements which may be made about the
transaction, including, without limitation, the effect of the combination
on ESC's earnings and cash flows, are qualified by important factors that
could cause actual operating results to differ materially from those
described herein or any such statements. These factors could include, among
others, the following: (i) factors disclosed from time to time in ESC's
filings with the Securities and Exchange Commission; (ii) the occurrence of
unanticipated events and circumstances which may render the transaction
less beneficial to ESC than projected; (iii) the effect of the intense
competition facing ESC and Coherent's medical group; and (iv) the inability
of ESC to integrate successfully its operations with those of Coherent's
medical group and thereby achieve the anticipated cost savings and other
synergies and be in a position to take advantage of potential opportunities
for growth. Results actually achieved thus may differ materially from the
expected results described herein or any such statement. Please refer to
ESC's Annual Reports on Form 10-K, its Current Reports on Form 8-K and its
Quarterly Reports on Form 10-Q for a more detailed description of certain
of these factors.
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{"company-data": {"conformed-name": "ESC MEDICAL SYSTEMS LTD", "cik": "0001004945", "assigned-sic": "5047", "irs-number": "000000000", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-27572", "film-number": "1640545"}, "business-address": {"street1": "PO BOX 240", "city": "YOKNEAM ISRAEL 20692", "state": "L5", "zip": "00000", "phone": "9729599000"}, "mail-address": {"street1": "100 CRESENT ROAD", "city": "NEEDHAM", "state": "MA", "zip": "02194"}}
SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                                                             -------------

                                  FORM 8-K

                               CURRENT REPORT
                   PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

      Date of report (Date of earliest event reported): April 30, 2001

                         ESC MEDICAL SYSTEMS, LTD.

           ------------------------------------------------------
             (Exact Name of Registrant as Specified in Charter)

               Israel                     000-27572            Not Applicable
               ------                     ---------            --------------
   (State or Other Jurisdiction of       (Commission           (IRS Employer
           Incorporation)                File Number)       Identification No.)

                    P.O. Box 240, Yokneam 20692, Israel
                    -----------------------------------
        (Address of principal executive offices, including zip code)

                  Registrant's telephone number, including area code:
                       011-972-4-959-9000

                               Not Applicable

       (Former Name or Former Address, if Changed Since Last Report)

Item 2.  Acquisition or Disposition of Assets

         On February 25, 2001, ESC Medical Systems, Ltd. ("ESC"), its
wholly-owned subsidiary, Energy Systems Holdings Inc. ("ESH"), and
Coherent, Inc. ("Coherent"), entered into an Asset Purchase Agreement,
dated as of February 25, 2001 (the "Asset Purchase Agreement"), pursuant to
which Coherent agreed to sell or cause to be sold to ESC and certain of its
subsidiaries (collectively, the "Buyer Group") substantially all of the
assets and liabilities of the Coherent Medical Group, Coherent's medical
products division (the "Acquisition"). On April 30, 2001, the Buyer Group
and Coherent and its subsidiaries completed the Acquisition (the
"Closing"). In addition, on April 30, 2001, the Asset Purchase Agreement
was amended by the parties thereto (the "First Amendment"). ESC issued a
press release relating to the Acquisition on April 30, 2001. A copy of the
press release is filed as Exhibit 99.1 hereto. The Asset Purchase Agreement
and an amendment thereto dated April 30, 2001 are filed as Exhibits 2.1 and
2.2 hereto, respectively.

         At the Closing, the Coherent entities received $100,000,000 in
cash (the "Cash Purchase Price"), 5,432,099 ESC ordinary shares (the
"Shares"), and an eighteen-month note bearing interest at the rate of 5%
per annum and in the principal amount of $12,900,000 (the "Note", together
with the Cash Purchase Price and the Shares, the "Closing Consideration").
The Asset Purchase Agreement also provides for a post-Closing earn-out
payment to Coherent of up to $25,000,000, subject to certain financial
conditions being met (the "Post-Closing Consideration"). The amount and
terms of the Closing Consideration and the Post-Closing Consideration were
determined by arms-length negotiations among the parties.

         Effective as of the Closing, Bernard Coullaird, Chairman and CEO
of Coherent, became a member of ESC's Board of Directors.

         To finance the Acquisition, ongoing working capital needs and, if
needed, the refinancing of ESC's 6% convertible subordinated notes due
September 1, 2002, ESC and certain of its subsidiaries entered into various
financing arrangements (the "Financing") with Bank Hapoalim B.M (the
"Bank"). The financing consists of: (a) a $100,000,000 six-year term loan,
(b) a $50,000,000 line of credit and (c) a letter of intent pursuant to
which the Bank agreed, subject to the terms and conditions set forth
therein, to provide up to $92,000,000 to refinance ESC's 6% convertible
subordinated notes due September 1, 2002. Each of the facilities is or will
be secured by substantially all of the assets of ESC, ESH and certain of
their material subsidiaries. In connection with the Financing, on April 30,
2001, ESC and the Bank also entered into, subject to shareholder approval,
a five year option agreement granting the Bank or any of its subsidiaries
the right to purchase from ESC up to 2,500,000 ESC ordinary shares at a
purchase price of US$20.25 per share, subject to certain adjustments.

         The assets acquired include, among other things, plant, equipment
and other physical property. It is ESC's current intention to continue to
use such assets for purposes similar to the purposes for which those assets
are currently being used.

         For more information concerning the Acquisition and the Financing,
please see the agreements which have been filed as exhibits or are
incorporated by reference into this report.

Item 7.  Financial Statements and Exhibits.

         (a) Financial Statements of Business Acquired.

         The financial statements required by Item 7 for this Form 8-K will
         be filed no later than July 13, 2001.

         (b) Pro Forma Financial Information.

         The pro forma financial information required by Item 7 for this
         Form 8-K will be filed no later than July 13, 2001.

         (c) Exhibits

Exhibit Number                         Description
2.1                                    Asset Purchase Agreement, which is
                                       incorporated by reference to Exhibit
                                       2.1 to the Current Report on Form
                                       8-K filed by ESC on February 25,
                                       2001.

2.2                                    First Amendment to the Asset
                                       Purchase Agreement, dated as of
                                       April 30, 2001, by and among ESC
                                       Medical Systems, Ltd., Energy
                                       Systems Holdings Inc. and Coherent,
                                       Inc.

10.1                                   Loan Agreement, dated as of April
                                       30, 2001, between Energy Systems
                                       Holdings Inc. and Bank Hapoalim
                                       B.M., an Israeli banking corporation
                                       acting through its New York branch.

10.2                                   Option Agreement, dated as of April
                                       30, 2001, between ESC Medical
                                       Systems, Ltd. and Bank Hapoalim B.M.
                                       and related letters dated April 30,
                                       2001.

10.3                                   Letter of Intent, dated as of April
                                       30, 2001, from Bank Hapoalim B.M.

10.4                                   Letters, dated April 24, 2001,
                                       regarding short term line of credit
                                       and related Agreement, dated as of
                                       April 30, 2001 between Bank Hapoalim
                                       B.M. and ESC Medical Systems, Ltd.

99.1                                   Press release dated April 30, 2001
                                       and titled "ESC Completes
                                       Acquisition of Coherent Medical".

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

                                                   ESC MEDICAL SYSTEMS LTD.

                                                   By:/s/Hadar Solomon
                                                   Name: Hadar Solomon
                                                   Title: General Counsel and
                                                          Corporate Secretary

Dated: May 15, 2001

                                                                Exhibit 2.2

                             FIRST AMENDMENT TO
                          ASSET PURCHASE AGREEMENT

         FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of April 30,
2001 (the "First Amendment"), by and among ESC MEDICAL SYSTEMS, LTD., a
corporation organized under the laws of the State of Israel ("Parent"),
ENERGY SYSTEMS HOLDINGS INC., a Delaware corporation (the "Buyer," and
collectively with Parent "Buyer Group"), and COHERENT, INC., a Delaware
corporation ("Seller"). Capitalized terms used and not otherwise defined in
this First Amendment shall have the meaning provided for such terms in the
Asset Purchase Agreement.

         WHEREAS, Parent, Buyer and Seller have entered into an Asset
Purchase Agreement, dated as of February 25, 2001 (the "Asset Purchase
Agreement");

         WHEREAS, the consummation of the transactions contemplated by the
Asset Purchase Agreement with respect to the operation of the Business by
Seller and its Subsidiaries in Japan and China is subject to regulatory
approvals and other requirements in such jurisdictions which may not be
obtained prior to the expected Closing Date;

         WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement that the transactions
contemplated by all Ancillary Agreements relating to the transfers of the
Assets by Non-U.S. Companies be consummated simultaneously with or
immediately prior to the Closing; and

         WHEREAS, the parties desire to consummate to the fullest extent
possible the transactions contemplated by the Asset Purchase Agreement on
the earliest possible date and provide each of Seller and Buyer Group with
economic and business benefits substantially comparable to those which
would have been available to each of Seller and Buyer Group if such
transactions had been fully consummated.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, intending to be legally bound
hereby, the parties agree as follows:

         1. The Asset Purchase Agreement is hereby amended to add a new
Section 1.10 to read in its entirety as follows:

                  "Section 1.10  Delayed Closings

                           (a) Buyer Group and Seller acknowledge that,
notwithstanding anything contained herein to the contrary, the transfer,
conveyance and delivery of the Japanese Regulatory Assets shall not occur
on the Closing Date and shall not be a condition to the Closing. The
parties will continue to use their reasonable best efforts to consummate
and to cause their respective subsidiaries to consummate the transfer of
the Japanese Regulatory Assets pursuant to the Asset Purchase Agreement,
attached hereto as Exhibit A (the "Japan Asset Purchase Agreement"), to
occur as promptly as practicable following the Closing.

                           (b) Buyer Group and Seller acknowledge that,
notwithstanding anything contained herein to the contrary, the transfer,
conveyance and delivery of the Local Transferred Assets (as defined in the
Asset Purchase Agreement attached hereto as Exhibit B (the "China Asset
Purchase Agreement")) shall not occur on the Closing Date and shall not be
a condition to the Closing. The parties will continue to use their
reasonable best efforts to consummate and to cause their subsidiaries to
consummate the transfer of the Local Transferred Assets to occur as
promptly as practicable following the Closing pursuant to the terms of
contemplated by the China Asset Purchase Agreement.

                           (c) The provisions of Section 1.6 shall be
applied on a basis as if all the closings referred to in the preceding
subsections (a) and (b) above had occurred simultaneously with the Closing.
Similarly, the number of shares of Parent Stock to be sold to Seller at the
Closing shall be determined as if all of the closings referred to in the
preceding subsections (a) and (b) had occurred simultaneously with the
Closing."

         2. All obligations of Seller pursuant to and in accordance with
the following Sections of the Asset Purchase Agreement shall remain in full
force and effect until the closing of the sale of the Assets contemplated
by the China Asset Purchase Agreement and the Japan Asset Purchase
Agreement: Section 5.1 (Conduct of Business), Section 5.2 (Access to
Information), Section 5.3 (Consents and Approvals), Section 5.4 (Reasonable
Efforts), Section 5.7 (Transfers Not Effected as of Closing), Section 5.8
(Retention), Section 5.9 (Prohibition on Solicitation and Hiring), Section
5.10 (No Negotiation) and Section 5.17 (Further Actions).

         3. The Asset Purchase Agreement is hereby amended to add a new
Section 1.11 to read in its entirety as follows:

                  "Section 1.11  Stock Transfer

                           (a) Buyer Group and Seller acknowledge that
notwithstanding anything contained herein to the contrary, Seller will
transfer, assign, convey and deliver to Laser Industries Ltd all the
outstanding shares of stock of (i) Coherent Star Medical Japan, Inc. (the
"Star Stock") and (ii) Coherent Medical Mexico S.A. de C.V. (the "Mexican
Stock") pursuant to and in accordance with the Stock Purchase Agreements
attached hereto as Exhibit C and Exhibit D, respectively. The Star Stock
and the Mexican Stock will for all purposes related to this Agreement, be
deemed an Asset.

                           (b) With respect to Coherent Star Medical Japan,
Inc. and Coherent Medical Mexico S.A. de C.V., Seller agrees to indemnify
and hold harmless Buyer Group from and against any and all liabilities for
Taxes arising in respect of taxable periods ending on or before the Closing
or, with respect to taxable periods that begin before but end after the
Closing, any Taxes attributable to the portion of such taxable period that
begins before and ends on the Closing."

         4. Section 6.1(f) of the Asset Purchase Agreement is hereby
amended in its entirety to read as follows:

                  "(f) The transactions contemplated by each of the
         Ancillary Agreements relating to the transfer of the Assets by
         Non-U.S. Companies, other than with respect to the China Asset
         Purchase Agreement and the Japan Asset Purchase Agreement, shall
         be or have been consummated simultaneously with or immediately
         prior to the Closing."

         5. Section 6.1 of the Asset Purchase Agreement is hereby amended
to include a new Section 6.1 (g) to read in its entirety as follows:

                  "(g) Each of Parent and the relevant Parent Subsidiaries
         and Seller and the Relevant Subsidiaries of Seller shall have
         executed and delivered the Japan Asset Purchase Agreement in the
         form attached hereto as Exhibit A and the China Asset Purchase
         Agreement in the form attached as Exhibit B and any attachments
         and Exhibits thereto".

         6. Section 9.7 of the Asset Purchase Agreement shall be amended to
include the following:

                  "(i)

                   (j) As used in this Agreement, "Japanese Regulatory
Assets" shall have the meaning set forth in the Japan Purchase Agreement.

         7. Seller and Buyer Group agree that, notwithstanding anything to
the contrary set forth in any Non-U.S. Agreement with respect to Transfer
Taxes (including but not limited to VAT), as between Seller and Buyer
Group, the provisions of Section 7.6 of the Asset Purchase Agreement will
prevail.

         8. The Asset Purchase Agreement is hereby amended to add a new
Section 5.26 to read in its entirety as follows:

         "Section 5.26. Consumption Tax Covenant

         On or before December 31, 2001, Buyer shall register as, and make
an election to become, a consumption tax payer in JapanExcept as
specifically amended in this First Amendment, the Asset Purchase Agreement
shall remain in full force and effect as originally constituted and the
undersigned shall remain obligated pursuant to the terms thereunder.

         9. This First Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York (regardless of the laws
that might otherwise govern under applicable principles of conflict of laws
thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.

         10. This First Amendment may be executed simultaneously in
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties have caused this First Amendment
to be executed as of the date first written above.

                                            ESC MEDICAL SYSTEMS, LTD.

                                            By: /s/ Yacha Sutton
                                                ----------------------------
                                            Name: Yacha Sutton
                                            Title:   Chief Executive Officer

                                            ENERGY SYSTEMS HOLDINGS INC.

                                            By: /s/ Yacha Sutton
                                                ----------------------------
                                            Name:    Yacha Sutton
                                            Title:   Director

                                            COHERENT, INC.

                                            By: /s/ Bernard Couillaud
                                            Name:    Bernard Couillaud
                                            Title: President and Chief
                                                   Executive Officer

                                                               Exhibit 10.1

                               LOAN AGREEMENT

         THIS LOAN AGREEMENT, dated as of April 30, 2001, between ENERGY
SYSTEMS HOLDINGS INC., a Delaware corporation (the "Borrower"), and BANK
HAPOALIM B.M., an Israeli banking corporation acting through its New York
Branches (the "Bank").

         In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:

1.       DEFINITIONS.

         1.1. Certain General Definitions. For all purposes of this
Agreement and the other Loan Documents, unless the context otherwise
requires:

         "Agreement" means this Loan Agreement, including all Exhibits and
Schedules hereto, as the same may be amended or otherwise modified from
time to time, and the terms "herein," "hereof," "hereunder" and like terms
shall be taken as referring to this Agreement in its entirety and shall not
be limited to any particular section or provision thereof.

         "Asset Purchase Agreement" means that certain Asset Purchase
Agreement dated as of February 25, 2001 and amended as of April 30, 2001,
between the Parent, the Borrower and the Seller, pursuant to which the
Borrower is to acquire the CMG Division.

         "Asset Purchase Agreement Pledge" means the Parent Asset Purchase
Agreement Pledge to be executed and delivered by the Parent, substantially
in the form of Exhibit B-1, as the same may be amended, supplemented or
otherwise modified from time to time.

         "Bank's Group" shall have the meaning provided therefor in Section
12.11(b) hereof.

         "Borrower Security Agreement" means the Borrower Security
Agreement to be executed and delivered by the Borrower, substantially in
the form of Exhibit B-2, as the same may be amended, supplemented or
otherwise modified from time to time.

         "Business Day" means a day on which (i) dealings in Dollar
deposits are carried on in the London Interbank Eurodollar market and (if
payment is required to be made on such day) on which banks are open for
business in London and in New York, and (ii) the Bank's New York Branches
shall be open for ordinary business. In the Bank's discretion, the New York
Branches may be closed on any Saturday, Sunday, legal holiday or other day
on which it is lawfully permitted to close.

         "Claimed Amount" shall have the meaning provided therefor in
Section 2.6(d) hereof.

         "Closing Date" means the date on which all of the conditions
specified in Section 8 have been satisfied.

         "CMG Division" means the Medical Division of the Seller, as more
specifically described in the Asset Purchase Agreement.

         "Collateral" means (a) all assets of the Parent (including but not
limited to the following tangible and intangible assets: receivables,
inventory, intangible assets, fixed assets, equipment, investments), now
owned or hereafter acquired, upon which a Lien is purported to be created
by the Parent Security Agreement, (b) all assets of the Borrower (including
but not limited to the following tangible and intangible assets:
receivables, inventory, intangible assets, fixed assets, equipment,
investments), now owned or hereafter acquired, upon which a Lien is
purported to be created by the Borrower Security Agreement, (c) all assets
of ESC Inc. (including but not limited to the following tangible and
intangible assets: receivables, inventory, intangible assets, fixed assets,
equipment, investments), now owned or hereafter acquired, upon which a Lien
is purported to be created by the ESC Inc. Security Agreement, (d) all
assets of the Italian Subsidiary and of the UK Subsidiary (including but
not limited to the following tangible and intangible assets: receivables,
inventory, intangible assets, fixed assets, equipment, investments), now
owned or hereafter acquired, upon which a Lien is purported to be created
by such Material Subsidiary's Material Subsidiary Security Agreement, (e)
the Parent Guarantee, (f) all of the shares of the Japanese Subsidiary held
by the Parent upon which a Lien is purported to be created by the Japanese
Pledge Agreement, (g) all of the shares of the German Subsidiary held by
the Parent upon which a Lien is purported to be created by the German
Subsidiary Security Agreement, (h) all of the shares of the Dutch
Subsidiary held by the Parent upon which a Lien is purported to be created
by the Dutch Subsidiary Security Agreement, (h) all of the shares of the
Luxembourg Subsidiary held by the Parent upon which a Lien is purported to
be created by the Luxembourg Subsidiary Security Agreement, and (i) the
Asset Purchase Agreement Pledge.

         "Control" means the power to direct or cause the direction of the
management and policies of a Person, either alone or in conjunction with
others and whether through the ownership of voting securities, by contract
or otherwise.

         "Default" means any condition, event or act which, with notice or
lapse of time, or both, would constitute an Event of Default.

         "Default Interest" shall have the meaning provided therefor in
Section 5.2 (a) hereof.

         "Deferred Payment" means a payment in the aggregate amount of
$12,904,000 to be made by the Parent to the Seller in connection with the
purchase of the CMG Division and to be evidenced by the Deferred Payment
Note.

         "Deferred Payment Note" means the promissory note evidencing the
Deferred Payment, made by the Parent in favor of the Seller, to be
delivered at the Closing (as defined in the Asset Purchase Agreement).

         "Disbursement Request" shall have the meaning provided therefor in
Section 2.1 hereof.

         "Dollars" and "$" means dollars in lawful currency of the United
States.

         "Dutch Subsidiary" means Lumenis Holdings (Holland) B.V., a
Subsidiary of the Parent.

         "Dutch Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the Dutch Subsidiary held by the Parent, to be executed and delivered by
the Parent, in form and substance satisfactory to the Bank.

         "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including the rules and regulations
promulgated thereunder.

         "ESC Financial Statements" shall have the meaning provided
therefor in Section 7.6 hereof.

         "ESC Inc." means ESC Medical Systems Inc., a Massachusetts
corporation and a Subsidiary of the Borrower.

         "ESC Inc. Guarantee" means the Guarantee to be executed and
delivered by ESC Inc., substantially in the form of Exhibit C-1, as the
same may be amended, supplemented or otherwise modified from time to time.

         "ESC Inc. Security Agreement" means the Subsidiary Security
Agreement to be executed and delivered by ESC Inc., substantially in the
form of Exhibit C, as the same may be amended, supplemented or otherwise
modified from time to time.

         "Event of Default" shall have the meaning provided therefor in
Section 11.1 hereof.

         "German Subsidiary" means ESC Medical Systems GmbH, a Subsidiary
of the Parent.

         "German Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the German Subsidiary held by the Parent, to be executed and delivered by
the Parent, in form and substance satisfactory to the Bank.

         "Governmental Person" means any United States, Israeli, or other
national, state or local government, political subdivision, or
governmental, quasi-governmental, judicial, public or statutory
instrumentality, agency, authority, body or entity including the Federal
Deposit Insurance Corporation, any central bank or any comparable
authority.

         "Governmental Rule" means any law, rule, regulation, ordinance,
order, code, interpretation, judgment, decree, directive, guideline, policy
or similar form of decision of any Governmental Person.

         "Indebtedness" of any Person means indebtedness incurred by that
Person to banks or financial institutions.

         "Interest Payment Date" means the last day of each Interest
Period.

         "Interest Period" means (i) the period commencing on the Closing
Date and ending three (3) months thereafter, and thereafter (or at the
option of the Bank, the period commencing on the Closing Date and ending on
the last Business Day of the third month following the Closing Date), (ii)
each period commencing on the last day of the preceding Interest Period and
ending three (3) months thereafter; provided, however, that (X) if any
Interest Period would otherwise end on a day which is not a Business Day,
the termination thereof shall be postponed to the next succeeding Business
Day, unless such Business Day falls in the next calendar month, in which
case such Interest Period shall end on the immediately preceding day which
is a Business Day, (Y) if any Interest Period begins on a day for which
there is no numerically corresponding day in the appropriate subsequent
month at the end of such Interest Period, then such Interest Period shall
end on the last Business Day of such appropriate subsequent calendar month,
and (Z) any Interest Period that would otherwise extend beyond the Maturity
Date shall end on the Maturity Date.

         "Italian Subsidiary" means ESC Medical srl, a Subsidiary of the
Parent.

         "Italian Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the assets of
the Italian Subsidiary, to be executed and delivered by the Parent, in form
and substance satisfactory to the Bank.

         "Japanese Subsidiary" means ESC Sharplan Co. Ltd., a Subsidiary of
the Parent.

         "Japanese Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the Japanese Subsidiary held by the Parent, to be executed and delivered by
the Parent, in form and substance satisfactory to the Bank.

         "Lender" shall have the meaning provided therefor in Section
2.6(b) hereof.

         "LIBOR" means the rate of interest (expressed as any annual rate)
determined by the Bank to be the arithmetic mean (rounded up, if necessary
to the nearest whole multiple of 1/8%) of the (i) rates for Dollar deposits
offered to the Bank that appear on the LIBOR 1 page of the Reuters Screen,
or any other Reuters Screen used by the Bank for determining such rates,
for Dollars as of 11:00 a.m. London time, two (2) Business Days prior to
the commencement of the respective Interest Period (or as of 11:00 a.m.
London time on the Closing Date, with respect to the Interest Period
commencing on the Closing Date), for an amount equal (or approximating as
close as possible) to the principal amount of the Loan outstanding from
time to time and for the respective Interest Period, or (ii) if Clause (i)
above is inapplicable, the rates of interest communicated to, and at the
request of, the Bank, by or on behalf of the principal London offices of
the Reference Banks or any two of them, as being the rates at which they
would offer to the Bank deposits in Dollars in the London Interbank
Eurodollar Market, for the respective Interest Period as of 11:00 a.m.
London time, two (2) Banking Days prior to the commencement of that
respective Interest Period, or (iii) if Clause (i) or (ii) above is
inapplicable or unavailable, then the rates of interest communicated to,
and at the request of, the Bank, by at least two (2) other banks in London
Interbank Eurodollar Market, as being the rates at which such banks would
offer the Bank deposits in Dollars as of 11:00 a.m., London time, two (2)
Business Days prior to the commencement of that respective Interest Period
for an amount equal (or approximating as close as possible) to the
principal amount of the Loan outstanding from time to time and for the
respective Interest Period.

         "Lien" means any floating or fixed charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or
in property or other assets of a Person, whether absolute or conditional,
voluntary or involuntary, whether created pursuant to agreement, arising by
force of statute, by judicial proceedings or otherwise.

         "Loan" shall have the meaning provided therefor in Section 2.1
hereof.

         "Loan Documents" means this Agreement, the Note, the Borrower
Security Agreement, the ESC Inc. Security Agreement, the Parent Security
Agreement, each Material Subsidiary Security Agreement, the Parent
Guarantee, the ESC Inc. Guarantee and the Option - Agreement.

         "Luxembourg Subsidiary" means Lumenis Luxembourg shrl, a
Subsidiary of the Parent.

         "Luxembourg Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the stock of
the Luxembourg Subsidiary held by a Subsidiary of the Parent, to be
executed and delivered by the Parent, in form and substance satisfactory to
the Bank.

         "Margin" means 1.75 % per annum.

         "Material Subsidiaries" means the Dutch Subsidiary, the German
Subsidiary, the Italian Subsidiary, the Japanese Subsidiary and the U.K.
Subsidiary.

         "Material Subsidiary Security Agreements" means the collective
reference to (a) the Dutch Subsidiary Security Agreement (b) the German
Subsidiary Security Agreement, (c) the Italian Subsidiary Security
Agreement, (d) the Japanese Subsidiary Security Agreement, (e) the
Luxembourg Subsidiary Security Agreement and (f) the U.K. Subsidiary
Security Agreement.

         "Maturity Date" means April 30, 2007.

         "New York Branches" means the New York branches of the Bank.

         "NIS" means new Israeli shekels.

         "Note" means the Borrower's promissory note, substantially in the
form of Exhibit A hereto, with appropriate insertions.

         "Option Agreement" means the Option Agreement to be executed and
delivered by the Parent in favor of the Bank, substantially in the form of
Exhibit F, as the same may be amended, supplemented or otherwise modified
from time to time.

         "Option Shares" shall have the meaning set forth in the Option
Agreement.

         "Parent" means ESC Medical Systems Ltd., an Israeli corporation.

         "Parent Guarantee" means the Parent Guarantee to be executed and
delivered by the Parent, substantially in the form of Exhibit E, as the
same may be amended, supplemented or otherwise modified from time to time.

         "Parent Security Agreement" means the Parent Security Agreement to
be executed and delivered by the Parent, substantially in the form of
Exhibit D, as the same may be amended, supplemented or otherwise modified
from time to time.

         "PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.

         "Permitted Encumbrances" means (i) Liens for current taxes not yet
due or taxes being contested in good faith, (ii) Liens created by operation
of law, or incurred in the ordinary course of business and securing
payments not delinquent or payments which are being contested in good
faith, (iii) leases or the rights, if any, of third-party suppliers or
other vendors having possession of equipment, (iv) imperfections of title,
easements and zoning restrictions, if any, (v) judgments Liens, in respect
of judgments that do not constitute an Event of Default hereunder, (vi)
Liens permitted under the Asset Purchase Agreement, and (vii) Liens on
assets purchased subsequent to the Closing Date other than with financing
obtained from the Bank, and (xii) Liens in favor of the Bank.

         "Permitted Restructure" means any transaction, merger,
consolidation or disposition of assets or shares, with respect to the
Parent or any of its Subsidiaries, unless resulting in (i) any Person
holding more than 50% of the voting rights of the Parent, or (ii) the
disposition of assets, other than to Parent or Parent's Subsidiaries,
exceeding (a) $5 million (US$5,000,000) of assets purchased under the Asset
Purchase Agreement or (b) $10 million (US$10,000,000) of other assets of
Parent existing as the Closing Date.

         "Person" means any individual, partnership, limited liability
company, joint venture, corporation (including, without limitation, the
Parent, the Borrower or any Subsidiary), trust, estate, unincorporated
organization or association or Governmental Person. If any Person is a
corporation, unless otherwise provided, the use of the term "Person" to
refer to that corporation means that corporation as a single entity and not
as consolidated with its Subsidiaries.

         "Plan" means an employee benefit plan or other plan, including
both single-employer and multi-employer plans, maintained for employees of
the Borrower or any Subsidiary thereof or any controlled group of trades or
businesses under common control, as defined respectively in Sections 1563
and 414(c) of the Internal Revenue Code of 1986, as amended, of which the
Borrower or any Subsidiary thereof is or becomes a part, and covered by
Title IV of ERISA.

         "Prepayment Date" shall have the meaning provided therefor in
Section 2.3(a) hereof.

         "Reference Bank" means Barclays Bank PLC, National Westminster
Bank PLC and Bankers Trust Company (in its name or as Deutsche Bank)

         "Reportable Event" shall have the meaning set forth in Section
4043(b) of Title IV of ERISA.

         "Seller" means Coherent Inc., a Delaware corporation.

         "Seller's Shares" means 5,432,099 ordinary shares, par value NIS
0.1 per share, of the Parent to be issued to the Seller pursuant to the
Asset Purchase Agreement.

         "Short Term Credit Loan" means the loan issued by the Bank to the
Parent pursuant to that certain Short Term Credit Letter in the principal
amount of $50,000,000.

         "Short Term Loan Credit Letter" means the Short Term Loan Credit
Letter dated April 24, 2001, between the Parent and the Bank.

         "Subsidiary" means, when used with reference to any corporation,
any corporation of which at least a majority of the outstanding stock,
having by the terms thereof ordinary voting power to elect a majority of
the Board of Directors of such corporation, is at the time directly or
indirectly owned by such first-mentioned corporation.

         "Substitute Basis" shall have the meaning provided therefor in
Section 2.3(d)(2) hereof.

         "Tax Credit" shall have the meaning provided therefor in Section
2.6(c) hereof.

         "Taxes" shall have the same meaning provided therefor in Section
2.6 hereof.

         "Transaction" means the acquisition by the Borrower of
substantially all of the assets and liabilities primarily related to the
business of the CMG Division pursuant to the terms and conditions of the
Asset Purchase Agreement, in exchange for certain consideration, including
the $100,000,000 cash payment to be made on the Closing Date, which cash
payment shall include the proceeds of the Loan.

         "Transfer" shall have the meaning provided therefor in Section
12.11(a).

         "Transferee" shall have the meaning provided therefor in Section
12.11(c).

         "Transferred Item" shall have the meaning provided therefor in
Section 12.11(a).

         "Treasury Obligation" means a note, bill or bond issued by the
United States Treasury Department as a full faith and credit general
obligation of the United States.

         "U.K. Subsidiary" means Spectron (U.K.) Ltd., an English company,
a Subsidiary of the Parent.

         "U.K. Subsidiary Security Agreement" means the document or
agreement evidencing the floating or fixed charge on all of the assets of
the U.K. Subsidiary, to be executed and delivered by the Parent, in form
and substance satisfactory to the Bank.

         "Uniform Commercial Code" means the Uniform Commercial Code in
effect from time to time in any state to the extent the same is applicable
by law to any portion of the Collateral.

         "United States" when used in a geographical sense, means all of
the States of the United States of America and the District of Columbia
and, so long as they continue as possessions or territories of the United
States, Puerto Rico and the Virgin Islands.

1.2. Use of Accounting Terms. Accounting terms used herein shall be
construed, calculations hereunder shall be made and financial data required
hereunder shall be prepared, both as to classification of items and as to
amounts, in accordance with generally accepted accounting principles in
effect in the United States as of the date thereof consistently applied,
which principles shall be consistent with those used in the preparation of
the most recent reviewed financial statements of such Person delivered to
the Bank. All statements relating to earnings and expenses shall set forth
separately or otherwise identify all extraordinary and nonrecurring items.

2.       THE LOAN

2.1. Loan. The Bank agrees, subject to and upon the terms and conditions
herein set forth, to make a loan (the "Loan"), as a single drawing, to the
Borrower on the Closing Date in the principal amount of One Hundred Million
Dollars ($100,000,000). Amounts prepaid on the Loan cannot be reborrowed.
The Borrower shall give the Bank a written request for disbursement in the
form of Exhibit H attached hereto (the "Disbursement Request") not later
than by 11:00 a.m., New York, New York time, two (2) Business Days prior to
the Closing Date. The Bank will make the amount of the Loan available to
the Borrower by transferring such amount to the Borrower's account
maintained with the Bank.

     2.2. Repayment of the Loan.

         (a) The Borrower shall repay the Loan to the Bank commencing on
October 30, 2002, in consecutive semi-annual installments on the last day
of the first and third Interest Period occurring in each calendar year
(i.e. on April 30 and October 30) commencing on October 30, 2002, with each
such semi-annual installment in an amount equal to $10,000,000.

         (b) The Borrower shall repay to the Bank any outstanding balance
of the Loan on the Maturity Date.

     2.3. Voluntary and Mandatory Prepayments.

(a) Upon not less than fourteen (14) days prior written notice to the Bank,
the Borrower may from time to time prepay the outstanding principal amount
of the Note, in part or in full, on the last Business Day of any Interest
Period ("Prepayment Date"); provided that each such prepayment shall be not
less than an amount of Five Million Dollars ($5,000,000) or any integral
multiple thereof. Upon not less than two (2) Business Days prior written
notice to the Bank, the Borrower may from time to time prepay the
outstanding principal amount of the Note, in part or in full, on any
Business Day, in accordance with Section 10.3 hereof.

         (b) Any such prepayments of the principal of the Note, whether
partial or full, shall be accompanied by the payment of any accrued
interest on the principal amount so prepaid and any other payment or charge
required by the Note.

         (c) This Agreement has been made in accordance with legal,
regulatory, fiscal and monetary measures currently in force and in
accordance with current market provisions. If any law, regulation,
directive or treaty or any change therein or in the interpretation or
application thereof, having a general applicability and made by any
Governmental Rule after the date hereof, shall make it unlawful for the
Bank to maintain the Loan or to claim or receive any amount otherwise
payable under the Note or this Agreement, the Bank shall so notify the
Borrower. In the case of any such notice, the Borrower shall prepay the
outstanding principal amount of the Note in full, together with all accrued
interest, on the next Interest Payment Date, if the Bank may lawfully
receive such prepayment on such day, or on such earlier date on which the
Bank may lawfully receive such payment, if payment on such earlier date is
reasonably required as a result of such impending illegality, but in any
event not earlier than within thirty (30) days.

         (d)      (1) If at any time subsequent to the date hereof by
                  reason of changes affecting the Eurodollar Interbank
                  Market, the Bank is unable, due to circumstances beyond
                  its control, to determine LIBOR, or there shall be no
                  objective possibility for the Bank to refinance itself in
                  Dollars in respect of the Loan, then and in any such
                  event the Bank shall give notice to the Borrower to that
                  effect.

         (2)      The Bank shall then offer the Borrower an alternative
                  basis (the "Substitute Basis") for the continuation of
                  the Loan. The Substitute Basis may include alternative
                  interest periods, alternative currencies or alternative
                  rates of interest taking into account the scope of the
                  Loan. The Substitute Basis shall be binding upon the
                  Borrower and shall take effect in accordance with its
                  terms from the date specified in the Bank's notice.

         (3)      If the Borrower determines that it does not wish to
                  continue to the Loan under the Substitute Basis, then it
                  shall so notify the Bank within ten (10) days of receipt
                  of the Bank's notice specifying such Substitute Basis,
                  whereupon the Loan, together with interest accrued and
                  accruing thereon at the rate prevailing during the last
                  Interest Period in respect of which LIBOR and the rate of
                  interest has been determined, shall become immediately
                  due and owing and payable.

         (4)      The Bank represents and warrants that it is not aware of
                  any circumstances or threats at the date hereof which
                  might cause the making or the continuation of the Loan by
                  the Bank to become impracticable or unlawful or which
                  makes the Bank unable to determine the LIBOR or to
                  refinance itself in Dollars.

         (e) Except as set forth in clause (a) through (d) above, and 2.4
and 2.5 below, the Note may not otherwise be prepaid in whole or in part.

     2.4. Compensation for Broken Funding. If the Loan or any part thereof
or any interest thereon is for any reason whatsoever repaid, paid or
recovered by the Bank under any security or otherwise, on any day other
than the agreed dates of payment, then the Borrower shall upon demand pay
to the Bank such amount or amounts as may be necessary to compensate the
Bank for any loss incurred by it on account of funds borrowed in order to
make, fund or maintain the Loan with respect to which repayment, payment or
recovery is made and/or any loss of profit caused thereby. The Bank shall
however exercise its best endeavors to mitigate such losses. For the
avoidance of doubt, if the Borrower effects payments or prepayments in full
compliance with the provisions of Sections 2.2, 2.3 or 2.5 hereunder, the
Borrower shall not be required to pay any amount under this Section.

     2.5. Increased Costs. If, after the date of this Agreement, the
adoption of any applicable Governmental Rule, any change in any applicable
Governmental Rule, any change in the interpretation or administration of
any applicable Governmental Rule by any Governmental Person charged with
the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of
any such Governmental Person of general applicability shall subject the
Bank to any tax, duty or other charge with respect to all or any portion of
the Loan or shall change the basis of taxation of payments to the Bank of
any amounts due under this Agreement, or the Note (except for changes which
affect franchise taxes or taxes measured by or imposed on the overall net
income of the Bank or any of its offices imposed by the tax laws of any
jurisdiction in the world); or shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit, capital adequacy
requirement, capital equivalency, ratio of assets to liabilities or any
other capital substitute or similar requirement against assets of, deposits
with or for the account of, credit extended by, letters of credit issued
and maintained by, or collateral subject to a lien in favor of the Bank, or
shall impose on the Bank any other condition affecting all or any portion
of the Loan; and the result of any of the foregoing is to increase the cost
to or to impose a cost on the Bank of making or maintaining all or any
portion of the Loan, or to reduce the amount of any sum received or
receivable by the Bank under this Agreement or the Note, or (in the case of
a capital adequacy or similar requirement) to reduce the rate of return on
the Bank's capital as a consequence of maintaining all or any portion of
the Loan to a level below that which could have been achieved but for the
imposition of such requirement (taking into consideration the Bank's
capital adequacy policies), then, within thirty (30) days after demand by
the Bank, the Borrower shall pay the Bank for its own account such
additional amount or amounts as will compensate the Bank for such increased
cost or reduction actually incurred. The Bank will promptly notify the
Borrower of any event of which it has knowledge, occurring after the date
of this Agreement, which will entitle the Bank to compensation pursuant to
this Section 2.5, and deliver to the Borrower a certificate of the Bank
claiming compensation for itself under this Section 2.5, setting forth the
additional amount or amounts to be paid to the Bank and certifying in
reasonable detail any event by reason of which it is entitled to make a
claim pursuant to this Section.. The Bank shall however exercise its best
endeavors to mitigate such increased costs. The Bank represents that it is
not aware of any such circumstances or threats on the date hereof, which
might give rise to a claim for increased cost hereunder.

         Without derogating from the provisions of Section 2.3 hereof, the
Borrower may, after receipt of the demand referred to in this section,
notify the Bank that it will prepay, on the last day of the Interest Period
the outstanding balance of the Loan, together with accrued interest thereon
and all other amounts owing to the Bank hereunder.

     2.6. Net Payments.

         (a) Subject to the provisions of Section 2.6(b), all payments to
the Bank under this Agreement or the Note shall all payments to the Bank
under this Agreement or the Note shall be made without setoff or
counterclaim and shall be increased by such amounts as may be necessary in
order that all such payments (after deduction or withholding for or on
account of any present or future taxes, levies, imposts, duties, or other
charges of whatsoever nature imposed by any government, any political
subdivision or any taxing authority, other than any franchise tax or other
tax owed and measured by the overall net income of the Bank or any of its
offices pursuant to the tax laws of any jurisdiction in the world
(collectively, the "Taxes")) shall not be less than the amounts otherwise
specified to be paid under this Agreement or the Note.

         (b) The Bank or any transferee which becomes a party hereto
pursuant to Section 12.11 (the Bank and such transferee each, a "Lender")
shall:

             (1) no later than the Closing Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 12.11 hereof after
the Closing Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower two accurate, complete and signed originals of U.S.
Internal Revenue Service Form W-8BEN or Form W-8 ECI or successor form, as
applicable, in each case indicating that such Lender is, on the date of
delivery thereof, entitled to receive payments of principal, interest and
fees for the account of its lending office under this Agreement free from
withholding of United States Federal income tax;

             (2) if at any time such Lender changes its lending office or
offices or selects an additional lending office, at the same time or
reasonably promptly thereafter, deliver to the Borrower in replacement for,
or in addition to, the forms previously delivered by it hereunder, two
accurate, complete and signed originals of such Form W-8BEN or Form W-8 ECI
or successor form, as applicable, in each case indicating that such Lender
is, on the date of delivery thereof, entitled to receive payments of
principal, interest and fees for the account of such changed or additional
lending office under this Agreement free from withholding of United States
Federal income tax; and

             (3) promptly upon the Borrower's reasonable request to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's exemption from Tax for
withholding Tax purposes.

For any period with respect to which a Lender has failed to provide the
Borrower with the appropriate form described in this Section 2.6(b) within
thirty (30) days of Borrower's reasonable request therefor, and such
failure shall continue unremedied for a period of fifteen (15) days after
the date upon which the Borrower gives notice to the Lender thereof, such
Lender shall not be entitled to payment from the Borrower of the increased
amounts pursuant to Section 2.6(a) or indemnification by the Borrower
pursuant to this Section 2.6 to the extent that such payment or
indemnification obligation would have been reduced if the applicable form
had been delivered to the Borrower; provided that nothing in this sentence
shall relieve the Borrower of its obligation to pay any additional amounts
pursuant to this Section 2.6 in the event that, as a result of any change
in any applicable law, treaty or Governmental Rule, regulation or order, or
any change in the interpretation, administration or application thereof,
such Lender is no longer properly entitled to deliver forms, certificates
or other evidence at a subsequent date establishing the fact that such
Lender is not subject to withholding as described herein; so long as, for
all periods prior to the date of such change, if such Lender shall have
satisfied the requirements of clauses 2.6(b)(1) or 2.6(b)(2), as
applicable; provided however, that should such Lender become subject to
Taxes because of its failure to deliver a form required hereunder, the
Borrower shall take such steps as the Lender shall reasonably request to
assist such Lender to recover such Taxes. Any Lender that is organized in a
jurisdiction other than the United States, a state thereof or the District
of Columbia claiming any indemnity payment or additional amounts payable
pursuant to this Section 2.6 shall use reasonable efforts to file any
certificate or document reasonably requested in writing by the Borrower or
to change the jurisdiction of its applicable lending office (consistent
with its internal policies and legal and regulatory restrictions, and so
long as such efforts would not be disadvantageous to it as determined in
its good faith discretion), if the making of such a filing or change would
avoid the need for or reduce the amount of any such indemnity payment or
additional amounts which may thereafter accrue.

         (c) If the Borrower is required under any law to deduct or
withhold any Tax from any payments hereunder, the Borrower may, after
effecting such payment on account of such Tax and after increasing the
payments of interest to the Bank, so that the Bank shall receive the full
amount payable hereunder as if no such deduction or withholding on account
of Taxes had been made, deliver to the Bank the original receipt or
receipts issued in the name of the Bank by the appropriate tax authority
certifying payment of such Taxes.

The Bank shall endeavor and exercise reasonable efforts to apply such
deduction or withholding against Taxes payable by it to the relevant income
tax authorities, or otherwise receive benefits from said income tax
authorities by way of any tax credit, tax deduction, tax refund or similar
benefit which may be available to the Bank in respect of the amount so
deducted or withheld by the Borrower ("Tax Credit").

         (d) Upon filing the Bank's annual tax returns with respect to any
tax year, the Bank shall claim a Tax Credit in respect of the amount of
Taxes specified in the tax receipts supplied by the Borrower to the Bank in
such year in accordance with the provisions of Section 2.6(c) (hereinafter,
"Claimed Amount").

         The Bank shall then enter into its books a liability (in Dollars)
towards the Borrower for the Claimed Amount, which shall however give no
claim whatsoever to the Borrower against the Bank, except as specifically
stipulated hereinafter.

         The Bank shall be fully discharged from such liability upon paying
to the Borrower the amount due (if any) in accordance with the provisions
of Section 2.6(e) hereinafter regardless of the fact that any such amount
(if any) may be smaller than the Claimed Amount and consequently smaller
than such liability.

         (e) In the event that in any final tax assessment issued by the
income tax authorities in respect of any tax year of the Bank for which the
Borrower made any deduction or withholding on account of Taxes and
delivered to the Bank appropriate tax receipts in respect thereof in
accordance with the provisions of Section 2.6(c), the Bank shall actually
receive a Tax Credit in respect of such tax receipt(s), the Bank shall
deliver to the Borrower within 60 (sixty) days from receipt of such final
tax assessment a certificate of the Comptroller of the Bank specifying the
percentage of the actual benefit to the Bank in respect of such tax
receipts (which certificate shall be deemed correct in all its details and
shall be final, conclusive and binding upon the Bank and the Borrower), and
shall pay to the Borrower such percentage of the tax receipt(s).

For the purposes hereof a tax assessment shall be deemed final only upon
expiration of the period during which the relevant tax authority has the
authority to open and or review the assessment under the applicable law.

         (f) The Borrower shall not be entitled to be advised of and/or
take part and/or interfere in any way whatsoever in the manner chosen by
the Bank to prepare its tax returns, determine its policies regarding Taxes
and handle all its taxing affairs in general (including - inter alia, in
any and all kind of negotiations with the Israeli tax authorities).

Furthermore, the Borrower shall have no claim whatsoever against the Bank
in connection with any decision, act or omission chosen, taken or omitted
by the Bank in connection with any of the foregoing all executed by the
Bank in good faith.

         (g) The Borrower shall have no claim against the Bank in
connection with any such Taxes paid, withheld or deducted, except as
otherwise specifically stipulated in this Section.

     2.7. Security for the Loan. The Loan shall be secured by a first
priority Lien on the Collateral. Notwithstanding the aforesaid and the
provisions of Sections 8.1, 8.5, 8.6 and 8.7 hereto, the Borrower may
postpone delivery of the documents pertaining to the Material Subsidiaries,
and shall procure for such delivery by not later than 60 (sixty) days after
the Closing Date.

3.       USE OF PROCEEDS.

         The proceeds of the Loan shall be utilized by the Borrower to
partially finance the Transaction and to pay transaction fees and expenses
related thereto.

4.       NOTE EVIDENCING BORROWINGS.

         The Loan shall be evidenced by the Note. All repayments of
principal by the Borrower shall be reflected by the Bank in its records and
on the schedule attached to the Note, which records or schedule shall be
rebuttal presumptive evidence of the entries made therein or thereon.

5.       INTEREST

         5.1. Interest.

             (a) The unpaid principal amount of the Loan shall bear
interest at a rate per annum equal to LIBOR plus the Margin for each
Interest Period.

             (b) Interest on the Loan shall accrue from and including the
date of the Closing Date to but excluding the date of any repayment
thereof, and shall be payable on each applicable Interest Payment Date, on
the date of any prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.

             (c) All computations of interest hereunder shall be made on
the actual number of days elapsed over a year of 360 days.

     5.2. Default Rate.

             (a) The Borrower shall pay default interest ("Default
Interest") on sums not paid on the due date under this Agreement or the
Borrower Security Agreement (or, in the event sums are payable on demand,
if not paid within seven (7) Business Days of the date of demand) from such
due date (or the date of demand) and up to the date of actual payment (as
well as after judgment) at a rate equal to two percent (2%) per annum above
the aggregate of the Margin and LIBOR.

             (b) Default Interest shall be due and payable on demand and
calculated on the basis of the actual number of days elapsed divided by 360
days.

     5.3. Generally. Interest shall be payable on the unpaid principal
balance of the Loan evidenced by the Note on each Interest Payment Date and
at any time that any part of such principal is due or is paid, or any time
that the Note is paid in full. Such interest shall be calculated on a daily
basis on the outstanding principal balance of the Loan at LIBOR plus the
Margin or the Default Rate, as the case may be, divided by 360 on the
actual days elapsed from the date hereof, or from the date the entire
principal balance of the Note shall have become due and payable, or from
the stated date of maturity, as appropriate, until paid. Any payment by
other than immediately available funds shall be subject to collection.
Interest shall continue to accrue until the funds by which payment of
principal is made are available to the Bank for its use. Interest shall
never exceed the maximum lawful rate of interest applicable to the Note.

6.       PAYMENTS, OFFSETS AND REDUCTION.

     6.1. Place of Payment. All payments hereunder (including payments with
respect to the Note) shall be made without set-off, counterclaim or
deduction and shall be made in immediately available funds by the Borrower
to the Bank, prior to 3:00 p.m., New York time, at its offices at 1177
Avenue of the Americas, New York, New York, 10036 or at such other place as
may be designated by the Bank to the Borrower in writing. Any payment
received after 3:00 p.m., New York time, shall be deemed received on the
next Business Day. If any payment of principal of or interest on the Note
or any other amount under the Note or this Agreement falls due on a day
that is not a Business Day, it shall be payable on the next succeeding
Business Day (unless such day would be a day in the next calendar month,
and in such case payment shall be due on the immediately preceding Business
Day), and the resulting additional or decreased time (if any) shall be
included in or deducted from the computation of interest.

     6.2. Set-Off. In addition to and not in limitation of all rights of
set-off that the Bank may have under applicable law, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter
maintained or held at any of the Bank's offices worldwide and in any
currency, shall be subject to being set off against any sum not paid on its
due date or within seven (7) days from demand by the Borrower to the Bank
arising under this Agreement or the other Loan Documents, and in
furtherance thereof, the Bank may at any time and from time to time after
an Event of Default shall have occurred and be continuing at its option and
without prior notice to the Borrower, except as may be required by law,
appropriate and apply toward the payment of any of such obligations of the
Borrower to the Bank, for sums not paid on its due date or within seven (7)
days from demand all or any part of the balances of each such balance,
credit, deposit, account, or money maintained or held at the Bank. The Bank
shall notify the Borrower forthwith upon the exercise of any right of
set-off giving details in relation thereto.

7.       REPRESENTATIONS AND WARRANTIES.

     To induce the Bank to enter into this Agreement and to make the Loan
hereunder, the Borrower represents, warrants and covenants to the Bank
that:

     7.1. Corporate Existence. Each of the Borrower and its Subsidiaries is
a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its formation and has the corporate power
and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage. Each of the
Borrower and its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to qualify would
have a material adverse effect on its business.

     7.2. Control and Holdings. All of the capital stock of the Borrower is
beneficially owned by the Parent. All of the capital ----------------------
stock of each Subsidiary of the Borrower is beneficially owned by the
Borrower or a Subsidiary of the Borrower. Schedule I is a ----------
complete listing of all direct and indirect Subsidiaries of the Borrower.

     7.3. Authorization and Execution. The Borrower and ESC Inc. has the
corporate power and authority to execute, deliver and carry out the terms
and provisions of the Loan Documents executed by it. The execution,
delivery and performance by the Borrower and ESC Inc. of the Loan Documents
to which it is a party and the borrowing hereunder have been duly
authorized by all requisite corporate action. This Agreement, the Note and
the Borrower Security Agreement, when executed and delivered by the
Borrower pursuant hereto, will be legal, valid and binding obligations of
the Borrower, enforceable against the Borrower, in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by the
application by a court of equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The ESC
Inc. Security Agreement, when executed and delivered by ESC Inc. pursuant
hereto, will be legal, valid and binding obligations of ESC Inc.,
enforceable against ESC Inc., 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 and by the application by a court of equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

     7.4. Compliance with Other Instruments. Each of the Borrower and its
Subsidiaries is not in default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any evidence of Indebtedness of the Borrower or such
Subsidiary, or contained in any material instrument under or pursuant to
which any such evidence of Indebtedness has been issued or made and
delivered. Neither the execution and delivery of the Loan Documents, nor
the consummation of the transactions herein contemplated, including but not
limited to the use of the proceeds of the Loan for the purposes set forth
herein, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Certificate of Incorporation or By-laws or
other organizational charter and instruments of the Borrower or such
Subsidiary, or of any material agreement or instrument to which the
Borrower or such Subsidiary is now a party or otherwise bound or to which
the Borrower's or such Subsidiary's properties or other assets is subject,
or of any law, statute, rule or regulation or any order or decree of any
court or governmental instrumentality, or of any arbitration award,
franchise or permit, or constitute a default thereunder, or if any action
was required under such instrumentality, award, franchise or permit, it
will not have a material adverse effect on the Borrower, or result in the
creation or imposition of any Lien upon any of the properties or other
assets of the Borrower or such Subsidiary, except as herein contemplated.

     7.5. Consents. No consent or approval of, or exemption by, any Person,
and no waiver of any right by any Person is required to authorize or
permit, or is otherwise required in connection with, the execution,
delivery and performance of the Loan Documents, or with respect to the
required use by the Borrower of the proceeds of the Loan, except those
which shall have been obtained on or prior to the date hereof.

     7.6. Financial Statements.

     (a) The Borrower has heretofore furnished to the Bank copies of the
unqualified audited consolidated financial statements of the Parent and its
consolidated Subsidiaries as of December 31, 2000 and for the year then
ended and consolidating financial statements for each of the Borrower, ESC
Inc. and each Material Subsidiary for such period (collectively, the "ESC
Financial Statements"). The ESC Financial Statements present fairly the
financial position of the Parent, its consolidated Subsidiaries, the
Borrower, ESC Inc. and each Material Subsidiary on the date of the balance
sheet included therein and the results of the operations of the Parent, its
consolidated Subsidiaries, the Borrower, ESC Inc. and each Material
Subsidiary for the period involved, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (subject to, in the case of the interim ESC
Financial Statements, normal year-end audit adjustments not material in
amount).

     7.7. No Material Changes. There has been no material adverse change in
the business, properties or other assets or in the condition, financial or
otherwise, of the Borrower, the Parent, ESC Inc. or any Material Subsidiary
since the date of the most recent balance sheets included in the ESC
Financial Statements.

     7.8. Litigation. There are no actions, suits, investigations or
proceedings pending or, to the knowledge of the Borrower threatened in
writing against the Borrower and its Subsidiaries at law or in equity or
before or by any governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or before any arbitrator of any
kind, which involve the possibility of any material liability or of any
material adverse effect on the business, operations, prospects, properties
or other assets or in the condition, financial or otherwise, of the Parent
and its Subsidiaries taken as a whole, except as disclosed under the Assets
Purchase Agreement and in Parent's filings with the Securities and Exchange
Commission.

7.9. Compliance with Law. The Borrower and its Subsidiaries are in
compliance, in all material respects, with all applicable requirements of
law and all applicable rules and regulations of each Federal, state,
municipal or other governmental department, agency or authority, domestic
or foreign, the noncompliance with which would have a material adverse
effect on the business, affairs, or financial condition of the Borrower and
its Subsidiaries, as the case may be.

     7.10. Investment Company. Neither the Borrower nor its Subsidiaries is
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, or the
regulations under such act.

     7.11. Regulation U. None of the proceeds of the Loan will be used,
directly or indirectly, for any purpose that will violate, or cause the
Bank to be in violation of, or that will require the Bank to file or obtain
any forms or notices or applications of any kind so as not to be in
violation of, Regulation U (12 CFR, Part 221) of the Board of Governors of
the Federal Reserve System. Neither the Borrower nor any agent acting on
its behalf has taken or will take any action which might cause this
Agreement or the Note or the making of the Loan to violate Regulation U or
any other regulation of the Board of Governors of the Federal Reserve
System.

     7.12. ERISA. Each single-employer Plan has been maintained and funded,
in all material respects, in accordance with its terms and with all
provisions of ERISA applicable thereto, and the Borrower and its
Subsidiaries have each taken all actions required to be taken by them to
cause each multi-employer Plan to be maintained and funded, in all material
respects, in accordance with its terms and with all provisions of ERISA
applicable thereto; no Reportable Event has occurred and is continuing with
respect to any single-employer Plan or, to the Borrower's knowledge, any
multi-employer Plan; and no liability to PBGC has been incurred by the
Borrower or any Subsidiary thereof with respect to any single-employer Plan
or, to the Borrower's knowledge, any multi-employer Plan, other than for
premiums due and payable.

     7.13. Indebtedness; Liens. The Borrower (a) does not have any
outstanding Indebtedness other than the Loan made hereunder, and (b) has
not granted a Lien in favor of any Person other than the Liens granted to
the Bank pursuant to the Borrower Security Agreement and Permitted
Encumbrances.

8.       CONDITIONS PRECEDENT TO THE LOAN.

         The obligation of the Bank to make the Loan to the Borrower
hereunder is subject to the satisfaction, on or before the making of the
Loan, of each of the following conditions precedent which are solely for
the benefit of the Bank:

     8.1. Loan Documents. The Bank shall have received (i) this Agreement,
the Note and the Borrower Security Agreement, executed and delivered by a
duly authorized officer of the Borrower; (ii) the ESC Inc. Security
Agreement and ESC Inc. Guarantee, executed and delivered by a duly
authorized officer of ESC Inc.; (iii) the Parent Security Agreement and the
Asset Purchase Agreement Pledge, executed and delivered by a duly
authorized officer of the Parent; (iv) the Parent Guarantee, executed and
delivered by a duly authorized officer of the Parent; (v) the Material
Subsidiary Security Agreement of each of Material Subsidiary executed by a
duly authorized signatory thereof; and (vi) the Option Agreement, executed
and delivered by a duly authorized officer of the Parent.

     8.2. Closing Certificate of Borrower. The Bank shall have received a
certificate of a Director of the Borrower, dated the Closing Date; (i)
attaching the certified Certificate of Incorporation and By-Laws of the
Borrower; (ii) attaching the resolutions of the Board of Directors of the
Borrower with respect to the transactions contemplated hereby; (iii)
certifying that such resolutions have not been amended, modified, revoked
or rescinded as of the date of such certificate; and (iv) certifying as to
the incumbency and signature of the officers of the Borrower executing any
Loan Document; such certificate (and the attachments thereto) shall be in
form and substance satisfactory to the Bank.

     8.3. Closing Certificate of Parent. The Bank shall have received a
certificate of the Secretary of the Parent, dated the Closing Date, (i)
attaching the certified Articles of Association and By-Laws of the Parent;
(ii) attaching the resolutions of the Board of Directors of the Parent with
respect to the transactions contemplated hereby; and (iii) certifying that
such resolutions have not been amended, modified, revoked or rescinded as
of the date of such certificate; such certificate (and the attachments
thereto) shall be in form and substance satisfactory to the Bank.

     8.4. Closing Certificate of ESC Inc. The Bank shall have received a
certificate of the Chief Operating Officer, Chief Executive Officer,
Executive Vice President or any Director of ESC Inc., dated the Closing
Date, (i) attaching the certified Certificate of Incorporation and By-Laws
of ESC Inc.; (ii) attaching the resolutions of the Board of Directors of
ESC Inc. with respect to the transactions contemplated hereby; (iii)
certifying that such resolutions have not been amended, modified, revoked
or rescinded as of the date of such certificate; and (iv) certifying as to
the incumbency and signature of the officers of ESC Inc. executing any Loan
Document; such certificate (and the attachments thereto) shall be in form
and substance satisfactory to the Bank.

     8.5. Legal Opinions. The Bank shall have received (a) an executed
legal opinion of Skadden, Arps Slate, Meagher & Flom LLP, special New York
counsel to the Borrower and ESC, Inc., (b) an executed legal opinion of the
General Counsel of the Parent with respect to certain matters related to
the Parent, Borrower and ESC Inc. The Bank shall have received an executed
legal opinion of local counsel to the Parent and each Material Subsidiary
in form and substance satisfactory to the Bank.

     8.6. Actions to Perfect Liens. The Bank shall have received evidence
in form and substance satisfactory to it that all filings, recordings,
registrations and other actions, necessary or, in the opinion of the Bank,
desirable to perfect the Liens created by the ESC Inc. Security Agreement,
the Parent Security Agreement and each Material Subsidiary Security
Agreement have been made.

     8.7. Lien Searches. The Bank shall have received the results of a
recent search by a Person reasonably satisfactory to the Bank, of the
Uniform Commercial Code, judgment and tax lien filings which may have been
filed with respect to personal property of the Borrower and ESC Inc. and
the results of such search shall be reasonably satisfactory to the Bank.
The Bank shall have received the results of a recent search by a Person
reasonably satisfactory to the Bank, with respect to lien filing for
property of any Material Subsidiary, and the results of such search shall
be reasonably satisfactory to the Bank.

     8.8. Asset Purchase Agreement. The Bank shall have received, in form
and substance satisfactory to it, a fully executed copy of the Asset
Purchase Agreement, including all schedules and exhibits thereto.

     8.9. Disbursement Request. The Bank shall have received a Disbursement
Request dated as of the Closing Date.

     8.10. Deferred Payment Note. The Bank shall have received evidence
satisfactory to it that the Parent shall have executed and delivered the
Deferred Payment Note to the Seller.

     8.11. Seller Shares. The Bank shall have received evidence
satisfactory to it that the Parent shall have issued the Seller Shares.

     8.12. Acquisition of the CMG Division. The Bank shall have received
evidence satisfactory to it that the acquisition of the CMG Division has
been completed in accordance with the terms and conditions of the Assets
Purchase Agreement contemporaneously with the making of the Loan.

     8.13. Fees. The Bank shall have received, for its own account, all
accrued fees and expenses owing hereunder or in connection herewith
(including, without limitation, accrued fees and disbursements of counsel
to the Bank), to the extent that such fees and expenses are due and payable
to the Bank.

     8.14. Option. The Parent shall have executed and delivered the Option
Agreement.

9.       AFFIRMATIVE COVENANTS.

         The Borrower covenants and agrees that from and after the date
hereof until all sums due and to become due hereunder or under any other
Loan Document have been paid or repaid in full, unless the Bank shall
otherwise consent in a writing delivered to the Borrower:

     9.1. Pay Principal and Interest. The Borrower will punctually pay or
cause to be paid the principal and interest to become due in respect of the
Note according to the terms hereof and thereof.

     9.2. Maintenance of Office. The Borrower will cause ESC Inc. to
maintain an office in Norwood, Massachusetts (or such other place in the
United States as the Borrower may designate in writing to the Bank or to
any subsequent holder of the Note), where notices and demands to or upon
the Borrower in respect of the Note and the Borrower Security Agreement may
be given or made.

     9.3. Keep Books. The Borrower will and will cause each of its Material
Subsidiaries to keep proper books of record and account in which true,
correct and complete entries will be made of the respective transactions of
the Borrower or such Person in accordance with United States or Israeli or
any other jurisdiction generally accepted accounting principles, as
applicable.

     9.4. Payment of Taxes; Corporate Existence; Maintenance of Properties.
The Borrower will and will cause each of its Subsidiaries to:

          (a) Pay and discharge promptly all taxes (including, without
limitation, all payroll withholdings), assessments and governmental charges
or levies imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed, or upon any part thereof, before the
same shall become in default, as well as all claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon its
property; provided, however, that it shall not be required to pay any such
tax, assessment, charge, levy or claim or discharge any such Lien if the
validity thereof shall be contested in good faith by appropriate
proceedings and if it shall have set aside on its books such reserves, if
any, as may be required in accordance with generally accepted accounting
principles with respect to the tax, assessment, charge, levy or claim so
contested;

          (b) Conduct its business according to good business practices;
keep in full force and effect the corporate existence, and material rights,
licenses, permits and franchises of the Borrower and each Material
Subsidiary and comply in all material respects with all of the laws, rules
and regulations governing its business; and make all such reports and pay
all such franchise and other taxes and license fees and do all such other
things as may be lawfully required, to maintain the material rights,
licenses, powers and franchises of the Borrower and each Material
Subsidiary under the laws of the United States and of the States or
jurisdictions in which it is organized or does business.

     9.5. Financial Statements and Reports. The Borrower will furnish to
the Bank in duplicate:

          (a) As soon as practicable and when available, and in any event
within 90 days after the end of each fiscal year of the Parent (and the
Borrower, ESC Inc. and each Material Subsidiary, as applicable), annual
unqualified audited consolidated balance sheets of the Parent and its
Subsidiaries as at the end of such year and consolidating balance sheets of
the Parent and each of the Borrower, ESC Inc. and each Material Subsidiary
for such period and related consolidated statements of income, retained
earnings and cash flows of the Parent and its Subsidiaries for such year
and consolidating statements of income, retained earnings and cash flows of
the Parent and each of the Borrower, ESC Inc. and each Material Subsidiary
for such period, setting forth in comparative form the corresponding
figures for the preceding fiscal year, audited by independent certified
public accountants of recognized standing selected by the Parent (and the
Borrower, ESC Inc. and each Material Subsidiary, as applicable), and
acceptable to the Bank;

          (b) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of the Parent (other
than the 4th quarter), a consolidated balance sheet, related consolidated
statements of income, retained earnings and cash flows of the Parent and
its Subsidiaries showing its financial condition as of the last day of such
fiscal quarter and the results of operations for such fiscal quarter,
certified by the chief financial officer of the Parent as to (i) fair
presentation of the financial position and the results of operations of the
Parent and its Subsidiaries and (ii) having been prepared in accordance
with generally accepted accounting principles consistently applied;

          (c) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of the Borrower (other
than the 4th quarter), a consolidating balance sheet, related consolidating
statements of income, retained earnings and cash flows of the Borrower
showing its financial condition as of the last day of such fiscal quarter
and the results of operations for such fiscal quarter, certified by the
chief financial officer of the Borrower as to (i) fair presentation of the
financial position and the results of operations of the Borrower and (ii)
having been prepared in accordance with generally accepted accounting
principles consistently applied;

          (d) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of ESC Inc. (other than
the 4th quarter), a consolidating balance sheet, related consolidating
statements of income, retained earnings and cash flows of ESC Inc. showing
its financial condition as of the last day of such fiscal quarter and the
results of operations for such fiscal quarter, certified by the chief
financial officer of ESC Inc. as to (i) fair presentation of the financial
position and the results of operations of ESC Inc. and (ii) having been
prepared in accordance with generally accepted accounting principles
consistently applied;

          (e) As soon as practicable and when available, and in any event
within 45 days after the end of each fiscal quarter of each Material
Subsidiary (other than the 4th quarter), a consolidating balance sheet,
related consolidating statements of income, retained earnings and cash
flows of such Material Subsidiary showing its financial condition as of the
last day of such fiscal quarter and the results of operations for such
fiscal quarter, certified by the chief financial officer of such Material
Subsidiary as to (i) fair presentation of the financial position and the
results of operations of such Material Subsidiary and (ii) having been
prepared in accordance with generally accepted accounting principles
consistently applied;

          (f) Promptly following the occurrence thereof, notice of any
material adverse change in the business, affairs or financial condition of
the Parent or any of its Material Subsidiaries;

          (g) Promptly following the occurrence thereof, notice of any
Default hereunder or of any default under any other Loan Document;

          (h) Such other information as to the financial condition,
operations, business, properties and other assets of the Parent and its
Subsidiaries as the Bank may from time to time reasonably request; and

          (i) The Borrower shall cause all audited financial statements
required to be delivered to the Bank pursuant to this Section 9.5 to be
delivered to the Bank by the independent certified public accountant who
performed the audit.

     9.6. ERISA Compliance. The Borrower will comply, in all material
respects, and cause each of its Subsidiaries to comply, in all material
respects, with the provisions of ERISA, if applicable, with respect to each
of its or their respective Plans and as soon as possible after the Borrower
knows or has reason to know that any Reportable Event with respect to any
Plan has occurred, furnish to the Bank a statement signed by its chief
executive officer or its chief financial officer setting forth details as
to such Reportable Event and the action, if any, which the Borrower or its
Subsidiary proposes to take with respect thereto, together with a copy of
the notice of such Reportable Event furnished to PBGC.

10.  NEGATIVE COVENANTS.

     The Borrower covenants and agrees that from and after the date hereof
until all sums due and to become due hereunder or under any other Loan
Document have been paid or repaid in full, unless the Bank shall otherwise
consent in a writing delivered to the Borrower, the Borrower shall not:

     10.1. Restrictions on Dividends, Distributions and Redemptions. Pay
dividends or make any other distribution pari passu to its shareholders
(other than to Parent or to Parent's Subsidiaries), unless such
distribution is an issue of bonus shares and/or other equitable securities
made pari passu to all shareholders, or redeem any shares of its capital
stock, or cause or permit any of its Subsidiaries to redeem any shares of
its capital stock, during the period beginning on the date hereof and
ending on the Maturity Date (or on such earlier or later date on which all
principal of and interest on the Note and all other amounts due to the Bank
under the Loan Documents have been paid in full), or cause or permit any of
its Subsidiaries to redeem any shares of its capital stock. The foregoing
restriction shall not apply to the extent Parent's equity shall exceed
$200,000,000.

     10.2. Use of Proceeds of Loan. Use any part of the proceeds of the
Loan for any purpose other than those specified in Section 3 hereof.

     10.3. Disposal of Property. Wind up, liquidate or dissolve, sell,
exchange, lease, transfer or otherwise dispose of all or substantially all
of (or agree to do any of the foregoing or permit ESC Inc. or any Material
Subsidiary to do or to agree to do any of the foregoing), its properties or
other assets, other than in transactions with the Parent or the
Subsidiaries or pursuant to a Permitted Restructure; provided, however,
that in the event assets in an aggregate of US$5 million (5,000,000) shall
be so transferred to any Subsidiary of Parent, such Subsidiary shall be
deemed a Material Subsidiary hereunder and shall execute and deliver to the
Bank a security agreement evidencing the charge of all of its assets or
create such charge over its shares held by the Parent in form and substance
satisfactory to the Bank. The foregoing restriction shall not apply in the
event that 100% of the cash proceeds of the sale of assets (net of
withholding) would be used to prepay the Loan.

     10.4. Liens. Contract, create, assume, incur or suffer to be created,
assumed or incurred and shall not permit any Subsidiary to contract,
create, assume, incur or suffer to be created, assumed or incurred, any
Lien upon, or pledge of, any property or other assets of the Borrower or
such Subsidiary, which will secure any other Indebtedness other than (i)
Liens created pursuant hereto, and (ii) Permitted Encumbrances.

     10.5. Indebtedness. Assume, incur or suffer to exist or permit any
Subsidiary to assume, incur or suffer to exist any Indebtedness other than
the Loan.

11.  DEFAULTS AND REMEDIES.

     11.1. Events of Default. In the case of the occurrence of, and during
the continuance of, any of the following events for any reason whatsoever,
and whether such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of
any governmental body or otherwise (each herein sometimes called an "Event
of Default"):

           (a) Any representation or warranty made herein or in any
certificate hereafter delivered to the Bank pursuant to this Agreement, the
Note or any other Loan Document shall prove to have been false or
misleading in any material respect when made; provided, however, that with
respect to circumstances that do not affect the validity, legality or
enforceability of this Agreement, the circumstances to which such
representation or warranty relates, if capable of being corrected so that
such representation or warranty shall become correct again, shall not have
been corrected until the earlier of 7 (seven) days from receipt of the
Bank's notice or 7 (seven) days from the date upon the Borrower has become
aware thereof; or

(b) Any default shall occur in the payment of principal of or interest on
the Note or any other amount under this Agreement, as and when the same
shall become due and payable, whether at the due date thereof, by
acceleration, mandatory prepayment or otherwise, and such default is not
remedied until the later of 30 (thirty) days from the due date of the
respective sum or 7 (seven) days from the date of Borrower's receipt of the
Bank's notice to that effect; or

           (c) Any default shall occur in the due observance or performance
by the Borrower, the Parent, ESC Inc. or any Material Subsidiary of any
other covenant, agreement or condition contained herein or in the Note, or
any other Loan Document to be performed by the Borrower or such Person, and
such default, if capable of being cured, is not remedied until the later of
45 (forty five) days from the due date of the respective default or 14
(fourteen) days from the date of Borrower's receipt of the Bank's notice to
that effect; or

           (d) (i) The Borrower, or the Parent or ESC Inc. or any Material
Subsidiary shall suspend or discontinue its business other than pursuant to
a Permitted Restructure, or (ii) the Borrower or ESC Inc. or any Material
Subsidiary shall call a meeting of its creditors for the purpose of
postponing or adjusting its liabilities or seeking an arrangement with its
creditors, shall make an assignment for the benefit of creditors or a
composition with creditors, shall be unable or admit in writing its
inability to pay its debts generally as they mature, shall generally not
pay its debts when they are due, shall file a petition in bankruptcy, shall
become insolvent (howsoever such insolvency may be evidenced), shall suffer
an order for relief to be entered against it under any bankruptcy law which
shall remain undismissed or unstayed for a period of 60 (sixty) days or
more, shall petition or apply to any tribunal for the appointment of any
receiver, custodian, liquidator or trustee of or for it or any substantial
part of its property or other assets or shall commence any proceeding
relating to it under any bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or there
shall be commenced against the Borrower or ESC Inc. or any Material
Subsidiary any such proceeding which shall remain undismissed or unstayed
for a period of 60 (sixty) days or more; or the Borrower or any of its
Subsidiaries shall take any action for the purpose of effecting any of the
foregoing; or

           (e) Any order, judgment or decree shall be entered in any ex
parte proceeding against the Borrower or the Parent or ESC Inc. or any
Material Subsidiary decreeing the dissolution of the Borrower or any of its
Subsidiaries and such order, judgment or decree shall remain undischarged
or unstayed for a period in excess of 60 (sixty) days; or

           (f) Any Loan Document shall become invalid or unenforceable, in
whole or in part, and such unenforceability persists for a period of 30
(thirty) days, or any default or event of default shall have occurred
thereunder and such default persists for more than the period of grace, if
any, specified therefor; or (A) the Borrower Security Agreement, ESC Inc.
Security Agreement, the Parent Security Agreement or any Material
Subsidiary Security Agreement shall cease for any reason to be in full
force and effect, or the Borrower, ESC Inc., the Parent or applicable
Material Subsidiary shall so assert, (B) the Lien created by the Borrower
Security Agreement, ESC Inc. Security Agreement, the Parent Security
Agreement or any Material Subsidiary Security Agreement shall cease to be
enforceable and of the same effect and priority purported to be created
thereby, or (C) the Parent Guarantee or ESC Guarantee shall cease for any
reason to be in full force and effect or the Parent or ESC Inc., as
applicable, shall so assert, and as long as event is continuing; or

           (g) Any default (unless duly waived in writing by the obligee)
shall occur with respect to any permitted Indebtedness (other than the
Indebtedness evidenced by the Note) of the Borrower or the Parent and its
Subsidiaries (including any Indebtedness of the Parent under the Short Term
Loan Credit Letter), for or relating to borrowed money (including, without
limitation, for the deferred purchase price of property or for the payment
of rent under any lease), or under any agreement under which any evidence
of Indebtedness may be issued by the Borrower and such default shall
continue for more than the period of grace, if any, specified therein, if
the effect of such default is to accelerate the maturity of such
Indebtedness or to permit the holder thereof, or any trustee, to cause the
same to become due prior to its stated maturity or if any such Indebtedness
shall not be paid when due (after giving effect to any grace period and
other than Indebtedness contested in good faith), and as long as such
default is continuing and involves liability in excess of US$500,000; or

           (h) Final judgment for the payment of money in excess of
$500,000 (to the extent not covered by insurance or bond) shall be rendered
by a court of record against the Borrower or the Parent or ESC Inc. or any
Material Subsidiary, and the Borrower or the Parent or ESC Inc. or the
Material Subsidiary shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution
thereof within 30 (thirty) days from the date of entry thereof and within
such period of 30 (thirty) days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or

           (i) Any Reportable Event which the Bank determines in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan shall have occurred and be continuing 30 (thirty) days
after notice to such effect shall be given to the Borrower by the Bank, or
any Plan shall be terminated, or a trustee shall be appointed by an
appropriate United States District Court to administer any Plan, or PBGC
shall institute proceedings to terminate any Plan or appoint a trustee to
administer any Plan, or the Borrower or any of its Subsidiaries shall
completely or partially withdraw from any multi-employer Plan or appoint a
trustee to administer any such Plan or shall cease operation at any
facility where such cessation could reasonably be expected to result in a
separation from employment of more than 20% of the total number of
employees who are participants under a Plan; and in each case such event or
condition, together with all such other events or conditions, if any, would
subject the Borrower or any of its Subsidiaries to any tax, penalty or
other liability aggregating in excess of $250,000, provided, however, that
in determining whether such taxes, penalties or other liabilities exceed
such limitation, there shall be excluded therefrom any tax, penalty or
other liability which (i) within 30 (thirty) days of being imposed, is paid
or satisfied, or (ii) is being contested in good faith and by appropriate
proceedings, with respect to which adequate reserves have been set aside by
the Borrower and its Subsidiaries in conformity with generally accepted
accounting principles and with respect to which none of the property or
assets of the Borrower or any of its Subsidiaries has become or is about to
become subject to any Lien; or

           (j) The Parent, Borrower or any of its Subsidiaries shall be in
default under any other obligation to Bank Hapoalim B.M., including its New
York Branches, and such default persists for more than the period of grace,
if any, specified therefor, and as long as such default is continuing; or

           (k) The Parent shall no longer Control the Borrower, or shall
cease to own a majority of the issued and outstanding common stock of the
Borrower; or the Borrower shall no longer Control ESC Inc, or shall cease
to own a majority of the issued and outstanding common stock of ESC Inc.,
except as s result of a Permitted Restructure; or

           (l) The Borrower or any of its Subsidiaries thereof shall become
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, or the
regulations under such Act; or

           (m) The Parent shall breach or a default shall occur and be
continuing under the Asset Purchase Agreement, except for any breach or
default that would not have a material impact on the ability of the
Borrower to perform its obligations hereunder or under the Borrower
Security Agreement, of the Parent to perform its obligations under the
Parent Guarantee and the Parent Security Agreement, of ESC Inc. to perform
its obligations under the ESC Inc. Guarantee and the ESC Inc. Security
Agreement and of any Material Subsidiary to perform its obligations under
its Material Subsidiary Security Agreement, and such breach or default
persists for more than the period of grace, if any, specified therefor, and
as long as such breach or default is continuing; or

           (n) The Bank shall fail to receive, after notice of exercise and
absent default on its behalf, the Option Shares (as defined in the Option
Agreement) in accordance with the terms and conditions of the Option
Agreement;

then, if any Event of Default described in subsection (d) above shall have
occurred the Note shall immediately become due and payable, and if any
Event of Default described in any other subsection of this Section 11.1
shall have occurred, and at any time thereafter, if any such event shall
then be continuing, the Bank may, by written notice to the Borrower,
declare the principal of and accrued interest on the Note, and any other
amounts owed under this Agreement, the Note or any Loan Document, to be due
and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived.

     11.2. Suits for Enforcement. If any one or more of such Events of
Default shall occur and be continuing, the holder of the Note may proceed,
to the extent permitted by law, to protect and enforce such holder's rights
either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, condition or agreement contained in
the Loan Documents or in aid of the exercise of any power granted in the
Loan Documents, or proceed to enforce the payment of the Note or to enforce
any other legal or equitable right of the holder of the Note.

     11.3. Remedies Cumulative. No right or remedy herein or in any other
agreement or instrument conferred upon the Bank or the holder of the Note
is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and shall be in addition to
every other right and remedy given hereunder or under any Loan Document or
now or hereafter existing at law or in equity or by statute or otherwise.
Without limiting the generality of the foregoing, if the Note or any of the
other obligations of the Borrower to the Bank shall not be paid when due,
whether at the stated maturity thereof, by acceleration or otherwise, the
Bank shall not be required to resort to any particular security, right or
remedy or to proceed in any particular order of priority, and the Bank
shall have the right at any time and from time to time, in any manner and
in any order, to enforce its security interests, liens, rights and
remedies, or any of them, as it deems appropriate in the circumstances and
apply the proceeds of its collateral to such obligations of the Borrower as
it determines in its sole discretion.

12.  MISCELLANEOUS.

     12.1. Notices. All notices, requests and other communications to any
party under this Agreement and the other Loan Documents shall be in writing
and shall be given to such party, by mail, telecopy, telex, personal
delivery or other customary means of delivery, addressed to it as set forth
below or such other address or telex number as such party may in the future
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective if given by telex, when such
telex is transmitted to the telex number specified below and the
appropriate answerback is received, if given by mail, two days after such
communication is deposited in the United States mails and sent by certified
or registered mail, return receipt requested, with first class postage
prepaid, addressed as aforesaid or if given by telecopy, personal delivery
or any other means, when received at the address specified below.

                    Party               Address

           If to the Borrower:          Energy Systems Holdings Inc.
                                        100 Morse Street,
                                        Norwood Massachusetts 02062
                                        Attention:  Louis Scafuri
                                        Telephone:  (781) 769-2970
                                        Telecopier: (781) 769-2970

           and with a copy to:          Skadden Arps, Slate, Meagher & Flom LLP
                                        Four Times Square
                                        New York, NY, 10036-6522
                                        Attention:  David Friedman
                                        Telephone:  (212) 735-3000
                                        Telecopier: (212) 735-2000

           If to the Bank:              Bank Hapoalim B.M.
                                        New York Branches
                                        1177 Avenue of the Americas
                                        New York, New York 10036
                                        Attention:  Eli Eisdorfer
                                        Telephone:  (212) 782-2165
                                        Telecopier:  (212) 782-2170

           with a copy to:              Bank Hapoalim B.M.
                                        New York Branches
                                        1177 Avenue of the Americas
                                        New York, New York 10036
                                        Attention:  Lawrence Lefkowitz, Esq.
                                        Telephone:  (212) 782-2130
                                        Telecopier:  (212) 782-2141

           and with a copy to:          Shaw Pittman
                                        1675 Broadway
                                        New York, New York 10019-5820
                                        Attention:  John C. Simons, Esq.
                                        Telecopy:  (212) 603-6801
                                        Phone:  (212) 603-6848

     12.2. Survival of Representations; Successors and Assigns. All
covenants, agreements, representations and warranties made herein and in
any certificate delivered pursuant hereto shall survive the making by the
Bank of the Loan contemplated herein and the execution and delivery to the
Bank of the Note evidencing the Loan regardless of any investigation made
by the Bank and of the Bank's access to any information and shall continue
in full force and effect until all sums due and to become due hereunder or
under any other Loan Document have been paid or repaid in full. Whenever in
this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party,
subject to the provisions hereof. All covenants, agreements,
representations and warranties by the Borrower which are contained or
incorporated in this Agreement or in any other Loan Document shall inure to
the benefit of the successors and assigns of the Bank and any holder of the
Note. Except for the parties hereto and their respective successors and
assigns, no other Person shall be entitled to the benefits of this
Agreement or to rely thereon.

     12.3. Effect of Delay. No failure or delay on the part of the Bank in
exercising any right, power or privilege hereunder or under the Note, nor
any course of dealing between the Borrower and the Bank, shall operate as a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise or the exercise of any other right, power or
privilege.

     12.4. Expenses. The Borrower agrees (a) to pay or reimburse the Bank
for all of its out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of any amendment, supplement or
modification to, this Agreement, the other Loan Documents, and any other
documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Bank, and (b) to pay or reimburse the Bank
for all its out-of-pocket costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the
other Loan Documents and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Bank.

     12.5. Modifications and Waivers. No modification or waiver of any
provisions of this Agreement or of any other agreement or instrument made
or issued pursuant hereto or contemplated hereby, nor consent to any
departure by the Borrower therefrom, shall in any event be effective,
irrespective of any course of dealing between the parties, unless the same
shall be in a writing executed by the Bank, and then such waiver or consent
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
thereby entitle the Borrower to any other or further notice or demand in
the same, similar or other circumstances. Any transaction or matter
excepted from the operation of any Section of this Agreement shall
nevertheless be subject to the prohibitions and limitations contained
elsewhere in this Agreement, unless expressly stated otherwise.

     12.6. Set-Off of Accounts. The balance of every account of the
Borrower with the Bank existing from time to time at any of the Bank's
offices worldwide and in any currency, shall be subject to being setoff
against any sum not paid on its due date or within 7 (seven) days from
demand by the Borrower to the Bank arising under this Agreement or other
Loan Documents, and the Bank may at any time and from time to time after an
Event of Default shall have occurred and be continuing at its option and
without prior notice to the Borrower, except as may be required by law,
appropriate and apply toward the payment of any of such obligations of the
Borrower to the Bank for sum not paid on its due date or within 7 (seven)
days from demand all or any part of the balance of each such account with
the Bank. The Bank shall notify the Borrower forthwith upon the exercise of
any right of set-off giving details in relation thereto.

     12.7. Counterparts. This Agreement may be executed in any number of
counterparts and by telecopier, each of which shall ------------ constitute
an original, and all of which taken together shall constitute one and the
same agreement.

     12.8. Construction and Jurisdiction. This Agreement, the Note or the
Borrower Security Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly within such State. Any action or
proceeding in connection with this Agreement, the Note, the Borrower
Security Agreement, or Security Agreement may be brought in a court of
record of the State of New York, County of New York or any federal court
located therein, the parties hereby consenting to the jurisdiction thereof,
and service of process may be made upon any party by mailing a copy thereof
to such party, by registered mail, at its address to be used for the giving
of notices under this Agreement. IN ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT, THE NOTE OR THE BORROWER SECURITY AGREEMENT, THE PARTIES
MUTUALLY WAIVE TRIAL BY JURY AND ANY CLAIM THAT NEW YORK COUNTY IS AN
INCONVENIENT FORUM.

     12.9. Headings. Section headings are for convenience only and shall
not affect the interpretation or construction of this -------- Agreement,
the Note, the Borrower Security Agreement, the ESC Inc. Security Agreement,
the Parent Security Agreement, the Parent Guarantee, the Material
Subsidiary Security Agreements, the Option Agreement or any other Loan
Document.

     12.10. Release of Collateral. Promptly after the Borrower shall have
repaid the Loan in full and shall have paid and repaid to the Bank any and
all of the sums due to the Bank hereunder and under all other Loan
Documents, and provided any and all of the sums due to the Bank under
documents signed between the Borrower and/or Parent and the Bank shall have
been paid to the Bank in full, the Bank shall release the Liens over the
Collateral. Notwithstanding the above, the Bank will release the Liens over
the Collateral before any and all amounts were so paid immediately at the
request of the Borrower and/or Parent, provided the Borrower and/or Parent
have deposited with the Bank and charged and pledged in favor of the Bank
sums equal to the outstanding balance of any and all amount due to the Bank
together with all sums accrued and/or to be accrued thereon until applied
to the payment or prepayment, as requested by the Borrower and/or the
Parent, of the said sums, according to documents signed between the
Borrower and/or Parent and the Bank.

     12.11. Transfers and Booking of Loan.

            (a) (i) Without limiting any of the Bank's rights hereunder,
the Bank may, after the Loan is made hereunder, book the Loan, or any
portion thereof, in any of its branches anywhere in the world, or
negotiate, assign, grant security interests in, delegate or otherwise
transfer (each of the foregoing acts, a "Transfer") all of, or sell one or
more participations in any portion of, any or all of the following: the
Note, and the Bank's rights and related obligations under this Agreement
and the other Loan Documents (any of the foregoing which is subject to a
Transfer, a "Transferred Item"); provided, however, that at no time shall
the Borrower be required, as a result of any such Transfer or
participation, to (x) give notices required by this Agreement to more than
one Person and that one Person's designated department, employees and/or
counsel, or (y) obtain any consent or approval required under this
Agreement from more than one Person, or (z) be subject to any additional
taxes, fees, costs or expenses (including withholding taxes), and further
provided that such "Person" shall be a member of the Bank's Group.

     The "Bank's Group" means any company which the Bank possesses 51% or
more of its outstanding share capital, provided, that such Transferee is a
bank or other financial institution that is not a competitor of the
Borrower.

         (b) In the event the Bank Transfers any Transferred Item, then to
the extent provided by the Bank with respect to such Transfer, the Person
to whom such Transfer is made (the "Transferee") shall have, and may
exercise and enjoy, the rights, powers, privileges and remedies of the Bank
with respect to such Transferred Item. The Bank shall, after any Transfer,
and to the extent of such Transfer, be forever relieved and fully
discharged from all liability and responsibility, if any, that it may
thereafter have to the Borrower with respect thereto, but not with respect
to matters occurring prior to such Transfer. The Bank shall retain all its
rights and powers with respect to any Transferred Item to the extent not so
Transferred. The foregoing shall not apply unless the Bank shall notify the
Borrower of such a Transfer promptly upon the execution of the Transfer and
the Transferee shall assure to the Borrower that it has assumed the
liability and responsibility from which the Bank is so discharged.

         (c) The provisions of Section 12.6 (regarding setoff rights) shall
apply to any account of the Borrower with, and any claim of the Borrower
against, any Transferee to the extent of such Transfer which shall have
purchased the Loan or any portion thereof and shall become a "Bank"
hereunder. This subsection (c) of Section 12.11 shall not limit any other
rights of the Bank or such Transferee whether arising under this Section
12.11, or otherwise hereunder or under applicable law.

         (d) The Bank is authorized to disclose any information it may have
or acquire about the Borrower and its Subsidiaries to any prospective or
actual Transferee, provided, that such Transferee is a bank or other
financial institution that is not a competitor of the Borrower.

       [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]

         IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be duly executed and delivered in the City of New York by
their duly authorized officers, all as of the date first above written.

                               ENERGY SYSTEMS HOLDINGS INC.

                               By: /s/ Sagi Genger
                                  ------------------------------------
                             Name: Sagi Genger
                              Title: Director

                               BANK HAPOALIM B.M.
                               AN ISRAELI BANK ACTING THROUGH
                               ITS NEW YORK BRANCHES

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

                               By: /s/ Maxine Levy
                                  ------------------------------------
                             Name: Maxine Levy
                               Title: Vice President

                                 SCHEDULES

Schedule I:    Subsidiaries of the Borrower

                                  EXHIBITS

Exhibit A          Form of Note
Exhibit B-1        Form of Parent Asset Purchase Agreement Pledge
Exhibit B-2        Form of Borrower Security Agreement
Exhibit C          Form of ESC Inc. Security Agreement
Exhibit C-1        Form of ESC Inc. Guarantee
Exhibit D          Form of Parent Security Agreement
Exhibit E          Form of Parent Guarantee
Exhibit F          Form of Option Agreement
Exhibit G          Form of Opinion of Borrower's Counsel
Exhibit H          Form of Disbursement Request

                                                                 Schedule I
                                                                 ----------

                        SUBSIDIARIES OF THE BORROWER

ESC Medical Systems Inc.
Laser Corporation
Laser Sales Corporation
Applied Optromics Corp.
Sharplan Lasers, Inc.
Sharplan 2000, Inc.
Sahar Technologies, Inc.

                                                               Exhibit 10.2

                              OPTION AGREEMENT

         THIS OPTION AGREEMENT (this "Agreement"), dated as of April 30,
2001 is made and entered into by and between ESC MEDICAL SYSTEMS LTD., a
company incorporated under the laws of the State of Israel ("ESC"), and
BANK HAPOALIM B.M., an Israeli banking corporation (the "Bank").

                                  RECITALS

         WHEREAS, ESC has requested, and may request from time to time
after the date hereof, the Bank to make loans and other extensions of
credit to ESC and/or to one or more subsidiaries of ESC (collectively, the
"Loans"); and

         WHEREAS, in order to induce the Bank to make the Loans to ESC
and/or to one or more such subsidiaries of ESC, ESC has agreed to execute
and deliver this Agreement to the Bank;

         NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, ESC and the Bank hereby agree as
follows:

     1. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:

         "Closing Price" means, as of any day, the last traded price
regular way reported on the NASDAQ National Market System for a share of
ESC Stock on such day.

         "ESC Stock" means the ordinary shares, par value NIS 0.1 per
share, issued by ESC.

         "Governmental Authority" shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision.

         "Lien" shall mean, with respect to any Person, any mortgage, lien,
pledge, hypothecation, charge, security interest or other encumbrance, or
any interest or title of any vendor, lessor, lender or other secured party
to or of such Person under any conditional sale or other title retention
agreement or a capital lease, upon or with respect to any property or asset
of such Person (including without limitation in the case of shares of
stock, shareholder agreements, voting trust agreements and all similar
arrangements).

         "Person" shall mean any individual or general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
estate, business trust, co-operative, association, unincorporated
organization, Governmental Authority or other entity, and where the context
so admits, the legal representatives, successors in interest and permitted
assigns of such Person.

         "Public Offering" means any public offering pursuant to an
effective registration statement under the United States Securities Act of
1933, as amended, or any other securities law of any other jurisdiction,
covering the offering and sale of shares of ESC Stock for the account of
ESC (other than a registration statement effected solely to implement an
employee benefit plan, a transaction in which Rule 145 of the United States
Securities and Exchange Commission is applicable or any other form or type
of registration in which ESC Stock cannot be included pursuant to United
States Securities and Exchange Commission rules and practice).

         "Unrealized Shares" means, as of any date during the Exercise
Period, the number of Option Shares equal to (i) 2,000,000, less (ii) the
number of Realization Shares purchased from time to time by the Optionee
pursuant to Paragraph 7(a) and/or Paragraph 7(b).

         2. Grant of Option. Upon the terms and subject to the conditions
set forth herein, ESC hereby grants to the Bank or to any of its
subsidiaries (the Bank or any such subsidiary, the "Optionee"), the
irrevocable right and option (the "Option") to purchase from ESC up to
2,500,000 shares of ESC Stock (the "Option Shares"), at a price per share
equal to the Purchase Price (as defined below). Subject to Paragraph 7, the
decision to elect to exercise the Option shall be in the sole discretion of
the Optionee, and the Optionee shall incur no liability whatsoever to any
Person for any failure to exercise the Option.

         3. Purchase Price. The purchase price (the "Purchase Price") for
the Option Shares shall be US$20.25 (Twenty and 25/100 United States
Dollars) per Option Share, subject to adjustment as set forth herein.
Notwithstanding the foregoing, if ESC undergoes a Public Offering at any
time during the Exercise Period (as defined below), the Purchase Price for
the Option Shares exercised and acquired in such Public Offering shall be
at a price per Option Share equal to the lower of (i) eighty-five percent
(85%) of the price per share paid by the purchasers of the ESC Stock in
such Public Offering, or (ii) US$20.25 (Twenty and 25/100 United States
Dollars) (subject to adjustment).

         4. Exercise Period. Subject to Paragraph 7, this Option may be
exercised, in part or in whole, during the period beginning on the date of
this Option and ending on the fifth anniversary of the date hereof (the
"Exercise Period"). Without derogating from Paragraph 7 below, at the end
of the Exercise Period, the Option shall expire with respect to any Option
Shares not then exercised and acquired.

         5. Adjustment of Purchase Price and Number of Option Shares. The
number and kind of securities purchasable initially upon the exercise of
this Option and the Purchase Price shall be subject to adjustment from time
to time upon the occurrence of certain events, as follows:

            (a) Adjustment for Share Splits and Combinations. If ESC at any
time or from time to time effects a subdivision of the outstanding shares
of ESC Stock, the number of shares of ESC Stock issuable upon exercise of
this Option immediately before the subdivision shall be proportionately
increased, and conversely, if ESC at any time or from time to time combines
the outstanding shares of ESC Stock, the number of shares of ESC Stock
issuable upon exercise of this Option immediately before the combination
shall be proportionately decreased. Any adjustment under this Paragraph
5(a) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

            (b) Adjustment for Certain Dividends and Distributions. In the
event ESC at any time, or from time to time makes or fixes a record date
for the determination of holders of shares of ESC Stock entitled to receive
a dividend or other distribution payable in additional shares of ESC Stock,
then and in each such event the number of shares of ESC Stock issuable upon
exercise of this Option shall be increased as of the time of such issuance
or, in the event such a record date is fixed, as of the close of business
on such record date, by multiplying the number of shares of ESC Stock
issuable upon exercise of this Option by a fraction: (i) the numerator of
which shall be the total number of shares of ESC Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of ESC Stock
issuable in payment of such dividend or distribution, and (ii) the
denominator of which is the total number of shares of ESC Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; provided, however, that if such record date
is fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed thereof, the number of shares of ESC Stock
issuable upon exercise of this Option shall be recomputed accordingly as of
the close of business on such record date and thereafter the number of
shares of ESC Stock issuable upon exercise of this Option shall be adjusted
pursuant to this Paragraph 5(b) as of the time of actual payment of such
dividends or distributions.

            (c) Adjustments for Other Dividends and Distributions. In the
event ESC at any time or from time to time makes or fixes a record date for
the determination of holders of shares of ESC Stock entitled to receive a
dividend or other distribution payable in securities of ESC other than
shares of ESC Stock, then in each such event provision shall be made so
that the Optionee shall receive upon exercise of this Option, in addition
to the number of shares of ESC Stock receivable thereupon, the amount of
securities of ESC that the Optionee would have received had this Option
been exercised for shares of ESC Stock immediately prior to such event (or
the record date for such event) and had the Optionee thereafter, during the
period from the date of such event to and including the date of exercise,
retained such securities receivable by it as aforesaid during such period,
subject to all other adjustments called for during such period under this
Paragraph 5 and ESC's Articles of Association with respect to the rights of
the Optionee.

            (d) Adjustment for Reclassification, Exchange and Substitution.
If the shares of ESC Stock issuable upon the exercise of this Option are
changed into the same or a different number of shares of any class or
classes of shares, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or shares
dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Paragraph), then and in any such event the
Optionee shall have the right thereafter to exercise this Option into the
kind and amount of shares and other securities receivable upon such
recapitalization, reclassification or other change, by holders of the
number of shares of ESC Stock for which this Option might have been
exercised immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein and under
ESC's Articles of Association.

            (e) Reorganization, Mergers, Consolidations or Sales of Assets.
If at any time from time to time there is a capital reorganization of the
shares of ESC Stock (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere
in this Paragraph) or a merger or consolidation of ESC with or into another
corporation, or the sale of all or substantially all of ESC's properties
and assets to any other Person, then, as a part of such reorganization,
merger, consolidation or sale, provision shall be made so that the Optionee
shall thereafter be entitled to receive upon exercise of this Option, the
number of shares or other securities or property of ESC, or of the
successor corporation resulting from such merger or consolidation or sale,
to which a holder of shares of ESC Stock deliverable upon conversion would
have been entitled on such capital reorganization, merger, consolidation or
sale. In any such case (except to the extent any cash or property is
received in such transaction), appropriate adjustment shall be made in the
application of the provisions of this subparagraph and ESC's Articles of
Association with respect to the rights of the Optionee after the
reorganization, merger, consolidation or sale to the end that the
provisions of this subparagraph and ESC's Articles of Association
(including adjustment of the number of shares of ESC Stock issuable upon
exercise of this Option) shall be applicable after that event and be as
nearly equivalent to the provisions hereof as may be practicable.

            (f) Other Transactions. In the event that ESC shall issue
shares to its shareholders as a result of a split-off, spin-off or the
like, then ESC shall complete such issuance or other action if, as part
thereof, allowance is made to protect the economic interest of the Optionee
either by increasing the number of Option Shares and/or by reducing
proportionately the Purchase Price of the Option Shares and/or by procuring
that the Optionee shall be entitled, on economically proportionate terms,
to acquire additional shares of the spun-off or split-off entities.

            (g) Notice of Capital Changes. If at any time ESC shall offer
for subscription pro rata to the holders of shares of ESC Stock any
additional shares of any class, other rights or any equity security of any
kind, or there shall be any capital reorganization or reclassification of
the capital shares of ESC Stock or the consolidation or merger of ESC with,
or sale of all or substantially all of its assets to another company or
there shall be a voluntary or involuntary dissolution, liquidation or
winding up of ESC, or other transaction described in this Paragraph 5,
then, in any one or more of said cases, ESC shall give the Optionee, by
registered or certified mail, postage prepaid, a written notice containing
a brief description of the proposed action and stating the date on which
(i) a record is to be taken for the purpose of such subscription or other
rights, or (ii) such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is to take place, as
the case may be. Such notice shall also specify the date as of which the
holders of record of shares of ESC Stock shall participate in such
subscription rights, or shall be entitled to exchange their shares of ESC
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least fourteen (14) days prior to the action in question, and not
less than fourteen (14) days prior to the record date in respect thereto.

            (h) Adjustment of Purchase Price. Upon each adjustment in the
number of shares of ESC Stock purchasable hereunder, the purchase price per
share shall be proportionately increased or decreased, as the case may be,
in a manner that is the inverse of the manner in which the number of shares
of ESC Stock purchasable hereunder shall be adjusted. In the event that ESC
shall hereafter issue any additional shares of ESC Stock or any securities
convertible into or exchangeable for ESC Stock or any warrants, options or
other rights to acquire shares of ESC Stock or such convertible securities,
pursuant to Paragraph 5(c) hereof, then the Purchase Price for the Option
Shares purchasable hereunder shall, at the sole option of the Optionee and
in lieu of any adjustment pursuant to such Paragraph, be reduced by an
amount equal to the Fair Market Value of such stock, securities, warrants,
options or rights as of the date of such initial issuance thereof, without
giving effect to any withholding or other taxes, charges, imposts or
duties. In the event that ESC shall hereafter pays any dividend or makes
any distribution payable in additional shares of ESC Stock pursuant to
Paragraph 5(b) hereof, then the Purchase Price for the Option Shares
purchasable hereunder shall, at the sole option of the Optionee and in lieu
of any adjustment in the number of Option Shares purchasable hereunder
pursuant to such Paragraph, be reduced by an amount equal to the amount of
all such payments and dividends, without giving effect to any withholding
or other taxes, charges, imposts or duties.

            (i) Notice of Adjustments. Whenever the Purchase Price or the
number of shares of ESC Stock purchasable hereunder shall be adjusted
pursuant to Paragraph 5 hereof, ESC shall prepare a certificate signed by
the chief financial officer of ESC setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Purchase Price and the number
of shares of ESC Stock purchasable hereunder after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by
first class mail, postage prepaid) to the Optionee.

            (j) Adjustment Proportionate; Rounding Upward. Any adjustment
under this Paragraph 5 in the number of Option Shares shall apply
proportionately to only the unexercised portion of the Option. If fractions
of a share would result from any such adjustment, the aggregate shares
adjustment shall be revised to the next higher whole number of shares.

     6.  Method of Exercising Option and Payment of Purchase Price.

         The Option may be exercised, in whole or in part on any number of
occasions during the Exercise Period, by the delivery by the Optionee to
ESC at its principal office of the attached Notice of Exercise. The Notice
of Exercise must be accompanied by payment in full of the aggregate
Purchase Price for the Option Shares being purchased upon such exercise.
Payment for such Option Shares shall be made in U.S. dollars by check
payable to the order of ESC or by wire transfer to an account designated by
ESC. With respect to each such exercise of this Option, simultaneous with
Optionee's payment of the Purchase Price for the number of Option Shares
indicated in the related Notice of Exercise, ESC shall issue and deliver to
Optionee a certificate or certificates evidencing such Option Shares
registered in the name of Optionee or its designee. Upon receipt by ESC of
this Option at its office in proper form for exercise, Optionee shall be
deemed to be the holder of record of the Option Shares transferable upon
such exercise. If this Option should be exercised in part only, ESC shall
concurrently with the delivery of the certificates for purchased Option
Shares, execute and deliver to the Optionee a new Option, on the same terms
and conditions as this Option, evidencing the rights of the Optionee
thereof to purchase the balance of the Option Shares.

     7.  Right of Realization by ESC.

         (a) ESC shall have the right to demand during the Exercise Period
that the Optionee exercise the Option and purchase 2,000,000 Option Shares
(the "Realization Shares") at the Purchase Price, if during the Exercise
Period, (i) ESC gives the Optionee not less than 10 days prior written
notice of its intention to undergo a Public Offering or a private placement
in which (Y) the consideration to be received by ESC in such Public
Offering or in a private placement, provided that ESC will notify the Bank
of the identity of the purchasers in such private offering (the
"Consideration") will be not less than US$40,000,000 (Forty Million United
States Dollars), and (Z) the price for each share of ESC Stock to be
purchased in such Public Offering or private placement will be not less
than US$20.25 (Twenty and 25/100 United States Dollars), and (ii) the
Closing Price for a share of ESC Stock is not less than US$23.00
(Twenty-Three and 00/100 United States Dollars) prior and on the date of
such demand.

         If the Optionee does not exercise and purchase the Realization
Shares, or any part thereof, in accordance with ESC's demand made pursuant
to Paragraph 7(a) above, then the number of Option Shares and Unrealized
Shares to which the Optionee can exercise and purchase under the Option
shall thereafter be reduced by an amount equal to 50% (the "Ratio") of the
balance obtained between (i) the Realization Shares and (ii) the number of
Realization Shares actually purchased by the Optionee in accordance with
ESC's demand made pursuant to Paragraph 7(a) above; provided, however, if
the actual stated Consideration in any Public Offering or private placement
is less than US$40,000,000 (Forty Million United States Dollars), then the
Ratio shall be adjusted to a percentage equal to the product of (Y) the
Ratio, multiplied by, (Z) a fraction, the numerator of which is the actual
stated Consideration and the denominator of which is US$40,000,000 (Forty
Million United States Dollars). Notwithstanding anything in this Paragraph
7(a) to the contrary, if ESC does not actually commence or undergo the
Public Offering or the private placement contemplated in Paragraph 7(a)
within sixty (60) days from the date of its demand pursuant to such
Paragraph, then this Paragraph 7(a) shall not apply and there will be no
reduction of the number of Unrealized Shares to which the Optionee can
exercise and purchase under the Option.

         (b) If during the Exercise Period, the Closing Price of a share of
ESC Stock is above US$26.00 (Twenty-Six and 00/100 United States Dollars)
during the period of twenty-two (22) consecutive trading days (not to
include a deviation of two (2) trading days during such 22-day period) (the
"Computation Period"), then ESC shall have the right to demand during the
Exercise Period that the Optionee exercise the Option and purchase the
Unrealized Shares at the Purchase Price within thirty (30) business days
after such demand is made on the Optionee (the "Realization Period"). If
the Optionee does not exercise and purchase the Unrealized Shares, or any
part thereof, in accordance with ESC's demand made pursuant to this
Paragraph 7(b), during the Realization Period, then the number of Option
Shares and Unrealized Shares to which the Optionee can exercise and
purchase under the Option shall thereafter be reduced by an amount equal to
50% of the Unrealized Shares.

         (c) If during the Computation Period, the Closing Price of a share
of ESC Stock is above US$30.00 (Thirty and 00/100 United States Dollars),
then ESC shall have the right to demand that the Optionee exercise the
Option and purchase all Unrealized Shares at the Purchase Price during the
Realization Period. If the Optionee does not exercise and purchase the
Unrealized Shares, or any part thereof, in accordance with ESC's demand
made pursuant to this Paragraph 7(c) during the Realization Period, then
the number of Option Shares and Unrealized Shares to which the Optionee can
exercise and purchase under the Option shall thereafter be reduced by an
amount equal to the balance between (i) the Unrealized Shares, and (ii) the
number of Realization Shares actually purchased by the Optionee in
accordance with ESC's demand made pursuant to this Paragraph 7(c).

         (d) Notwithstanding anything in this Agreement to the contrary,
500,000 of the Option Shares shall be exercised according to the Optionee's
sole discretion during the Exercise Period, and such Option Shares shall
not be deemed to be "Realization Shares" and shall not be subject to any
right of ESC to demand that the Optionee exercise the Option and purchase
such shares.

     8. Investment Representation. Optionee, and each of its subsidiaries
who is issued Option Shares pursuant to this Agreement, represent that (i)
it is an "accredited investor," as that term is defined in Rule 501(a) of
Regulation D under the United States Securities Act of 1933, as amended, or
any successor federal statute (the "Securities Act"), and (ii) any and all
Option Shares purchased hereunder shall be acquired for investment only and
without a view to the resale or distribution thereof, except in any case
pursuant to the registration of such Option or Option Shares under the
Securities Act or pursuant to a valid exemption from such registration
requirement. If the Option Shares are not so registered, certificates for
the Option Shares shall bear the legend set forth in Paragraph 12 hereof.

     9.  Exchange, Transfer, Assignment or Loss of Option.

         (a) For purposes of this Agreement, "Transfer", as to this Option,
the Option Shares or any shares of ESC Stock, means any transfer, sale,
exchange, assignment, the creation of any Lien, option or right to
purchase, and any other disposition of any kind, whether voluntary or
involuntary, affecting title to, possession of or voting rights with
respect thereto. Optionee and each of its subsidiaries who is issued Option
Shares pursuant to this Agreement acknowledges that the Option and the
Option Shares issuable upon exercise thereof have not been registered under
the Securities Act, and agree that it will not Transfer any this Option or
the Option Shares except upon the terms and conditions specified herein,
and that it will cause any transferee thereof to agree to take and hold the
same subject to the terms and conditions specified herein, provided that,
Optionee or any holder of the Option Shares may sell Option Shares
purchased upon exercise of this Option in one or more private transactions
not requiring registration under the Securities Act. Prior to any Transfer
of any Option Shares (other than a Transfer among Optionee and/or any of
its affiliates), the holder thereof shall give written notice to ESC of
such holder's intention to effect such Transfer and the identity of the
proposed transferee. Each holder wishing to effect such a Transfer of the
Option Shares shall also furnish to ESC an agreement by the transferee
thereof that it is taking and holding the same subject to the terms and
conditions specified herein and, unless the transferee is an affiliate of
such holder, a written opinion of such holder's counsel, in form reasonably
satisfactory to ESC, to the effect that the proposed Transfer may be
effected without registration under the Securities Act. The restrictions
set forth in Paragraphs 8, 9 and 12 shall terminate and cease to be
effective with respect to any Option Shares that are registered under the
Securities Act or upon receipt by ESC of an opinion of counsel, reasonably
satisfactory to ESC, to the effect that compliance with such restrictions
is not necessary in order to comply with the Securities Act with respect to
the Transfer of the Option Shares.

         (b) Subject to the restrictions set forth herein, this Option is
exchangeable, without expense, at the option of the Optionee, upon
presentation and surrender hereof to ESC or at the office of its stock
transfer agent, if any, for other options of different denominations
entitling the holder thereof to purchase in the aggregate the same number
of Option Shares purchasable hereunder; provided, that the foregoing shall
not apply to Unrealized Shares. Upon surrender of this Option to ESC at its
principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, ESC shall, without charge, execute and deliver a new
Option in the name of the assignee named in such instrument of assignment
and this Option shall promptly be canceled; provided, however, that this
Option may not be transferred except to members of the Bank's Group. The
term "Option" as used herein includes any Options into which this Option
may be divided or exchanged. Upon receipt by ESC of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Option, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Option, if
mutilated, ESC will execute and deliver a new Option of like tenor and
date.

     10. Representations, Warranties and Covenants of ESC.

         (a)   ESC hereby represents and warrants to Optionee that:

          (i)  There has been reserved, and ESC shall at all times keep
               reserved so long as the Option remains outstanding, out of
               its authorized ESC Stock, such number of shares of ESC Stock
               as shall be subject to purchase under the Option, and ESC
               will supply every transfer agent for ESC Stock and other
               securities of ESC issuable upon exercise of the Option with
               duly executed stock and other certificates, as appropriate,
               for such purpose;

          (ii) Upon delivery of, and payment for the Option Shares as
               contemplated by this Agreement, the Optionee will acquire
               duly authorized, validly issued, fully paid and
               nonassessable Option Shares;

     11. Legend. Except as provided in Paragraph 9(a) hereof, each stock
certificate evidencing the Option Shares issued to the Optionee or to any
other Person in connection with a transfer pursuant to this Agreement shall
include the following legend:

     "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
     "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE
     OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
     HYPOTHECATED UNLESS AND UNTIL REGISTERED OR QUALIFIED UNDER THE
     SECURITIES ACT AND UNDER SUCH LAWS, OR UNLESS AN EXEMPTION FROM
     REGISTRATION AND QUALIFICATION IS AVAILABLE. THE SALE, PLEDGE,
     HYPOTHECATION OR TRANSFER OF THE SHARES REPRESENTED BY THIS
     CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN OPTION
     AGREEMENT DATED APRIL 30, 2001 TO WHICH THE ISSUER IS SUBJECT. A COPY
     OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
     SECRETARY OF THE ISSUER."

     12. Fractional Interest. No fractional shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional
shares ESC shall round up the number of Option Shares to be issued.

     13. No Rights in Option Shares. Optionee shall have none of the rights
of a shareholder with respect to the Option Shares unless and until the
Option Shares are issued to it upon exercise of the Option.

     14. Registration Rights. If ESC effects a registration with respect to
the public resale by shareholders of any ESC Stock under the Securities
Act, or any other relevant securities laws of any other jurisdiction, the
Optionee shall have the right to have included in such registered offering
the Option Shares, on a pro rata basis with the other selling shareholders
participating in such registered offering, in proportion to the respective
holdings of Optionee and all such other selling shareholders.

     15. Expenses. ESC shall pay Israeli Stamp Duty, if any, on the issue
of the Option Shares, and will notify the Israeli Companies Registrar of
such issue within the time period required by law. The Stamp Duty on this
Option, if any, will be paid in full by ESC.

     16. Notices. All notices, requests and other communications to any
party under this Option shall be in writing and shall be given to such
party, by mail, telecopy, telex, personal delivery or other customary means
of delivery, addressed to it as set forth below or such other address or
telex number as such party may in the future specify for such purpose by
notice to the other party. Each such notice, request or communication shall
be effective if given by telex, when such telex is transmitted to the telex
number specified below and the appropriate answerback is received, if given
by mail, two days after such communication is deposited in the United
States mails and sent by certified or registered mail, return receipt
requested, with first class postage prepaid, addressed as aforesaid or if
given by telecopy, personal delivery or any other means, when received at
the address specified below.

                   Party                Address

          If to ESC:                    ESC Medical Systems Ltd.
                                        Yokneam Industrial Park,
                                        P.O.B. 240, Yokneam 20692
                                        Attention:  President
                                        Telephone:  04-9599000
                                        Telecopier:  04-9599070

          With a copy to:               Zellermayer, Pelossof & Co.
                                        Rubinstein House
                                        20 Lincoln Street
                                        Tel Aviv 67134
                                        Attention:  Revital Kerem, Advocate
                                        Telephone:  03-6255555
                                        Telecopier:  03-6255500

          If to the Optionee:           Bank Hapoalim B.M.
                                        63 Yehuda Halevy St
                                        Tel Aviv
                                        Attention:  Mr. Mr. Ya'akov Elinav
                                        Telephone:  03-5674791
                                        Telecopier:  03-5676008

          with a copy to:               Shaw Pittman
                                        335 Madison Ave., 26th floor
                                        New York, New York  10017-4605
                                        Attention:  John C. Simons, Esq.
                                        Telephone:  (212) 603-6848
                                        Telecopier:  (212) 603-6801

         Notice to any other Optionee shall be sent to the address
indicated on the applicable Assignment Form.

     17. Governing Law/Submission to Jurisdiction.

         (a) This Agreement shall be governed by the laws of the State of
Israel. For the purposes of this Agreement ESC hereby irrevocably submits
to the exclusive jurisdiction of the competent courts in Tel-Aviv - Jaffa,
Israel.

         (b) ESC agrees that any summons, notice or judgment or other legal
process or document in connection with any proceedings referred to in
sub-clause (a) hereof may be serviced upon by delivering same to ESC at its
address set forth in Paragraph 16 and a copy to Zellermayer, Pelossof &
Co., Advocates, 20 Lincoln Street, Tel Aviv, Israel 67134.

     18. Miscellaneous. This Agreement cannot be changed or terminated
orally. This Agreement contains the entire agreement between the parties
relating to the subject matter hereof. The paragraph headings herein are
intended for reference only and shall not affect the interpretation hereof.
This Agreement may be executed in any number of counterparts and by
telecopier, each of which shall constitute an original, and all of which
taken together shall constitute one and the same agreement. Except as
specifically stated herein as constituting an explicit waiver or
modification of any provision of a loan agreement or other document
evidencing indebtedness owing from ESC to the Optionee, nothing contained
herein shall constitute a waiver or modification by the Optionee of any of
the covenants, representations or agreements under such loan or other
document. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.

     19. Successors and Assigns. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors
and permitted assigns.

     20. Availability of Public Information. With a view to making
available to the Optionee and any subsequent holder of the Option Shares
the benefits of certain rules and regulations of the United States
Securities Exchange Commission (the "SEC") (including, without limitation,
Rules 144 and 144A under the Securities Act), which may permit the sale of
the Option Shares to the public or certain other institutions without
registration, ESC agrees to take any and all such actions as may be
required of it to make available to the Optionee and such subsequent
holders such benefits, including, without limitation, to:

         (i)   make and keep public information available, as those terms
               are understood and defined in Rule 144 under the Securities
               Act or any successor provision thereto from and after the
               date ESC first becomes subject to the provisions of Section
               13 or 15(d) of the United States Securities Exchange Act of
               1934, as amended, or any successor federal statute (the
               "Exchange Act"); and

         (ii)  file with the SEC in a timely manner all reports and other
               documents required of ESC under the Securities Act and the
               Exchange Act from and after the date ESC first becomes
               subject to the provisions of Section 13 or 15(d) of the
               Exchange Act; and

         (iii) so long as the Optionee or any affiliate of the Optionee
               owns any Option or Option Shares, furnish to the Optionee
               forthwith upon request a written statement by ESC as to
               compliance with the reporting requirements of Rule 144 or
               any successor provision thereto, and of the Securities Act
               and the Exchange Act, a copy of the most recent annual or
               quarterly report of ESC filed with the SEC, in each case
               from and after the date ESC first becomes subject to the
               provisions of Section 13 or 15(d) of the Exchange Act, and
               such other reports and documents of ESC and other
               information in the possession of or reasonably obtainable by
               ESC as the Optionee and its affiliates and subsequent
               holders of the Option Shares may reasonably request in
               availing itself of any rule or regulation of the SEC
               allowing the Optionee and its affiliates and subsequent
               holders of the Option Shares to sell any such securities
               without registration.

     21. Shareholder Approval. This Option shall not be effective as long
and until the grant of the Option was approved by the shareholders of the
Company.

         IN WITNESS WHEREOF, the parties have executed this Option
Agreement as of the day and year first above written.

                                            BANK HAPOALIM B.M.

                                            By: /s/ L. Landau
                                            ------------------------

                                            By: /s/ L. Ben Ami
                                            ------------------------

                                            ESC MEDICAL SYSTEMS LTD.

                                            By : /s/ Yacha Sutton
                                            ------------------------

                             NOTICE OF EXERCISE

To:

1.       The undersigned hereby elects to purchase _________ Option Shares,
         pursuant to the terms of the attached Option, and tenders herewith
         payment of the purchase price for such shares in full.

2.       In exercising this Option, the undersigned hereby confirms and
         acknowledges that the Option Shares are being acquired solely for
         the account of the undersigned (and not as a nominee for any other
         party) for investment, and that the undersigned will not offer,
         sell or otherwise dispose of any such Option Shares except under
         circumstances that will not result in a violation of the United
         States Securities Act of 1933, as amended, or any state securities
         laws.

3.       Please issue a certificate representing said Option Shares in the
         name of the undersigned and deliver such certificate to the
         undersigned.

4.       Please issue a new Option for the unexercised portion of the
         attached Option in the name of the undersigned and deliver such
         new Option to the undersigned.

----------------------              -------------------------
      (Date)                              (Print Name)

                                     -------------------------
                                          (Signature)

                              ASSIGNMENT FORM

                  FOR VALUE RECEIVED,                 hereby sells, assigns
and transfers unto
                                      ---------------

Name
    ------------------------------------------------------------

(Please typewrite or print in block letters)

Address
       ---------------------------------------------------------

and the above transferee hereby acquires and assumes the right to purchase
Option Shares represented by this Option to the extent of ______ Option
Shares as to which such right is exercisable and agrees to be bound by the
terms and conditions of the Option Agreement, and do hereby confirm that
the above transferee is a subsidiary of Bank Hapoalim B.M.

Date

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

Transferor Signature

--------------------
Transferee Signature

                          ESC MEDICAL SYSTEMS LTD.

                                                       Date: April 30, 2001

To:  Bank Hapoalim B.M.

Re:      Option Agreement

Whereas           we will grant an option to purchase from us up to
                  2,500,000 ordinary shares of our share capital, all
                  according to the terms and conditions of the option
                  agreement a copy of which is attached to this letter and
                  forms an integral part of it (the "Option" or "Option
                  Agreement")

and               Whereas we have informed you that in order to furnish you
                  the Option duly executed we have to obtain our general
                  assembly's approval (the "Approval").

and               Whereas we have undertaken to grant you the Option duly
                  executed within 70 (seventy) days of the drawdown of a
                  loan (the "Interim Period") in the sum of $ 100,000,000
                  (One Hundred Million U.S. Dollars) which you have granted
                  us in order to finance the acquisition of the CMG
                  division from Coherent Inc (the: "Loan" or the "Loan
                  Agreement").

and               Whereas it was agreed between us that if we shall not
                  obtain the Approval during the Interim Period, we shall
                  provide you with an alternative financial compensation in
                  connection with the Loan, satisfactory to you.

Now Therefore we hereby undertake that if we shall not grant you the Option
duly executed during the Interim Period we shall compensate you as follows:

(i)  The Interest on the Loan will be LIBOR plus 8% p.a. as of the Closing
     Date as such term is defined in the Loan Agreement.

(ii) The facility fee according to our facility fee letter as of this date
     addressed to you will be $2,700,000 (Two Million and Seven Hundred
     Thousand United States Dollars) and will be paid within 3 days from
     the end of the Interim Period.

The Loan Agreement will be amended as to reflect the above amendments and
we undertake to sign all documents concerning the above amendments in
connection with the said amendments. We shall bear all fees and expenses
incurred by you in connection with the above amendments.

If we will notify you within the Interim Period that related documentation
is under SEC review, the Interim Period shall be extended by additional 30
days.

Subject to the above, all terms of the Loan Agreement and/or any other
document we have signed in your favor will remain in full force.

                             Very truly yours,

                              /s/ Yacha Sutton
                              ------------------------

                              ESC Medical Systems Ltd.

                          ESC MEDICAL SYSTEMS LTD.

                                                       Date: April 30, 2001

To

Bank Hapoalim B.M.

                            Re: Option Agreement

                  Attached herewith is the Option Agreement and the
Compensation Letter signed by ourselves. (The Option Agreement and the
Compensation Letter are attached to this letter and marked "A" and "B"
respectively).

Please note that the Option Agreement is subject to our shareholders
approval.

If will not notify you within 70 days from the date of this letter that
such approval was granted and that the Option Agreement is valid and was
duly executed in your favor then the Compensation Letter shall apply
according to the terms and conditions specified in such letter. If we will
notify you within the said 70 days period that related documentation is
under SEC review, such 70 days period shall be extended by additional 30
days.

Except for the above all our rights according to the documents we have
and/or will sign in your favor.

                             Very truly yours,

                              /s/ Yacha Sutton
                              ------------------------
                              ESC Medical Systems Ltd.

Date: April 30, 2001

ESC Medical Systems Ltd.
Yokneam Industrial Park,
P.O.B. 240, Yokneam 20692

Attention:  President

Dear Sirs,

         Reference is made to the Option Agreement dated as of April 30,
2001 (the "Option Agreement"), by and between ESC Medical Systems Ltd.
("ESC") and Bank Hapoalim B.M. (the "Bank"), pursuant to which the Bank has
the irrevocable right and option to purchase from ESC up to 2,500,000
ordinary shares, par value NIS 0.1 per share, issued by ESC, upon the terms
and conditions specified therein. All capitalized terms used and not
defined herein shall have the meanings given to such terms in the Option
Agreement.

         Notwithstanding anything in the Option Agreement to the contrary,
during the period (the "Period") that (i) any portion of the Option remains
unexercised during the Exercise Period, or (ii) the Bank or any affiliate
of the Bank is the legal or beneficial owner or holder of any class of
voting securities of ESC, the Bank undertakes as follows:

         (a) The Bank, and each affiliate of the Bank who acquires any
class of voting securities of ESC, will at all times be a passive investor
and will neither have nor seek the ability to influence management of ESC
during the Period.

         (b) At no time during the Period will the Bank or any affiliate of
the Bank have the ability after purchase or acquisition of any ordinary
shares of ESC (whether pursuant to the Option Agreement or otherwise) or
any other class of voting securities of ESC, to vote more than 4.99% of any
class of voting securities of ESC. Contemporaneous with the execution and
delivery of the Option Agreement and this letter agreement, the Bank shall
execute and deliver to ESC an Irrevocable Proxy for Excess Shares (the
"Proxy"), substantially in the form of Schedule 1 attached hereto, pursuant
to which the Bank will grant to ESC an irrevocable proxy during the Period
for each class of voting securities of ESC acquired by the Bank or any
affiliate of the Bank in excess of 4.99% of such class of voting securities
(the "Excess Shares") in order that the Excess Shares will be voted solely
at the discretion of ESC's management.

         (c) At all times during the Period, the Bank and/or any affiliated
permitted transferee will seek to dispose of any acquired Excess Shares in
an orderly fashion as quickly as reasonably possible taking into account
the marketability and pricing of the shares and any applicable holding
periods and/or other transfer restrictions imposed on the Bank or such
transferee pursuant to the Option Agreement or any applicable United States
securities laws and regulations.

         If you are in agreement with the foregoing, please so indicate by
signing in the space provided on the enclosed copy of this letter, and then
return such signed copy to the Bank.

                                 Sincerely,

                                  BANK HAPOALIM B.M.

                                  By: /s/ L. Landau
                                  ------------------------

                                  By: /s/ L. Ben Ami
                                  ------------------------

ACCEPTED AND AGREED TO as of the date first above written:

ESC MEDICAL SYSTEMS LTD.

By: /s/ Sagi Genger
   ------------------------

                                 SCHEDULE 1
Date: April 30, 2001

ESC Medical Systems Ltd.
Yokneam Industrial Park,
P.O.B. 240, Yokneam 20692
Attention:  President

                  Re: Irrevocable Proxy for Excess Shares

Dear Sirs,

         Reference is made to (i) the Option Agreement dated as of April
30, 2001 (the "Option Agreement"), by and between ESC Medical Systems Ltd.
("ESC") and Bank Hapoalim B.M. (the "Bank"), pursuant to which the Bank has
the irrevocable right and option to purchase from ESC up to 2,500,000
ordinary shares, par value NIS 0.1 per share, issued by ESC, upon the terms
and conditions specified therein, and (ii) the letter agreement dated April
30, 2001, between the Bank and ESC entered into in connection with the
Option Agreement. All capitalized terms used and not defined herein shall
have the meanings given to such terms in the Option Agreement.

         The Bank hereby appoints ESC as its proxy during the Period to
attend and to vote on its behalf at any meeting of ESC, and on any
adjournment thereof, with respect to each class of voting securities of ESC
acquired or purchased by the Bank or any affiliate of the Bank in excess of
4.99% of such class of voting securities (the "Excess Shares"). During the
Period, the Excess Shares shall be voted solely at the discretion of ESC's
management. The term "Period" means the period during which (i) any portion
of the Option remains unexercised during the Exercise Period, or (ii) the
Bank or any affiliate of the Bank is the legal or beneficial owner or
holder of any class of voting securities of ESC.

         This proxy is irrevocable and may not be canceled by the Bank.
This proxy will automatically expire and be of no further force and effect
upon termination or lapse of the Period. This proxy also will automatically
expire and be of no further force and effect as to any Excess Shares
immediately upon the sale or transfer of such Excess Shares to any third
party who is not an affiliate of the Bank in accordaance with the Option
Agreement and/or applicable United States securities laws and regulations.

                                     Sincerely yours,
                                     BANK HAPOALIM B.M.

                                     By:_______________________
                                           Name:
                                           Title:

                                     By:_______________________
                                           Name:
                                           Title:

                                                       Date: April 30, 2001

Bank Hapoalim B.M
Head Office
45 Rothschild Boulevard
Tel-Aviv

To:      ESC Medical Systems Ltd. (the "Company")

Re:      Intention Letter for Granting Credit

1. As per your request we confirm that we will provide you a loan (the
"Loan") for the purpose specified in this letter subject to the following
conditions:

     (a) Purpose: To finance the acquisition of the outstanding 6%
     Convertible Subordinated Notes issued by the Company on September 10,
     1997.(the "Notes")

     (b) Amount: US$ 91,200,000 (Ninety One Million and Two Hundred
     Thousand United States Dollars).

     (c) Commitment Fee: 1% (one percent) p.a. to be paid in advance during
     the Availability Period for every 12 months period or any part
     thereof, on the Amount. It is agreed that if the said commitment will
     be cancelled before the end of the Availability Period then the
     Commitment Fee will be computed until the date of the cancellation and
     monies paid in excess of the above computation will be returned to the
     Company.

     (d) Availability Period: Until September 1 2002.

     (e) Term: 4 years from drawdown.

     (f) Interest:

          (i) LIBOR plus 2.25% p.a. during the first year from drawdown.

          (ii) (ii)LIBOR plus 2.75% p.a. during the second year from
     drawdown.

          (iii) (LIBOR plus 3.5% p.a. during the third and fourth year from
     drawdown.

     (g) Repayment: principal - in one lump sum at the end of the term.
     Interest - every 3 (three) months.

     (h) Additional Conditions:

     (i) the Loan will be made available provided that the ratio between
     the total debt to the Bank according to the consolidated financial
     statements of the Company plus the total debt on account of the Notes
     divided by the EBITDA will be equal or less than 3 (three).

     (ii) You will sign all documents for the drawdown and the conditions
     specified in this letter according to our practices concerning the
     Loan.

     (iii) All collaterals created in the Bank's favor in connection with a
     certain loan agreement signed between the Bank and Energy Systems
     Holdings Inc on April 30, 2001 and a certain short term loan agreement
     signed between the Bank and the Company on April 24, 2001 shall serve
     also as collaterals for the repayment of the Loan.

     (iv) You will be given the credit only if there is no legal (or any
     other) hindrance.

     (v) You will not be in any breach of any of your obligations according
     to the documents you have signed or will sign in our favour.

     (vi) You will reimburse the Bank with all actual out of pocket costs
     and expenses of the Bank in connection with the preparation, drafting
     and execution of all documents in connection with the Loan, including
     but not limited to legal costs and all stamp-duties.

     (vii) the Bank shall be entitled to convert the Loan or any part of it
     into additional shares of the Company as long as the Loan is
     outstanding, at a price of US$ 20.25 (Twenty United States Dollars and
     twenty five cents) per share. Notwithstanding the above if the Company
     will request to prepay the Loan, the Bank shall have the right within
     30 days from receiving such prepayment notice to exercise its
     conversion rights as aforesaid.

2. Nothing in the above shall derogate from our rights according to the
documents you have and\or will sign in our favor.

                             Very truly yours,

                             Bank Hapoalim B.M.

                               /s/ L. Landau
                                 L. Landau

                               /s/ L. Ben Ami
                                 L. Ben Ami

We the undersigned agree to the above:

/s/ Sagi Genger

ESC Medical Systems Ltd.

                                                               Exhibit 10.4

                                                             April 24, 2001

Bank Hapoalim B.M.
Head Office
Corporate Banking Division
41-45 Rothschild Boulevard
Tel Aviv

To:  ESC Medical Systems Ltd.

Re:      STATUS OF SHORT TERM CREDIT LINE

         We hereby confirm that we are providing you with a short term
credit line (hereinafter: the "Credit Line") up to the sum of $50,000,000
(Fifty Million United States Dollars) for the period commencing on the date
of this letter and ending 12 (twelve) months from the date of this letter
(the " First Period") and up to $20,000,000 (Twenty Million United States
Dollars) for the period which begins at the end of the First Period and
ends 24 (twenty four) months from the date of this letter (the "Expiry
Date"), subject to all terms and conditions stated herein.

         The credit granted according to the Credit Line bears interest of
LIBOR plus 1% (One percent) p.a.

         a) In respect of the allocation of the Credit Line you will pay
the Bank a fee at the rate of 0.25% (One Quarter of One percent) per annum
(hereinafter: "the Commitment Fee") on the unutilized part of the Credit
Line.

         b) The Commitment Fee will be paid in advance on the date of the
allocation of the Credit Line for the period commencing on the date of this
letter and ending on the end of the next calendar quarter and thereafter
quarterly on the first day of each quarter or on the nearest date to such
date with value of the first day of that quarter until the Expiry Date on
the unutilized part of the Credit Line on the date of such computation.

         Commencing from the end of the First Period and so long as the
Credit Line is in force you will maintain in your consolidated financial
statements a financial ratio in which the ratio between inventory plus all
debts owned to you by your clients for sales made in your ordinary course
of business to the utilized sum of the Credit Line will not be less than
2.5 (two point five).

         The terms set out above will be construed in accordance with U.S. GAAP.

         The Credit Line shall be available to ESC until the Expiry Date
subject to the terms hereof, unless and to the extent ESC shall notify the
Bank of its desire to terminate the commitment of the Bank hereunder.

         In any case of contradiction between the above and the provisions
of the Application to Open an Account and General Conditions for Operating
the Account, then the provisions of this letter shall govern.

         All our rights according to documents signed by you in our favour
are fully reserved and are in no way affected by this letter.

                             Very truly yours,

                              BANK HAPOALIM B.M.

                               /s/ L. Landau
                                 L. Landau

                               /s/ L. Ben Ami
                                 L. Ben Ami

We agree to the above

/s/ Sagi Genger

ESC Medical Systems Ltd

                                                       Date: April 24, 2001

Account no 11145, Branch no 700
Bank Hapoalim B.M.
Haifa Central Branch.

Re:      Short Term Credit Line - Additional Terms

Dear Sirs,

         Reference is made to the Short Term Credit Line Letter dated April
24, 2001(the"Letter").

         Capitalized terms used herein and not defined herein shall have
the meanings given to such terms in the Letter.

1.       Interest

         (a)      LIBOR - For the purpose of the Credit Line, "LIBOR"
                  (London Interbank Offered Rate) - means the rate of
                  Interest determined by the Bank as being the highest
                  interest rate (rounded upwards to the nearest 1/8 of one
                  percent) at which deposits in the currency of the
                  Overdraft are offered to the Bank in the London Interbank
                  Market or in any other Interbank Market in Europe for
                  periods of one day ("Overnight").

         (b)      Interest Payment Dates

                  (i)  The Interest (excluding Interest on Excesses as
                       hereinafter defined) will be paid by us to the Bank
                       in the currency of the Overdraft as set out below:

                  (ii) Monthly - (hereinafter: the "Interest Period") on
                       the first day of the next calendar month following
                       the termination of each Interest Period or on the
                       nearest date possible after the first day of such
                       calendar month, with value of the first day of the
                       month.

                  (iii) The Interest in respect of the first Interest
                       Period will be repaid by us to the Bank in the
                       currency of the Overdraft on the first day of the
                       next calendar month following the date monies are
                       first drawn on account of the Overdraft Facility or
                       on the nearest date after the first day of such
                       calendar month, with value of the first day of the
                       month.

         We declare that we are aware that the first Interest Period may be
shorter than the other Interest Periods.

         (c)   Manner of Calculating the Interest

               (i)  The Interest shall be calculated by the Bank and paid
                    by us or compounded with the amount due from us in
                    connection with Credit Line at the beginning of each
                    calendar month, for the month or period that has
                    passed.

               (ii) The Interest will be computed on the basis of daily or
          other balances at the discretion of the Bank and the number of
          days that have actually elapsed divided by 360.

2.       Debit on a day not being a business day

(i)                        If the Expiry Date of the Credit Line falls on a
                           day which is not a business day (as hereinafter
                           defined), the Facility will terminate on the
                           first succeeding business day and bear interest
                           at the rate required according to paragraph 3
                           above, subject as provided in any law.

(ii)                       It is stated that the debit in respect of the
                           Interest, Interest on Excesses, the Overdraft
                           Fee or any other sum that we owe or will be
                           liable to pay under this document and/or the
                           Letter will be made on the date prescribed for
                           the discharge of the debit under this
                           Application and/or the above Conditions
                           (hereinafter: "the Debit Date") or on the
                           nearest date as possible after the Debit Date
                           with value of the Debit Date (without taking
                           into account the fact that any Debit Date falls
                           on a business day).

     (b) The term "Business Day" - means a day on which banks in Tel-Aviv,
     London and the country in which the currency of the Overdraft is legal
     tender are open to the public and on which the Bank's branches in
     Israel - or most of them - are open for business to the public.

     This document constitutes an integral part of the Letter.

                                                          Yours faithfully,

                                                           /s/ Yacha Sutton

                                                  ESC Medical Systems, Ltd.

                                 AGREEMENT

 This Agreement is dated as of the 30 day of April, 2001 and made between:

                             Bank Hapoalim B.M

                                ("The Bank")

                                    and

                          ESC Medical Systems Ltd.

         a company registered under the laws of the State of Israel

                             ("the Borrower").

         Whereas the Borrower and\or any of its Subsidiaries has received
and intends to receive, from time to time, from the Bank the Loan, the
Short Term Credit Line and the Additional Financing (hereinafter, jointly
and severally - "the Banking Services");

         Whereas in order to induce the Bank to grant the Banking Services
to the Borrower and\or any of its Subsidiaries, the Borrower is prepared to
undertake the conditions hereinafter set forth in connection with the
Banking Services, as long as the Banking Services are not paid up in full
and\or if the Bank is committed to provide any of the Banking Services to
the Borrower or any of its Subsidiaries.

         Now, therefore, it is hereby agreed and declared between the
parties as follows:

1.       Interpretation

          (a)  This Agreement forms an integral part of the Borrower's
               application to open an account and the general conditions
               for operating an account which have been signed by the
               Borrower in the Bank ("the Application to Open an Account").

          (b)       (i) The provisions of Sections 2.7 (Security), 2.5
                    (Increased Costs), 5.2 (Default Rate), 6.2 (Set-off),
                    12.5 (Modifications and Waivers), 12.10 (Release of
                    Collateral) and 12.11 (Transfer of Booking of Loans) of
                    the Loan Agreement are hereby incorporated herein,
                    mutatis mutandis.

               (ii) The provisions of Section 2.3(c) and 2.3(d) of the Loan
                    Agreement shall apply, mutatis mutandis, to the Short
                    Term Credit Loan and the Additional Financing.

               (iii) The provisions of Section 2.4 of the Loan Agreement
                    shall apply, mutatis mutandis, to the Additional
                    Financing.

          (c)  Unless otherwise agreed the Borrower's obligations in this
               Agreement are in addition to those contained in the
               Application to open an account and nothing in this Agreement
               shall derogate from any of the Bank's rights under the
               Application to open an account.

          (d)  In the case of any contradiction between the provisions of
               this Agreement and the provisions of the Application to open
               an account the provisions of this Agreement shall govern.

          (e)  The Preamble to this Agreement constitutes an inseparable
               part hereof.

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

          (g)  Use of Accounting Terms. Accounting terms used herein shall
               be construed, calculations hereunder shall be made and
               financial data required hereunder shall be prepared, both as
               to classification of items and as to amounts, in accordance
               with generally accepted accounting principles in effect in
               the United States as of the date thereof consistently
               applied, which principles shall be consistent with those
               used in the preparation of the most recent reviewed
               financial statements of such Person delivered to the Bank.
               All statements relating to earnings and expenses shall set
               forth separately or otherwise identify all extraordinary and
               nonrecurring items.

2.       Definitions

         "Additional Financing" - means a certain commitment of the Bank to
provide the Borrower credit in order to repay 6% Convertible Subordinated
Notes issued by the Borrower on September 10, 1997 up to the sum of US$
93,000,000 (Ninety Three Million United States Dollars).

         "Indebtedness" of any Person means indebtedness incurred by that
Person to banks or financial institutions.

         "Lien" means any floating or fixed charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or
in property or other assets of a Person, whether absolute or conditional,
voluntary or involuntary, whether created pursuant to agreement, arising by
force of statute, by judicial proceedings or otherwise.

         "Loan" or "Loan Agreement" means - the Loan Agreement between the
Bank and Energy Systems Holdings Inc, dated April 30, 2001.

         "Material Subsidiary" means Energy Systems Holdings Inc., ESC Inc.
and any Subsidiary which is a "Material Subsidiary" under the Loan
Agreement.

         "Permitted Encumbrances" means [(i) Liens for current taxes not
yet due or taxes being contested in good faith, (ii) Liens created by
operation of law, [or incurred in the ordinary course of business and
securing payments not delinquent or payments which are being contested in
good faith] (iii) leases or the rights, if any, of third-party suppliers or
other vendors having possession of equipment, (iv) imperfections of title,
easements and zoning restrictions, if any, (v) judgments Liens, in respect
of judgments that do not constitute an Event of Default hereunder, (vi)
Liens permitted under the Asset Purchase Agreement, (vii) Liens in favor of
the Bank , and (viii) Liens on assets purchased subsequent to the Closing
Date other than with financing obtained from the Bank.

         "Permitted Restructure" means any transaction, merger,
consolidation or disposition of assets or shares, with respect to the
Borrower or any of its Subsidiaries, unless resulting in (i) any Person
holding more than 50% of the voting rights of the Borrower, or (ii) the
disposition of assets, other than to Borrower's Subsidiaries, exceeding (a)
US$5,000,000 (Five Million United States Dollars) of assets purchased under
the Asset Purchase Agreement as such term is defined in the Loan Agreement
or (b) US$10,000,000 (Ten Million United States Dollars) of other assets of
Borrower existing at the Closing Date as such term is defined in the Loan
Agreement.

         "Short Term Credit Loan" means a short term credit loan granted by
the Bank to the Borrower pursuant to a certain Short Term Credit Letter
signed on April 24, 2001 in the principal amount of $50,000,000 (Fifty
Million United States Dollars).

         "Subsidiary" means, when used with reference to any corporation,
any corporation of which at least a majority of the outstanding stock,
having by the terms thereof ordinary voting power to elect a majority of
the Board of Directors of such corporation, is at the time directly or
indirectly owned by such first-mentioned corporation.

3.       Representations and Warranties

         The Borrower represents and warrants to the Bank in relation to
the Borrower and its Subsidiaries that:

         Corporate Existence - Each of the Borrower and its Subsidiaries is
a duly organised and validly existing corporation in good standing under
the laws of the jurisdiction of its formation and has the corporate power
and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage. Each of the
Borrower and its Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to qualifywould
have a material adverse effect on its business.

         Legal Capacity - the Borrower has the full power and corporate
authority and legal right to enter into, exercise its rights and perform
its obligations under this Agreement;

         Execution - the execution, delivery and performance by the
Borrower of its obligations assumed by it under this Agreement will not (i)
violate any existing law, regulation or authorisation to which the Borrower
is subject, (ii) result in any breach of or default under any material
agreement or other instrument to which the Borrower is now a party or is
subject, or if any breach or default has occurred under such agreement or
instrument, it will not have a material adverse effect on the Borrower or
(iii) violate any provision of the Borrower's Memorandum and Articles of
Association or other constituent documents;

4.       Undertakings

         The Borrower undertakes that from and after the date hereof until
the payment in full of all sums due in connection with the Banking Services
and provided that no commitment of the Bank under the Banking Services
exists, then unless the Bank shall otherwise consent in writing delivered
to the Borrower, the Borrower shall:

          (a)  Compliance with good business practices - Conduct its
               business according to good business practices; keep in full
               force and effect its corporate existence, and material
               rights, licenses, permits and franchises and comply in all
               material respects with all of the laws, rules and
               regulations governing its business; and make all such
               reports and pay all such franchise and other taxes and
               license fees and do all such other things as may be lawfully
               required, to maintain its material rights, licenses, powers
               and franchises under the any laws applicable or
               jurisdictions in which it is organised or does business.

          (b)  Restrictions on Dividends, Distributions and Redemption. Not
               pay dividends or make any other distribution pari passu to
               its shareholders, unless such distribution is an issue of
               bonus shares and/or other equitable securities made pari
               passu to all shareholders, or redeem any shares of its
               capital stock, or cause or permit any of its Subsidiaries to
               redeem any shares of its capital stock, or cause or permit
               any of its Subsidiaries to redeem any shares of its capital
               stock. The foregoing restriction shall not apply to the
               extent Borrower's equity shall exceed US$200,000,000 (Two
               Hundred Million United States Dollars).

          (c)  Disposal of Property. Not wind up, liquidate or dissolve,
               sell, exchange, lease, transfer or otherwise dispose of all
               or substantially all of (or agree to do any of the foregoing
               or permit any Material Subsidiaries to do or to agree to do
               any of the foregoing), its properties or other assets, other
               than in transaction with any of its Subsidiaries or pursuant
               to a Permitted Restructure; provided, however, that in the
               event assets in an aggregate of US$5,000,000 (Five Million
               United States Dollars) shall be so transferred to any
               Subsidiary of Borrower, such Subsidiary shall be deemed a
               Material Subsidiary hereunder and shall execute and deliver
               to the Bank a security agreement evidencing the charge of
               all of its assets or create such charge over its shares held
               by the Borrower in form and substance satisfactory to the
               Bank. The foregoing restriction shall not apply in the event
               that the cash proceeds of the sale of assets (net of
               withholding) would be used to prepay the Loan or the
               Additional Financing.

          (d)  Liens. Not contract, create, assume, incur or suffer to be
               created, assumed or incurred and shall not permit any
               Subsidiary to contract, create, assume, incur or suffer to
               be created, assumed or incurred, any Lien upon, or pledge
               of, any property or other assets of the Borrower or such
               Subsidiary, which will secure any other Indebtedness other
               than Liens created to the benefit of the Bank and Permitted
               Encumbrances.

          (e)  Indebtedness. Not assume, incur or suffer to exist or permit
               any Subsidiary to assume, incur or suffer to exist any
               Indebtedness other than to the Bank or in connection with
               assets purchased subsequent to Sub-Section (j) below or
               purchased after the Additional Financing was granted or the
               commitment to grant it expired which are subject to a
               Permitted Encumbrance other than with financing obtained
               from the Bank.

          (f)  Deposits - The Borrower and its Subsidiaries (excluding
               Subsidiaries holding solely assets purchased according to
               Sub Section (j) below or or purchased after the Additional
               Financing was granted or the commitment to grant it expired
               which are subject to a Permitted Encumbrance other than with
               financing obtained from the Bank) will deposit in the Bank
               all Cash and Cash Equivalents which appear in their
               financial statements except for such amounts needed by such
               Subsidiaries in their ordinary course of business.

          (g)  New Material Subsidiary - at any time any Subsidiary which
               at the date of this agreement is not a Material Subsidiary
               becomes a Material Subsidiary after the date of this
               Agreement, in accordance with the provisions of Section 4(c)
               hereof, then the Borrower shall cause that such Material
               Subsidiary to create in favor of the Bank a first ranking
               charge over all its assets or create such charge over its
               shares held by the Borrower to secure the repayment of all
               amounts due under the Banking Services.

          (h)  If Opusdent Ltd. will issue additional shares to the
               Borrower and\or any of its Subsidiaries (in addition to the
               100,000 ordinary shares issued until the date of this
               agreement) (the "Additional Shares") then the Borrower
               and\or such Subsidiary will pledge in favor of the Bank such
               Additional Shares in order to secure the repayment of the
               Banking Services, provided that such Additional Shares were
               issued against an outstanding debt of Opusdent to the
               Borrower as described in the Borrower's letter to the Bank
               as of this date. Such pledge shall be in form and substance
               to the full satisfaction of the Bank. The Borrower shall not
               approve any issuance of shares by Opusdent to the Borrower
               and/or any of its Subsidiaries as long as there is any
               outstanding debt of Opusdent to the Borrower, other than in
               consideration of such debt, in whole or in part.

          (i)  Purchase of Assets - not to purchase any assets until the
               granting of the Additional Financing unless such purchase is
               made against allotment of shares in the Borrower.
(j)  Financial Statements and Reports. The Borrower will furnish
               to the Bank in duplicate:

               (i)  As soon as practicable and when available, and in any
                    event within 90 days after the end of each fiscal year
                    of the Borrower and each Material Subsidiary, annual
                    audited consolidated balance sheets of the Borrower and
                    its Subsidiaries as at the end of such year and
                    consolidating audited balance sheets of the Borrower
                    and each Material Subsidiary for such period and
                    related consolidated statements of income, retained
                    earnings and cash flows of the Borrower and its
                    Subsidiaries for such year and consolidating statements
                    of income, retained earnings and cash flows of the
                    Borrower and each Material Subsidiary for such period,
                    setting forth in comparative form the corresponding
                    figures for the preceding fiscal year, audited by
                    independent certified public accountants of recognised
                    standing selected by the Borrower (and each Material
                    Subsidiary, as applicable), and acceptable to the Bank;

               (ii) As soon as practicable and when available, and in any
                    event within 45 days after the end of each fiscal
                    quarter of the Borrower (other than the 4th quarter), a
                    consolidated balance sheet, related consolidated
                    statements of income, retained earnings and cash flows
                    of the Borrower and its Subsidiaries showing its
                    financial condition as of the last day of such fiscal
                    quarter and the results of operations for such fiscal
                    quarter, certified by the chief financial officer of
                    the Borrower as to (i) fair presentation of the
                    financial position and the results of operations of the
                    Borrower and its Subsidiaries and (ii) having been
                    prepared in accordance with generally accepted
                    accounting principles consistently applied;

               (iii) As soon as practicable and when available, and in any
                    event within 45 days after the end of each fiscal
                    quarter of each Material Subsidiary (other than the 4th
                    quarter), a consolidating balance sheet, related
                    consolidating statements of income, retained earnings
                    and cash flows of such Material Subsidiary showing its
                    financial condition as of the last day of such fiscal
                    quarter and the results of operations for such fiscal
                    quarter, certified by the chief financial officer of
                    such Material Subsidiary as to (i) fair presentation of
                    the financial position and the results of operations of
                    such Material Subsidiary and (ii) having been prepared
                    in accordance with generally accepted accounting
                    principles consistently applied;

               (iv) Promptly following the occurrence thereof, notice of
                    any material adverse change in the business, affairs or
                    financial condition of the Borrower or any of its
                    Material Subsidiaries;

               (v)  Such other information as to the financial condition,
                    operations, business, properties and other assets of
                    the Borrower and its Subsidiaries as the Bank may from
                    time to time reasonably request.

5.       Events of Default

         Notwithstanding the provisions under the Application to open an
Account, an Event of Default in respect of any of the Banking Services
shall occur if:

          (a) Any default shall occur in the payment of principal of or
          interest on the amount due under any agreement of the Banking
          Services, as and when the same shall become due and payable,
          whether at the due date thereof, by acceleration, mandatory
          prepayment or otherwise, and such default is not remedied until
          the later of 30 (thirty) days from the due date of the respective
          sum or 7 (seven) days from the date of Borrower's receipt of the
          Bank's notice to that effect; or

          (b) Any default shall occur in the due observance or performance
          by the Borrower or any Material Subsidiary of any other covenant,
          agreement or condition contained herein or in any other document
          for the Banking Services and such default, if capable of being
          cured, is not remedied until the later of 45 (forty five) days
          from the due date of the respective default or 14 (fourteen) days
          from the date of Borrower's receipt of the Bank's notice to that
          effect; or

          (c) Any representation or warranty made herein or under any
          document for the Banking Services shall prove to have been false
          or misleading in any material respect when made; provided,
          however, that with respect to circumstances that do not affect
          the validity, legality or enforceability of the relevant document
          for the Banking Services, the circumstances to which such
          representation or warranty relates, if capable of being corrected
          so that such representation or warranty shall become correct
          again, shall not have been corrected until the earlier of 7
          (seven) days from receipt of the Bank's notice or 7 (seven) days
          from the date upon the Borrower has become aware thereof; or

          (d) Any order, judgment or decree shall be entered in any ex
          parte proceeding against the Borrower or any Material Subsidiary
          decreeing the dissolution of the Borrower or such Material
          Subsidiary and such order, judgment or decree shall remain
          undischarged or unstayed for a period in excess of 60 days; or

          (e) Final judgment for the payment of money in excess of $500,000
          (to the extent not covered by insurance or bond) shall be
          rendered by a court of record against the and the Borrower or any
          of its Material Subsidiaries, and the Borrower or any such
          Material Subsidiary shall not discharge the same or provide for
          its discharge in accordance with its terms, or procure a stay of
          execution thereof within 30 days from the date of entry thereof
          and within such period of 30 days, or such longer period during
          which execution of such judgment shall have been stayed, appeal
          therefrom and cause the execution thereof to be stayed during
          such appeal; or

          (f) The Borrower or any Material Subsidiary shall suspend or
          discontinue its business other than pursuant to a Permitted
          Restructure, or (ii) the Borrower or any Material Subsidiary
          shall call a meeting of its creditors for the purpose of
          postponing or adjusting its liabilities or seeking an arrangement
          with its creditors, shall make an assignment for the benefit of
          creditors or a composition with creditors, shall be unable or
          admit in writing its inability to pay its debts generally as they
          mature, shall generally not pay its debts when they are due,
          shall file a petition in bankruptcy, shall become insolvent
          (howsoever such insolvency may be evidenced), shall suffer an
          order for relief to be entered against it under any bankruptcy
          law which shall remain undismissed or unstayed for a period of 60
          days or more, shall petition or apply to any tribunal for the
          appointment of any receiver, custodian, liquidator or trustee of
          or for it or any substantial part of its property or other assets
          or shall commence any proceeding relating to it under any
          bankruptcy, reorganization, arrangement, readjustment of debt,
          receivership, dissolution or liquidation law or statute of any
          jurisdiction, whether now or hereafter in effect; or there shall
          be commenced against the Borrower or any Material Subsidiary, any
          such proceeding which shall remain undismissed or unstayed for a
          period of 60 days or more; or the Borrower or any of its
          Subsidiaries shall take any action for the purpose of effecting
          any of the foregoing; or

          (g) the Bank in its sole discretion considers that a material
          adverse change in the financial or business condition of the
          Borrower shall have occurred;

          (h) Any of the documents for the Banking Services shall become
          invalid or unenforceable, in whole or in part, and such
          unenforceability persists for a period of 30 (thirty) days, or
          any default or event of default shall have occurred thereunder,
          and such default persists for more than the period of grace, if
          any, specified therefor;

          (i) The Borrower or any of its Subsidiaries shall be in default
          under any other obligation to Bank Hapoalim B.M., including its
          New York Branches, and such default persists for more than the
          period of grace, if any, specified therefor, and as long as such
          default is continuing.

6.       Disclosure of Information

          (a) Any branch of the bank administering the loan may disclose to
          the Head Office of the Bank, or to any assignee thereof, or to
          the Bank of Israel, the Examiner of Bank, the Controller of
          Foreign Exchange or any person acting under their authority or to
          any other regulatory authority having jurisdiction over the Bank
          or over the Head Office of the Bank or to the Head Office of the
          Bank for delivery by the latter to any such regulatory
          authorities, such information about the Borrower or the Loan as
          may be required by such regulatory authorities or as the branch
          or the Head Office of the Bank may deem appropriate; provided
          that upon the disclosure of information to any person who/which
          is not a regulatory authority, such person will confirm to the
          bank that such information will be treated in confidence.

7.       Notices

          (a) Each communication to be made under this agreement shall be
          made in writing and, unless otherwise stated, may be made also by
          telex or facsimile transmission.

          (b) Each communication or document to be made or delivered by one
          person to another pursuant to this Agreement shall (unless that
          other party has by fifteen (15) days' written notice specified
          another address) be made or delivered to that party, addressed as
          follows:

               (i) if to the Borrower at:

               Yokneam Industrial Park,
               P.O.B. 240, Yokneam 20692
               Israel
               Fax No: 04-9599070

              (ii) if to the Bank at:-

               Bank Hapoalim B.M
               41 Rothschild Blvd
               Tel Aviv
               Fax no. 03-5675699
               Att: Mrs. Lea Landau

and shall be deemed to have been made or delivered the next banking day
after dispatch (in the case of any communication made by telex or any form
of facsimile transmission) or (in the case of any communication made by
letter) the next banking day after being physically left at that address.

8.       Governing Law and Jurisdiction

               (a) This Agreement shall be governed by and construed in
               accordance with the laws of the State of Israel.

               (b) For the purpose of this Agreement the exclusive place of
               jurisdiction shall be the competent courts of law in Tel
               Aviv-Jaffa.

9.       Special Conditions

         Notwithstanding Section 6 of the Companies Law 5759-1999 ,the Bank
hereby agrees that in any Event of Default (as such term is defined under
this Agreement) it shall have no claim , demand or any recourse to the
assets and rights of any of the shareholders of the Borrower.

         In Witness Whereof the Borrower and the Bank have caused this
Agreement to be duly executed and delivered in Tel Aviv., as of the date
first above written.

    /s/ Sagi Genger                                         /s/ L. Landau

                                                             /s/ L. Ben Ami

    ESC Medical Systems Ltd.                             Bank Hapoalim B.M.

                                                               Exhibit 99.1

               ESC Completes Acquisition of Coherent Medical

         YOKNEAM, Israel, April 30 /PRNewswire/ -- ESC Medical Systems
Ltd(NASDAQ: ESCM - news) announced today that it closed the previously
announced transaction to acquire the assets and assume the liabilities of
Coherent Medical Group from Coherent, Inc. (NASDAQ: COHR - news). ESC
results for the second quarter ended June 30, 2001, will reflect the
Coherent Medical Group results as of May 1. With the close of this
transaction we are the global leader in cutting- edge laser and light based
technologies for medical and aesthetic applications," said Yacha Sutton
President and CEO of ESC Medical Systems Ltd. "This acquisition elevates
our capabilities in the aesthetic, surgical and ophthalmic marketplace. Our
management and employees are focused on delivering on the potential of the
combination".

         ESC Shareholders will vote on a board proposal to change the
corporate name to "Lumenis" at the upcoming shareholders meeting.

         ESC Medical Systems develops, manufactures and markets medical
devices utilizing state-of the art proprietary intense pulsed light source
and laser technology. Its systems are used in a variety of aesthetic,
surgical and medical applications, including the non-invasive treatment of
veins and other benign vascular lesions, pigmented lesions, hair removal
and skin rejuvenation, as well as ENT, OB/GYN and neurosurgery. For more
information about the Company, and its products log on to
http://www.lumenis.com or http://www.escmed.com .

         Founded in 1966, Coherent, Inc, is a Standard & Poor's SmallCap
600 company and a world leader in providing photonics based solutions to
the commercial, scientific,medical, and telecom markets. For more
information about Coherent, visit the Company's Web site at
http://www.coherentinc.com for product and financial updates.

         ESC cautions that certain forward looking statements contained in
this announcement or other statements which may be made about the
transaction, including, without limitation, the effect of the combination
on ESC's earnings and cash flows, are qualified by important factors that
could cause actual operating results to differ materially from those
described herein or any such statements. These factors could include, among
others, the following: (i) factors disclosed from time to time in ESC's
filings with the Securities and Exchange Commission; (ii) the occurrence of
unanticipated events and circumstances which may render the transaction
less beneficial to ESC than projected; (iii) the effect of the intense
competition facing ESC and Coherent's medical group; and (iv) the inability
of ESC to integrate successfully its operations with those of Coherent's
medical group and thereby achieve the anticipated cost savings and other
synergies and be in a position to take advantage of potential opportunities
for growth. Results actually achieved thus may differ materially from the
expected results described herein or any such statement. Please refer to
ESC's Annual Reports on Form 10-K, its Current Reports on Form 8-K and its
Quarterly Reports on Form 10-Q for a more detailed description of certain
of these factors.