Exhibit 10.3

 

NON-RECOURSE SECURED PROMISSORY NOTE

Dated: April 11, 2003

 

$258,000

 

FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to
the order of Medis Technologies Ltd. (“Medis”), a Delaware corporation, or its
assigns (Medis and any subsequent holder of this Note being hereinafter
sometimes referred to as the “Holder”), the lesser of (a) the unpaid principal
amount of all loans made by Medis to the Borrower hereunder (which shall not, in
any event, exceed Two Hundred Fifty Eight Thousand Dollars ($258,000)) and (b)
Two Hundred Fifty Eight Thousand Dollars ($258,000), in lawful money of the
United States of America, on December 31, 2006 (the “Maturity Date”). The
Borrower further promises to pay interest on the unpaid principal balance of
this Note from time to time outstanding at a rate equal to the applicable
federal rate, as defined in Section 1274(d) of the Internal Revenue Code of
1986, as amended, for mid-term loans, in effect on the borrowing date or dates
thereof, compounded semi-annually, until the entire principal amount hereof has
been paid in full. Interest hereunder shall be payable annually in arrears on
each anniversary of the date hereof. All accrued and unpaid interest shall be
paid in full on the Maturity Date.

 

Payment of the principal of and interest on this Note is secured pursuant to the
terms of a certain Pledge Agreement of even date herewith between Medis and the
Borrower (the “Pledge Agreement”), pursuant to which the Borrower has pledged
Collateral (as defined therein) to Medis. Any Holder shall be entitled to the
benefits of the Pledge Agreement.

 

The Holder shall have no recourse to any assets of the Borrower for the
repayment of amounts due under this Note other than the Collateral under the
Pledge Agreement and, if the proceeds of the Collateral are not sufficient to
pay in full the amounts due hereunder, the Borrower shall not be liable for the
deficiency.

 

This Note is subject to the following further terms and conditions:

 

1.            All payments of principal of and interest on this Note shall be
made at the principal offices of Medis or at such other location either within
or outside of the United States of America as may be designated from time to
time in writing by notice given by the Holder to the Borrower. The Borrower may,
at the Borrower’s option, prepay this Note in whole or in part at any time or
from time to time without penalty or premium. Any prepayments of any portion of
the principal amount of this Note shall be accompanied by payment of all accrued
but unpaid interest on that portion of the principal amount being prepaid.

 

2.            At the Holder’s option, payment or prepayment, as applicable, of
principal of and interest on this Note may also be made, in whole or in part, by
delivery to the Holder of shares of common stock of the Holder (“Shares”),
including Pledged Shares, having a Fair Market Value on the day preceding the
date of the transfer equal to the cash amount for which such Shares are
substituted. As used in the preceding sentence, the term Fair Market Value shall
mean on any date the average of the high and low sales prices of the Shares on
such date on the principal national securities exchange on which such shares are
listed or admitted to trading, or if such

 

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Shares are not so listed or admitted to trading, the arithmetic mean of the per
Share closing bid price and per Share closing asked price on such date as quoted
on the National Association of Securities Dealers Automated Quotation System or
such other market in which such prices are regularly quoted, or, if there have
been no published bid or asked quotations with respect to Shares on such date,
the Fair Market Value shall be the value established by the Board of Directors
of the Holder in good faith.

 

3.            The Holder is hereby authorized by the Borrower to record on the
schedule annexed to this Note (or on a supplemental schedule thereto) the amount
of each loan made by Medis to the Borrower and the amount of each payment or
prepayment of principal of such loans received by the Holder, it being
understood, however, that failure to make any such notation shall not affect the
rights of the Holder or the obligations of the Borrower hereunder in respect of
this Note.

 

4.            (a)            The Borrower shall prepay this Note, together with
accrued interest thereon, upon the bona fide sale to a party or parties having
no affiliation, direct or indirect, with the Borrower, of any of the Pledged
Shares, to the extent of 50% of the gross proceeds of such sale, less applicable
brokerage commission and taxes (the “Net Sale Proceeds”). The Borrower shall
also prepay this Note to the extent of any cash dividends or distributions paid
upon the Pledged Shares, less any payment of applicable taxes thereon.

 

(b)           If the Borrower desires to sell any of the Pledged Shares, he
shall give written notice (the “Notice”) to the Holder setting forth the number
of Pledged Shares to be sold, the proposed price per share if not a public sale
“at market,” and to whom such Pledged Shares shall be sold if a private
transaction and in such instance accompanied by the Borrower’s representation
that any such sale will be in a bona fide arm’s length transaction or
transactions with a third party or parties having no affiliation, direct or
indirect, with the Borrower. Upon receipt of the Notice, the Holder shall use
its best efforts to sell such Pledged Shares on behalf of the Borrower, and upon
receipt of the Net Proceeds of such sale, will remit to the Borrower 50% of the
Net Sale Proceeds. If any such sale shall be a public sale, the Holder is hereby
authorized in its sole discretion to select a securities broker-dealer to effect
such sale.

 

5.            Notwithstanding any other provision of this Note, the entire
principal amount outstanding, and any accrued interest, shall be due and payable
on the earliest of (a) the Maturity Date, or (b) six months following the
termination of the Borrower’s employment with the Holder or any of its
Affiliates (as defined in the Pledge Agreement).

 

6.            Any repayments made under this Note shall be first applied to the
payment of any unpaid and accrued interest and then to the payment of the
principal amount outstanding hereunder.

 

7.            (a) Upon the failure of the Borrower to pay (x) the principal on
the Note when and as the same becomes due and payable, whether at maturity
thereof, upon the occurrence of an event requiring mandatory prepayment under
Section 1(a) hereof, or upon the Borrower’s termination of employment requiring
payment in full under Section 2 hereof, or (y) the interest on the Note when and
as the same becomes due and payable, and such failure to pay principal or
interest continues for ten (10) days; (b) upon the Borrower’s breach of the
Pledge Agreement; or

 

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(c) if the Borrower shall file a petition in bankruptcy or for an arrangement or
any similar relief pursuant to Title 11 of the United States Code or under any
similar present or future federal law or the law of any other jurisdiction or
shall be adjudicated a bankrupt or insolvent, or consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of all or any substantial part of the
Borrower’s property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing the Borrower’s inability to pay the
Borrower’s debts generally as they become due, or shall take any action in
furtherance of any of the foregoing and such event is not cured within 60 days
(each of the events described in clauses (a), (b) and (c) being referred to
herein as an “Event of Default”), then, and in any such event, the Holder may
declare, by written notice of the Event of Default given to the Borrower, the
entire principal amount of this Note to be forthwith due and payable, whereupon
the entire principal amount of this Note outstanding and any accrued and unpaid
interest hereunder shall become due and payable without presentment, demand,
protest, notice of dishonor and all other demands and notices of any kind, all
of which are hereby expressly waived.

 

8.            (a) The validity, performance and enforcement of this Note shall
be governed by the laws of the State of New York, without giving effect to the
principles of the conflicts of law thereof.

 

(b)           Any litigation based hereon, or arising out of, under, or in
connection with, this Note shall be brought and maintained exclusively in the
courts of the State of New York or in the United States District Court for the
Southern District of New York.  The Borrower hereby expressly and irrevocably
submits to the personal jurisdiction of the courts of the State of New York and
of the United States District Court for the Southern District of New York for
the purpose of any such litigation as set forth above and irrevocably agrees to
be bound by any judgment rendered thereby in connection with such litigation,
subject to such Borrower’s right to contest such judgment by motion or appeal on
any grounds not expressly waived in this Section 10(b).  The Borrower hereby
irrevocably consents to the service of process by registered mail, postage
prepaid, or by personal service within or without the State of New York.  The
Borrower hereby expressly and irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter may have to the
laying of venue of any such litigation brought in any such court referred to
above and any claim that any such litigation has been brought in an inconvenient
forum.  To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to the Borrower or the Borrower’s property,
the Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Note. The Borrower hereby expressly waives the right to a
trial by jury for the purpose of any such litigation as set forth above.

 

(c)           If the date set for payment of principal or interest hereunder is
a Saturday, Sunday or legal holiday, then such payment shall be due on the next
succeeding business day.

 

(d)           The Borrower hereby waives presentment, demand, protest, notice of
dishonor, diligence and all other notices, any release or discharge arising from
any extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.

 

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(e)           The Borrower shall not be deemed, by any act or omission, to have
waived any of its rights or remedies hereunder unless such waiver is in writing
and signed by the Holder and then only to the extent specifically set forth in
such writing.  A waiver with reference to one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy as to a subsequent
event.  No delay or omission of the Holder to exercise any right, whether before
or after a default hereunder, shall impair any such right or shall be construed
to be a waiver of any right or default, and the acceptance at any time by the
Holder of any past-due amount shall not be deemed to be a waiver of the right to
require prompt payment when due of any other amounts then or thereafter due and
payable.

 

(f)            To the extent permitted by law, the remedies of the Holder as
provided herein, or any one or more of them, or in law or in equity, shall be
cumulative and concurrent, and may be pursued singularly, successively or
together at the Holder’s sole discretion, and may be exercised as often as
occasion therefor shall occur.

 

(g)           If any provisions of this Note would require the Borrower to pay
interest hereon at a rate exceeding the highest rate allowed by applicable law,
the Borrower shall instead pay interest under this Note at the highest rate
permitted by applicable law.

 

 

/s/ Gennadi Finkelshtain

 

GENNADI FINKELSHTAIN

 

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LOAN AND REPAYMENT SCHEDULE TO THE SECURED PROMISSORY NOTE

 

This Note evidences loans in the principal amounts and made on the dates set
forth below:

 

Date

 

Principal Amount of
Loan

 

Principal Amount
Repaid

 

Balance
Outstanding

 

 

 

 

NOTE: Additional pages of this Loan and Repayment Schedule to the Note may be
attached to the Note by the Holder as may be necessary to record the above
information regarding each loan.

 

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