EXHIBIT 10.1

May 8, 2006
 
Mr. Robert K. Lifton
Medis Technologies Ltd.
805 Third Avenue
 
New York, New York 10022
 
Dear Mr. Lifton:
 
Upon the execution and delivery by the parties to this Letter Agreement, Merrill
Lynch Investment Managers, L.P., on behalf of various advised funds
(collectively, the “Funds”), shall surrender $2,418,000 aggregate principal
amount of the 6% Senior Convertible Notes due July 15, 2010 (the “Notes”) of
Medis Technologies Ltd. (“Medis”), in the Funds’ favor, to Medis for
cancellation. In exchange for the surrender of the Notes by the Funds, Medis
shall issue to the Funds an aggregate of 153,068 shares of Medis common stock
(the “Shares”). Of such Shares, an aggregate of (i) 139,769 Shares shall be
freely tradable and (ii) 13,299 Shares shall be restricted, which Medis agrees
to register as soon as possible.
 
The Notes were issued under that Indenture dated as of July 26, 2005 by and
between Medis and Wachovia Bank, National Association (the “Indenture”).
 
We represent and warrant to you that (i) the Funds are the record and beneficial
holder of the Notes, (ii) we have full authority and capacity to execute,
deliver and perform the Agreement, and to bind and obligate the Funds hereunder,
(iii) we and/or the Funds have received all consents or approvals of or have
given proper notice to any person or authority required in order for us to
execute, deliver and perform the Agreement, (iv) the Agreement is a legal, valid
and binding agreement of ours, enforceable against us in accordance with its
terms, (v) the Funds own the Notes free and clear of all liens, charges and
encumbrances, and upon the consummation of the Exchange, Medis will own the
Notes free and clear of all liens, charges and encumbrances and (vi) each Fund
is acquiring the Shares for its own account for investment purposes only and not
with a present view to the resale or distribution of the Shares.
 
Additionally, we and the Funds hereby (i) waive any and all terms, conditions
and covenants under the Indenture insofar as any of them may prohibit entering
into or consummating the Exchange, (ii) waive any cause of action we or the
Funds may have against Wachovia Bank, National Association, as Trustee under the
Indenture governing the Notes (the “Trustee”) in connection with the Exchange,
(iii) agree to indemnify the Trustee for any loss, liability, claim or damage it
may incur in connection with the Exchange and (iv) authorize and direct the
Trustee to consummate the Exchange.
 
[Remainder of Page Intentionally Left Blank; Signature Page Follows in
Counterparts]
 

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Sincerely yours, 
      Merrill Lynch Investment Managers, L.P.  
   
   
  Date:  By:   /s/   

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Name:   Title:

 
Agreed to and Accepted
As of the Date Hereof:
 
Medis Technologies Ltd.
 

 
By:   /s/ Robert K. Lifton

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Name: Robert K. Lifton
Title: Chairman and CEO