Exhibit 10.20

 

DISTRIBUTION AGREEMENT

 

This Distribution Agreement (“Agreement”) is made and entered into as of March
9th, 2004 (“Effective Date”), by and between ACCO Brands, Inc., a Delaware
corporation, through its Kensington Technology Group, with business offices at
2000 Alameda de las Pulgas, 2nd Floor, San Mateo, CA  94403 (“Kensington”) and
Medis Technologies Ltd., a Delaware corporation, with business offices at 805
3rd Avenue, New York, NY 10022 (“Medis”).  Kensington and Medis are referred to
in this Agreement as the “Parties” collectively, and each individually as a
“Party.”

 

Background

 

Medis is in the business of designing and developing advanced technology
products related to sources of clean energy, with a primary focus on direct
liquid fuel cell technology.  Kensington is in the business of developing,
manufacturing and distributing a variety of technology accessory products,
including mobile power and connectivity devices.  Medis is willing to appoint
Kensington, and Kensington is willing to accept such appointment, as a
distributor of certain Medis products, subject to the terms and conditions of
this Agreement.

 

Terms

 

1.             Definitions

 

1.1          “Affiliate” means any person, corporation, partnership or other
entity (i) which, directly or indirectly, owns or controls at least fifty
percent of the equity or voting power of a Party, or (ii) of which a Party,
directly or indirectly, owns or controls at least fifty percent of the equity or
voting power, or (iii) of which at least fifty percent of the equity or voting
power, directly or indirectly, is under ownership or control that is common to a
Party.

 

1.2          “Enhancement” means (i) any modification made to a device
identified in Exhibit A, (ii) any feature or functionality added to or combined
with any device identified in Exhibit A, or (iii) any feature or functionality
that is designed for use with any device identified in Exhibit A, in each case,
which is created, developed or conceived by or for Medis, or created, developed
or conceived by Kensington and incorporated into the Product, during the term of
this Agreement.

 

1.3          “Intellectual Property Rights” means any and all rights existing
under patent law, copyright law, semiconductor chip design law, moral rights
law, trade secret law, trademark law, unfair competition law, publicity rights,
privacy rights and any and all other similar proprietary rights, and any and all
renewals, extensions, continuations and restorations thereof, now or hereafter
in force and effect.

 

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1.4          “Marks” means the trademarks, service marks, logos, trade names,
business names, corporate names, brand names and similar identifying materials
owned by or licensed to a particular Party.

 

1.5          “Packaging” means the packaging for each Product, including without
limitation, all cartons, containers, tags, labels, display stands, product
inserts and wrapping materials to be used on or with such Product.

 

1.6          “Products” means (i) the devices identified in Exhibit A
(including, but not limited to, the finished goods in Kensington-branded
packages as contemplated in Section 3.1), and all parts and components necessary
for the repair and replacement of such devices, (ii) all Enhancements, and (iii)
all New Items added to this Agreement by written amendment in accordance with
Section 3.2.  Notwithstanding the foregoing, Products refers only to devices
that are “secondary” power sources for charging portable/mobile handheld
devices, including without limitation, cellular phones, digital cameras, MP3
players, Nintendo Game Boys and comparable game devices, computer tablets (PDAs)
and similar devices.  “Secondary” means other than the primary power source
embedded within or integral to the powered handheld device.

 

2.             Appointment

 

2.1          General.  Subject to the terms of this Agreement, Medis hereby
appoints Kensington, and Kensington hereby accepts the appointment, as a
worldwide distributor of the Products, and Kensington shall have the right to
market, offer to sell, sell, transfer and otherwise distribute the Products
anywhere in the world to other distributors, customers and potential customers,
but excluding purchasers that Kensington has reason to believe are purchasing
for military or law enforcement applications, and purchasers sourcing Products
through established government contracting procedures and protocols.

 

2.2          “Semi-Exclusive” Nature of Rights.  The rights granted to
Kensington under Section 2.1 shall be “semi-exclusive,” in that Medis agrees as
follows:

 

2.2.1       Substantially Similar Products; Excluded Distributors.  Medis will
not directly or indirectly offer to sell, sell, distribute, license, or
otherwise transfer any of the Products, or any item that is “Substantially
Similar” to any Product, to any third party listed on Exhibit B, or to any of
such third party’s successors, assigns, or Affiliates, subject to the provisions
of Section 2.2.1.  An item shall be considered “Substantially Similar” to a
Product if, in Kensington’s sole discretion acting in good faith, it is similar
in appearance, construction, design and performance to such Product.

 

2.2.2       Territory and Permitted Market Limitations.  Notwithstanding the
provisions of Section 2.2.1, if Medis has an opportunity to engage a third party
(excluding parties listed on Exhibit B) as a distributor of one or more Products
in a particular geographic territory outside North America and the countries

 

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comprising the European Union, (collectively, “Permitted Territory”) or
particular markets, other than computer retailers, anywhere in the world
including in North America and the countries comprising the European Union
(“Permitted Markets”) but which potential distributor requires exclusivity to
distribute the Products, Medis shall first notify Kensington of the situation
and the Parties will promptly meet to discuss the same.  If Medis determines
that the opportunity requires granting the distributor exclusive rights in a
Permitted Territory of Permitted Markets”), Medis may limit Kensington’s
exclusive rights to exclude that particular area in the Permitted Territory or
Permitted Market effective thirty (30) days following written notice to
Kensington.  Medis will notify Kensington of the situation as described above
prior to a decision by Medis with the objective of discussing the situation.  If
the Parties cannot reach an agreement, Medis’ determination will prevail.

 

2.3          Minimum Annual Purchase Targets.  The Parties agree that Kensington
shall endeavor to purchase at least [Subject to a request for confidential
treatment; Separately filed with the Commission] units of Products during the
first “Year” following the “Commercialization Date” (as the terms “Year” and
“Commercialization Date” are defined in Section 5.3.1), and at least [Subject to
a request for confidential treatment; Separately filed with the Commission]
units of Products during the third Year (no minimum volume applies to the second
Year) and each renewal Year thereafter (each being the “Minimum Annual Purchase
Target” for the respective Year.)  From time to time at the request of either
Party, the Parties agree to in good faith negotiate an increase or decrease in
the Minimum Annual Purchase Target for any Year, whether adjusted prospectively
or retrospectively, if the requesting Party can demonstrate to the other Party’s
reasonable satisfaction based on credible evidence of materially better or
adverse and sustained marketplace conditions during the respective Year that are
likely to impact or have impacted Kensington’s ability to surpass or to meet
such Minimum Annual Purchase Target and achieve a reasonable profit margin on
the Products. For purposes of clarification, a failure to reach such agreement
for any reason will result in the contractual Minimum Annual Purchase Targets
remaining in effect.

 

2.4          Failure to Meet Minimum Annual Purchase Target.  If Kensington
fails in any Year to meet the Minimum Annual Purchase Target, as adjusted in
accordance with Section 2.3, then Medis shall have the right, as Medis’
exclusive remedy, to either (i) cease compliance with its obligations under
Section 2.2 by providing written notice to Kensington no later than sixty (60)
days following the end of the Year in which the Minimum Annual Purchase Target
was not met, or (ii) terminate this Agreement.  Medis’ obligations under Section
2.2 shall cease or this Agreement will terminate, as applicable, thirty (30)
days after the effective date of the notice, as determined in accordance with
Section 14.1.

 

2.5          Kensington Non-Compete Commitment.  During the period in which
Medis’ obligations under Section 2.2 remain in effect, Kensington agrees that it
will not directly or indirectly offer to sell, sell, distribute or otherwise
transfer through its Kensington Technology Group any liquid fuel cell product
which includes the same or similar functionality as any of the Products, except
with Medis’ prior written consent.

 

2.6          Affiliates. Kensington may, at its sole discretion and without
Medis’ further consent, extend any or all of the rights granted in Section 2.1
to one or more of its

 

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Affiliates.  Kensington shall provide Medis with prompt written notice of each
such extension.

 

3.             Products

 

3.1          Kensington Branded Products.  Products will be in the standard form
that they are sold generally by Medis, except for changes that are mutually
agreed to in writing by the Parties to reflect Kensington branding features. 
The Parties currently intend that Products will be modified to be in plastic
colors specified by Kensington, will include both Kensington’s and Medis’ logos
and trade names, will be packaged as specified by Kensington, and may be
otherwise modified as agreed to in writing by the Parties.  Medis shall not,
directly or indirectly, distribute any Product bearing any of Kensington’s
Packaging or Marks to any third party.

 

3.2          New Items; Right of First Refusal.  The Parties will formally meet
at least once per calendar quarter to identify future opportunities for new
items that incorporate Medis’ liquid fuel cell technology and are not considered
Products (each a “New Item”).  Examples of New Items include, but are not
limited to, rechargeable power packs and recharge packs incorporating new or
next generation liquid fuel cell technology to power products with significant
sustained mobile operating requirements.  Medis will submit to Kensington
specifications, and where existing in Medis’ drawings or samples, for each
proposed New Item that Medis intends to develop, market or sell during the term
of this Agreement.  Medis will indicate what participation, if any, it expects
from Kensington in facilitating or financing the development of such New Item. 
If Kensington notifies Medis within sixty (60) days of receipt of the
specifications that Kensington is interested in distributing the New Item, then
the Parties will negotiate in good faith and agree upon a product development
and distribution arrangement which includes an estimated development schedule,
associated non-recurring engineering costs and tooling charges, unit volume
commitments, product price quotations, and other relevant details.  Upon
reaching mutual agreement, such New Item will be added to this Agreement by
written amendment.  If Kensington notifies Medis that it is not interested in
distributing the New Item, Kensington fails to timely notify Medis of
Kensington’s decision, or the Parties are unable to reach agreement for any
reason regarding the terms of the development or distribution of the New Item
after good faith negotiations, Medis shall be free to market the New Item
directly or with a third party(ies) independently of Kensington; however, before
offering distribution rights to the New Item to a third party on terms and
conditions more favorable to the third party than those last offered to
Kensington, Medis shall first give Kensington the opportunity, on thirty (30)
days’ prior written notice, to accept such more favorable terms and conditions.

 

4.                                      Product Development and Acceptance

 

4.1          Development.  Medis shall be solely responsible for the development
of each Product, which development shall generally consist of: (i) finalization
of specifications for the Product consistent with the initial criteria set forth
in Exhibit C, as amended from time to time by the Parties; (ii) successful beta
testing of the Product in

 

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appropriate test environments and against reasonable performance criteria; and
(iii) initiation of commercial production of the Product.  Medis will keep
Kensington apprised of the status of development for each Product, shall provide
details reasonably requested by Kensington with respect to each Product, and
shall facilitate Kensington’s coordination of distribution logistics with
manufacturers of each Product in anticipation of commercialization, including
without limitation, the estimated date for completion of each of sub-items (i)
through (iii).

 

4.2          Samples.  Upon completion of the development of each Product, Medis
will provide Kensington with at least two (2) manufactured units of the Product
that meet the final specifications for the Product, together with final
Packaging and labeling criteria agreed upon by the Parties.  Within thirty (30)
days following receipt of such Product samples, Kensington will advise Medis
whether Kensington, in its sole discretion, accepts the Product, accepts the
Product subject to specified modifications, or rejects the Product.  If
Kensington fails to timely notify Medis of Kensington’s decision or Kensington
rejects the Product, Medis shall have the right to terminate the Agreement by
written notice to Kensington, whereupon neither Party shall have any further
liability to the other Party. If Kensington accepts the Product, the date of
such notice to Medis shall be treated as the “Product Acceptance Date” for such
Product.

 

5.             Product Sourcing

 

5.1          General.  The Parties currently intend that Medis will be solely
responsible for the manufacture of each Product through subcontractors selected
by Medis, and that Kensington will purchase Products from Medis as finished
goods (“Finished Goods Sourcing”). However, the Parties also currently intend
that Kensington will provide considerable logistics support in sourcing Products
purchased by Kensington from the manufacturer selected by Medis.  Prior to the
Product Acceptance Date for each Product, the Parties will agree upon the
arrangement under which Kensington will purchase the Product from Medis and
negotiate an appropriate agreement that will reflect terms and conditions of the
type typical for purchasing finished products.

 

5.2          Kensington Contribution to Manufacturing Set-Up.  Notwithstanding
the current intent of the Parties to conduct business under this Agreement in
the nature of a finished good sourcing arrangement as described in Section 5.1,
Kensington agrees to collaborate with Medis as reasonably requested by Medis to
identify and select manufacturers for each Product, evaluate production
facilities, and generally facilitate manufacture of the Products.  Kensington
will, in good faith, review any reasonable request from Medis that Kensington
contribute a portion of the nonrecurring engineering and tooling costs for any
Product.

 

5.3          Pricing

 

5.3.1       Commercialization Date and Year.  “Commercialization Date” means the
earlier to occur of April 1 or September 1 following the first delivery to
Kensington of a commercially reasonable quantity of the first Product to be
distributed by

 

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Kensington.  The twelve (12) month period following the Commercialization Date,
and each subsequent annual anniversary thereof, shall be referred to as a
“Year.”  A “commercially reasonable quantity” shall mean the date Medis notifies
Kensington in writing of Medis’ present readiness to deliver at least 50,000
units per month thereafter.

 

5.3.2       Initial Price.  Prior to the Product Acceptance Date, the Parties
will negotiate a reasonable unit price for the first Product to be distributed
by Kensington (the “Initial Price” for such Product) in an amount that takes
into account the broader logistics role undertaken by Kensington in sourcing the
Product.  In no event will the Initial Price for the first Product be greater
than [Subject to a request for confidential treatment; Separately filed with the
Commission] per unit (the “Price Target” for the first Product).  The Parties
will engage in similar price negotiations to determine the Initial Price and
Price Target for each additional Product to be distributed by Kensington, such
negotiations to occur no later than one hundred and twenty (120) days prior to
the date set for the first commercial sale of such additional Product.  The
Initial Price for each Product shall be subject to adjustment as provided in
Sections 5.3.3 through 5.3.5.

 

5.3.3       Lack of Economic Feasibility.  If, as of the Commercialization Date
for a Product, either Party in good faith reasonably believes that the Initial
Price for the Product is not economically feasible to achieve the Party’s
business objectives for commercialization of the Product, that Party shall
notify the other Party in writing.  Upon either giving or receiving such notice,
Kensington may, in its sole discretion exercised by giving written notice to
Medis, elect to either: (i) immediately terminate this Agreement with respect to
that Product (or the entire Agreement if there is then only one Product) and
Medis shall immediately return to Kensington all non-recurring engineering cost
contributions, if any, previously requested or approved in writing by Medis,
attributable to the Product development and paid by Kensington pursuant to
Section 5.2 and after repayment neither Party shall have any further liability
to the other in connection with the given Product (or this Agreement if there is
only one Product); or (ii) continue the Agreement at price mutually agreed upon
by the Parties that exceeds the Price Target.

 

5.3.4       General Price Adjustment.  Medis may adjust the Initial Price upon
not less than ninety (90) days’ prior written notice to Kensington to not more
than the average price at which Medis sells the Product to third parties
purchasing substantially similar volumes of Product on substantially similar
terms.  The Parties will collaborate regularly for the purpose of identifying
opportunities for cost savings in the manufacture, logistical sourcing and
distribution of the Products, measuring such cost savings, and devising an
equitable procedure for the Parties to mutually benefit from and share the cost
savings.

 

5.3.5       Best Price Adjustment.  Notwithstanding the provisions of Sections
5.3.3 and 5.3.4, the Initial Price for each Product, as well as any adjusted
price for such Product, will be no greater than the lowest price for such
Product charged by Medis to any non-military or non-law enforcement customer of
Medis that purchases an aggregate of at least one million (1,000,000) units of
Product within the twelve (12) month period immediately preceding Kensington’s
Product purchase.  Medis shall

 

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automatically apply such best price to all Kensington purchase orders shipped
after best pricing is triggered under this provision.

 

5.4          Pricing Freedom.  Kensington shall be solely responsible for
setting the prices it charges to its customers.

 

                5.5          Payment Terms.  Kensington shall pay Medis for
Products net thirty (30) days following delivery of Product by Medis, F.O.B.
Kensington’s designated facilities.  Payment shall be made by wire transfer to a
bank and account in the United States designated by Medis in writing from time
to time.

 

5.6          Kensington’s Duties.  During the Term of this Agreement, Kensington
shall in addition to its other commitments set forth in this Agreement, and at
its sole expense:

 

5.6.1       Product Promotion.  Use reasonable commercial efforts to advertise,
market and promote the Products in a manner consistent with the initiatives and
programs used for Kensington’s other Products, including without limitation,
using due diligence to place Products in locations carrying other Kensington
products; promoting the Products at trade shows and on Kensington’s world wide
web site, and generally undertaking other initiatives it deems appropriate to
expand distribution of the Products;

 

5.6.2       Adherence to Product Labeling:  promote the characteristics,
functionality, and performance of the Product in a manner consistent with the
Product labeling provided by Medis;

 

5.6.3       Customer Service:  train and maintain a staff knowledgeable in the
use of the Products and provide customer service support in a manner which, in
Kensington’s judgment, is best suited for the Products;

 

5.6.4       Customer Feedback:  provide Medis with timely customer feedback
regarding Product performance and operational issues, claims and complaints;

 

5.6.5       Laws:  inform Medis of potentially applicable regulatory
requirements of Laws (as defined in Section 14) of which Kensington may become
aware in jurisdictions where Kensington distributes the Product which
requirements Kensington reasonably believes may not be known to Medis;

 

5.6.6       Assistance:  take all reasonable actions and providing all
reasonable assistance to Medis, as requested by Medis, to enable Medis to derive
the benefits of this Agreement; and

 

5.6.7       Use of Kensington Marks:  utilize in the promotion of the Products
only Kensington Marks and Design work that does not infringe or otherwise
violate any proprietary right or Intellectual Property Right of any third party.

 

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6.                                      Branding; Trademarks; Design Work

 

6.1          Packaging; Branding; Third Party Licenses.  Responsibility for
designing and developing the Packaging for each Product and the branding used on
the Packaging, ownership of the Packaging and Intellectual Property Rights
therein, and the responsibility for securing any third party copyright rights
and trademark rights necessary for Kensington to implement its branding
strategies will be agreed upon by the Parties prior to the Product Acceptance
Date..

 

6.2          Medis Marks.  The Parties agree that at least one Medis Mark will
be used at least one time on the Packaging for each Product.  Such use shall be
in accordance with reasonable guidelines provided by Medis prior to the Product
Acceptance Date.  The Parties shall mutually determine which Medis Mark shall be
used on each Product.

 

6.3          License.  Medis grants to Kensington a non-exclusive, royalty-free,
worldwide right and license to use and reproduce Medis’ Marks on and in
connection with the Products, to use and reproduce Medis’ Marks on and in
connection with advertising, marketing and promotional materials for the
Products, and to distribute such Products and materials throughout the world, in
accordance with the reasonable guidelines provided by Medis and subject to the
provisions of this Agreement.

 

6.4          Ownership of Marks.  Each Party owns all right, title and interest
in and to its own Marks. Each use of a Party’s Mark on or in connection with the
Products shall inure to the sole and exclusive benefit of the owner of the Mark
or its designated Affiliate, as applicable.  The other Party acknowledges that
it has no right, title or interest in or to the other Party’s Marks and that
none is conferred by virtue of this Agreement.  In the event that any such
rights in the owner’s Marks are deemed to accrue to the other Party, such other
Party does hereby irrevocably and in perpetuity assign all worldwide right,
title and interest in and to the owner’s Marks to the owner or its designated
Affiliate and shall, upon the owner’s request, confirm such assignment in
writing.

 

6.5          Prohibited Action Against Owner’s Marks.  During and after the term
of this Agreement, each Party agrees that is will not, without the other Party’s
prior written consent, directly or indirectly:

 

6.5.1       Same or Confusingly Similar Mark. Use, file an application to
register or register in any country, any Mark of the other Party, or any
imitation or translation thereof, or any trade name, trademark, service mark,
word, symbol, emblem, or logo, that resembles or is confusingly similar to any
Mark of the other Party.  If any such use, application or registration arises,
which in the reasonable opinion of the other Party is the same or confusingly
similar, deceptive or misleading with respect to such other Party’s Marks, the
Party shall immediately abandon such use, application or registration, or at the
other Party’s discretion, irrevocably and in perpetuity assign all worldwide
right, title and interest in and to the same to the other Party or its
designated Affiliate.

 

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6.5.2       Initiation of Acts Against the Other Party’s Marks.  Take any
action, or aid any person in taking any action, that might prejudice the
validity of or the other Party’s or its Affiliates’ title to, such other Party’s
Marks and shall not assert the invalidity or contest the ownership by the other
Party or its Affiliates of such other Party’s Marks in any country, either as a
complete or partial defense to any claim made by such other Party or its
Affiliates, or as a basis of any claim against such other Party or its
Affiliates.

 

6.6          Product Quality.  Medis agrees to maintain quality standards for
the Products bearing Kensington’s Marks that are consistent with the standards
of quality that Medis maintains for its other branded products, but no less than
any mutually agreed upon standards.  Kensington may take reasonable precautions
to ensure that the quality of the Products and Packaging with which its Marks
are used is maintained.

 

6.7          Design Work

 

6.7.1       Ownership.  To the extent permitted by applicable laws, any design
work initiated or requested in writing by Kensington with respect to the
Packaging of the Products (including without limitation, labels or package
designs) or Kensington-owned tooling, equipment or molds, and made by any
employee or subcontractor of Medis (collectively, the “Kensington Works”) are
the exclusive property of Kensington and are provided to Kensington on a “work
made for hire” basis.

 

6.7.2       Assignment.  Medis shall promptly sign and have each of its
employees and subcontractors promptly sign all necessary papers, as determined
and requested by Kensington, to establish Kensington’s ownership in the
Kensington Works, and all Intellectual Property Rights therein, and to have each
such employee and subcontractor who qualifies as an inventor of any of the
Kensington Works, as determined by Kensington, to promptly sign all papers
requested by Kensington for purposes of filing patent applications for the
Kensington Works in patent offices in all countries throughout the world. The
Parties acknowledge that this provision shall only apply to design work provided
by or requested by Kensington.

 

6.7.3       Ownership of Products and Enhancements.  All Intellectual Property
Rights owned by a Party prior to the Effective Date of this Agreement, and all
Intellectual Property Rights developed solely by a Party during the Term of this
Agreement shall remain the sole and exclusive property of that Party and any
third party licensor from which the Party may have obtained such rights.  The
Products, their parts and components, and all Enhancements to the Products,
shall be the sole and exclusive Property of Medis, except for the Kensington
Works, if any.

 

7.             Representations and Warranties.  Medis represents and warrants
that as of the Effective Date and as of the Product Acceptance Date for each
Product:

 

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7.1          Ownership.  The Products (with the exception of the Kensington
Works) and the Medis Marks are the result of Medis’ exclusive work and efforts
and that Medis has exclusive ownership of all rights, including proprietary
rights and Intellectual Property Rights, in all Products (with the exception of
the Kensington Works) and Medis Marks.

 

7.2          Assistance.  Medis will take all reasonable actions and will
provide all reasonable assistance to Kensington, as requested by Kensington, to
enable Kensington to derive the benefits of this Agreement.

 

7.3          Infringement.  The manufacture, use, sale, offer for sale, import,
reproduction and distribution of the Products (with the exception of the
Kensington Works and Kensington Marks) as contemplated in this Agreement does
not and will not infringe or otherwise violate any proprietary right or
Intellectual Property Right of any third party.

 

7.4          Other Agreements.  Medis is not a party to and has no knowledge of
any other agreement now in effect that in any way affects the rights that
Kensington is obtaining under this Agreement.

 

7.5          Claims.  There are no claims, actions, suits or proceedings
commenced, pending or threatened against Medis which will or might in any way
affect or relate to the rights and benefits granted to Kensington under this
Agreement, and Medis is not aware of any grounds existing on which any claims,
actions, suits or proceedings might be commenced against Medis with respect to
any of the Products or any Intellectual Property Rights therein.

 

7.6          No Pending Actions.  No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is or has been pending or
threatened against Medis in connection with any Product or anticipated Product. 
Further, Medis has not been sued, or threatened with a lawsuit, action or
proceeding that involves a claim that the manufacture, use, import, sale, offer
for sale, reproduction or distribution of any Product infringes any Intellectual
Property Right or other propriety right of any third party.

 

7.7          No Infringement by Third Parties.  No person or entity is
infringing, misappropriating or otherwise making any unauthorized use or
disclosure of any Intellectual Property Rights of Medis that may be incorporated
into or related to any Product.  Medis has not brought any action, suit or
proceeding for infringement or violation of any of its Intellectual Property
Rights that may be included in, encompassed by or related to any Product.

 

                7.8          Product Warranty.  The Parties will negotiate a
mutually acceptable product warranty in connection with the finished goods
sourcing arrangement.

 

8.             Term.  This Agreement shall commence on the Effective Date and
continue for an “Initial Term” of thirty six (36) months, after which it shall
automatically renew for

 

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successive periods of twenty-four (24) months (each a “Renewal Term”), unless
either Party gives written notice to the other Party of an intent not to renew
following the Initial Term or any Renewal Term, or unless the Agreement is
terminated sooner as provided in Section 9.

 

9.             Termination

 

9.1          Right to Terminate.  In the event that a Party commits a material
beach of any of the terms of this Agreement or materially defaults in the
performance of any of its duties or obligations hereunder, and such breach or
default is not remedied within thirty (30) days after delivery of written notice
of such breach or default, the non-breaching Party may immediately terminate
this Agreement by giving written notice of termination.  In addition, a Party
may terminate this Agreement immediately upon written notice to the other Party
in the event of such other Party’s liquidation, bankruptcy, proceedings under a
debtor’s relief law, inability to meet debts as they mature or insolvency, or in
the event that such other Party’s business or assets or any part thereof are
seized or expropriated by judicial or governmental process, or in the event of a
substantial change in control of such other Party without prior written consent
of the Party, provided that notice of termination is given within sixty (60)
days of the change in control.

 

9.2          Effect of Termination.  Termination of this Agreement shall not
relieve either Party of any of its obligations that have matured as of the date
of termination for payments or delivery of Products.  Upon expiration or
termination of this Agreement, all tooling, equipment, molds and other material
owned by one Party and in the possession and control of the other Party shall be
crated and shipped in good order, by and at the cost and risk of the shipping
Party, F.O.B. the receiving Party’s designated facility, promptly as directed by
the receiving Party.

 

9.3          Liquidation.  Unless this Agreement is terminated by Medis as a
result of an uncured material breach by Kensington, Kensington shall have the
right to distribute all Products in transit to Kensington or its customers, to
distribute all Products in Kensington’s inventory, and to have completed the
manufacture of all Products that are in the “Process of Manufacture” as of the
date of termination or expiration.  A Product shall be considered in the
“Process of Manufacture” if, prior to the expiration or termination date
(whichever is applicable), either (i) Kensington or any of its Affiliates has
placed an order for the Product which order has been accepted by Medis, or (ii)
any aspect of the actual manufacturing process has commenced for Product that
bears any Kensington brand customization.  Kensington shall comply with all
other terms and conditions of this Agreement with respect to such Products
distributed pursuant to this provision.

 

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10.          Indemnification

 

10.1        Indemnified Claims.  Medis shall indemnify and hold harmless
Kensington, its successors, assigns, parent, subsidiaries and Affiliates, and
the officers, directors, employees and agents of each of them, from and against
any and all losses, damages and expenses of any nature (including reasonable
attorneys’ fees) arising out of or relating directly or indirectly to any claim,
suit, action, or proceeding (collectively, “Claims”) (i) that its performance or
nonperformance under this Agreement infringes, violates or misappropriates any
Intellectual Property Right of any third party; (ii) that Medis has or will
violate any statute, regulation or rule of law in the manufacture, assembly,
packaging or delivery of any Products (except to the extent of Kensington’s
liability under Section 14); or (iii) based on the breach or alleged breach by
Medis of any representation or warranty in this Agreement alleging personal
injury, death, or property damage to a third party caused by a Product or
related to a breach of the Product warranty as finally determined by the Parties
(except to the extent such damage or Product defect was caused by or arose as a
result of the acts of Kensington while the Product was in its control or
custody, or in connection with the Packaging of the Products by Kensington,
Kensington Work, or Kensington’s distribution of the Product).

 

10.2        Notice and Procedure.  Kensington shall promptly notify Medis in
writing of any Claims or amounts subject to indemnity and will render to Medis
at Medis’ expense whatever information and assistance Medis may reasonably
require in connection with such Claims.  Any delay in notice to Medis will
relieve Medis of its defense and indemnity obligations only to the extent of any
prejudice of the defense of the Claims.  Medis will have the sole right to
conduct the defense of any Claims and all negotiations for compromise or
settlement, except that Medis will not enter into any compromise or settlement
that will have the effect of creating any liability or obligation (whether legal
or equitable) on Kensington’s part without the prior written consent of
Kensington, and no compromise or settlement is authorized unless Kensington is
completely released of liability under the compromise or settlement.  Any
counsel selected by Medis to defend Kensington will be subject to the reasonable
approval of Kensington.  If Medis, after receiving notice of any Claims, fails
to begin the defense of the Claims, or after commencing a defense fails to
vigorously proceed with such defense, Kensington may (following written notice
to Medis) retain counsel and undertake the defense, compromise, or settlement of
the Claims at the expense of Medis.

 

10.3        Additional Remedies.  In the event of any infringement claim, and if
required by Kensington, Medis shall do in addition to its indemnity and defense
obligations, one of the following and at its expense: (i) procure for Kensington
the right to continue selling the allegedly infringing Product(s) and component
parts; (ii) replace the allegedly infringing Product(s) and component parts with
non-infringing items of substantially equivalent quality and purpose; (iii)
modify the allegedly infringing Product(s) and component parts so as to avoid
infringement, provided that as modified the Product(s) and components remain of
substantially equivalent quality and purpose; or (iv) accept the return of the
allegedly infringing Product(s) and component parts, and refund the total price
paid.

 

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11.          Insurance

 

11.1        Insurance to be Carried by Medis.  During the term of this
Agreement, Medis shall procure and maintain sufficient and adequate insurance
policies, such as comprehensive general liability insurance, including
contractual, products and completed operations, personal injury, bodily injury
and property damage liability with a combined single limit of not less a
reasonable amount per occurrence agreed upon by the Parties, with reputable
insurance companies, such insurance to include Kensington and its Affiliates as
additional insureds.

 

11.2        Certificate of Insurance.  Medis agrees to furnish Kensington with
certificates of all policies of insurance, and such certificates shall stipulate
that coverage will not be canceled or substantially changed without thirty (30)
days’ prior written notice by registered mail to Kensington.

 

11.3        Compliance with Insurance Provisions.  Medis shall not be deemed to
be relieved of any responsibility by the fact that it carries insurance.  Should
at any time Medis or subcontractor neglect or refuse to provide the insurance
requirements herein, or should such insurance be canceled or changed
substantially, or should the full occurrence limit of any policy not be
available to satisfy the requirements of this Agreement, Kensington shall have
the right to immediately cancel this Agreement.

 

12.          Confidentiality

 

12.1        Proprietary Information.  A Party or its Affiliates (“Discloser”)
may disclose to the other Party (“Recipient”) certain proprietary and
confidential information that relates to the Product or distribution information
and is marked as “confidential” or “proprietary” in writing or identified as
confidential verbally prior to disclosure to the Recipient, including but not
limited to technical information and all Intellectual Property Rights therein,
business information, the terms and conditions of this Agreement, and the
Parties’ discussions relating to the Products or distribution information (all
such information hereinafter referred to as “Proprietary Information”). 
Proprietary Information, however, does not include information that: (i) is now
or subsequently becomes generally available to the public through no fault or
breach on the part of the Recipient; (ii) the Recipient can demonstrate to have
had rightfully in its possession without an obligation of confidentiality prior
to disclosure to the Discloser; or (iii) the Recipient rightfully obtains
without an obligation of confidentiality from a third party who has the right to
transfer or disclose it, or (iv) is independently developed by employees or
agents of the Recipient who did not have access to the Proprietary Information.

 

12.2        Duty of Confidentiality.  The Recipient acknowledges that the
Proprietary Information is proprietary and strictly confidential.  Accordingly,
the Recipient shall hold in confidence, not disclose, divulge, furnish or make
accessible to others and not use for its own purposes or for any purpose other
than as contemplated in

 

13

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this Agreement, any Proprietary Information received from the Discloser.  The
Recipient may use the Proprietary Information only to the extent necessary for
carrying out the Recipient’s obligations under this Agreement.  The Recipient
shall keep Proprietary Information in strict confidence, exercising the highest
degree of care, and shall limit disclosure of Proprietary Information only to
its key employees with a specific need to know and who have been advised in
writing of the restrictions imposed by this Agreement and have agreed to abide
by such restrictions.  The Recipient will immediately advise the Discloser in
writing of any actual or suspected misappropriation or misuse by any person of
any Proprietary Information the Recipient has received from the Discloser.

 

12.3        Ownership.  The Proprietary Information will be made available to
the Recipient in correspondence and in the course of meetings and telephone
conferences as well as in other forms between the Discloser and Recipient.  All
Proprietary Information and materials supplied to the Recipient by the Discloser
or their authorized agents, representatives and contractors, shall be and remain
the exclusive property of the Discloser.  The Recipient agrees to return all
Proprietary Information of the Discloser within ten (10) days of the Discloser’s
request therefor with any notes and extracts the Recipient has made.  The
Recipient will also, upon the Discloser’s request, supply written certification
that all Proprietary Information has been returned.

 

12.4        Remedy.  The Recipient acknowledges and agrees that the Proprietary
Information is unique and proprietary, that there would not be an adequate
remedy at law to protect the Proprietary Information, and that the Discloser
would suffer irreparable injury from any unauthorized use or disclosure of any
of its Proprietary Information. The Recipient acknowledges and agrees that, in
the event the Recipient breaches or threatens to breach any of the terms of this
Section 12, the Discloser shall be entitled to seek a restraining order,
injunction or similar remedy in order to specifically enforce those terms as
well as a right to pursue all of its other remedies in equity and at law.

 

12.5        No Export.  The Recipient certifies that no Proprietary Information,
or any portion thereof, will be exported to any country in violation of the
United States Export Administration Act and regulations thereunder.

 

12.6        No Other Rights.  Except as expressly provided, nothing in this
Agreement shall obligate the Discloser to disclose any information to the
Recipient or to enter into any agreement or arrangement with the Recipient, nor
shall delivery of Proprietary Information by the Discloser be construed as
granting any rights, by license or otherwise, in any information,
specifications, technology or Products, or in any Intellectual Property Right or
other proprietary right of the Discloser, and the Recipient shall not assert any
claim to or right in any of the Discloser’s Proprietary Information.  The
Recipient’s obligations under this Agreement shall survive the termination of
this Agreement regardless of the manner of such termination and notwithstanding
the return of all the Proprietary Information.

 

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13.          No Rights In Either Party.  Except as expressly provided, nothing
in this Agreement or the relationship between and Medis shall grant to either
Party any rights to or interest in the Intellectual Property Rights of the
other, in the designs of any Product or Packaging, in any associated artwork or
in any of either Party’s other Proprietary Information.  All property now or
hereafter owned by any Party under the terms of this Agreement shall be returned
to such Party by and at the cost and risk of loss of the other immediately upon
request therefor or upon termination of this Agreement or as soon as possible
thereafter.

 

14.          Compliance with Laws.  Medis warrants that it will comply with all
applicable United States and foreign laws, statutes, government rules,
regulations and ordinances, including but not limited to environmental laws
(collectively, “Laws”) with respect to the manufacture and sale of the Products
and its performance under this Agreement and shall obtain all necessary
approvals and permits to perform its obligations under this Agreement.  When
delivered to Kensington, all Products will be property classified, described,
packaged, marked and labeled, and otherwise be in property condition according
to applicable Laws.  Kensington shall be solely responsible for complying with
all applicable Laws with respect to Kensington’s distribution of the Products
and its performance under this Agreement and shall obtain all necessary
approvals and permits to perform its obligations under this Agreement.  If
either Party receives any notice or becomes aware of any violation of any Laws
by the Products or the distribution thereof, the Party shall promptly notify the
other Party of such notice or violations.

 

15.          FORCE MAJEURE.  Force Majeure in this Agreement shall mean any
circumstances beyond the reasonable control of the affected Party, preventing
complete or partial fulfillment by such Party of its obligations under this
Agreement and shall include without limitation, fire, acts of nature, war,
military operations of any character, blockade, and the like.  The time
stipulated for fulfillment of the respective obligations shall be automatically
extended for a period, equal to that during which such circumstances remain in
force, provided that a written notice is sent by the Party for whom it becomes
difficult to meet its obligations not later than fourteen (14) days from the
occurrence of any such circumstances and similarly another notice of its
cessation is sent on cessation, and during the period of delay, the affected
Party takes all reasonable efforts to address the delay.

 

16.          LIMITATION OF DAMAGES.  Except for the indemnification obligations
pursuant to Section 10 (or a breach of those obligations), any breach of Section
12 Confidentiality, or a Party’s intentional recklessness or willful misconduct,
under no circumstances and under no legal theory, in tort, contract, or
otherwise, will either Party be liable to the other Party for any indirect,
special, incidental or consequential damages, even if the Party has been
informed of the possibility of such damages.

 

17.          MISCELLANEOUS

 

17.1        Notices.  All notices shall be in writing and, unless otherwise
specified herein, shall be deemed effective when delivered personally or by
courier service with

 

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receipt provided, or three (3) business days after deposit with a receipted
overnight or two-day delivery service, prepaid, addressed as follows (or to such
other address as specified by either Party in writing):

 

If to Medis:

 

Medis Technologies Ltd.

805 Third Avenue, 15th Floor

New York, NY  10022

Attention:  Robert K. Lifton

Title:  Chairman and Chief Executive Officer

Fax No: 212-935-9216

 

If to Kensington:

 

ACCO Brands, Inc.

Through its Kensington Technology Group

2000 Alameda De Las Pulgas

San Mateo, CA  94403

Attention:  President

Fax No: 650-572-9675

 

With a Copy to:

 

Fortune Brands, Inc.

300 Tower Parkway

Lincolnshire, IL 60069

Attn:  General Counsel

Fax No: 847-484-4490

 

17.2        Entire Agreement.  This Agreement (including the Exhibits)
constitutes the entire agreement between the Parties concerning the subject
matter of this Agreement and supersedes all prior agreements and understandings
(whether written or oral) with respect to the subject matter of this Agreement. 
No representative of Kensington or Medis is authorized to make any
representation, warranty or promise not contained in this Agreement, except as
provided by the next succeeding sentence.  No change, termination, waiver or
other modification of any of the provisions of this Agreement shall be binding
on either Party unless in writing and signed by an officer of each Party who is
authorized to take such action.  No change, termination, waiver or other
modification of this Agreement (including the expiration hereof) shall affect
the rights of either Party to enforce any claim that matured prior to the date
of such modification.  No waiver of any provision hereof or default, or exercise
of any election provided under this Agreement, shall affect the right of either
Party thereafter to enforce said provision or to exercise any right or remedy or
election in the event of any other default, whether or not similar.

 

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17.3        Remedies.  The rights and remedies of each Party under this
Agreement are not exclusive but shall be in addition to all other rights and
remedies to which that Party is entitled against the other Party, subject to the
provisions of Section 16.

 

17.4        Independent Contractor.  Unless otherwise expressly agreed in this
Agreement, Medis is an independent contractor, and Medis shall not represent
that it has any power to bind Kensington or to assume or to create any
obligation or responsibility, express or implied, on behalf of Kensington.  This
Agreement shall not be construed as constituting Medis and Kensington partners
or to create any other form of legal association, which would impose liability
upon one Party for the acts or failure to act of the other.

 

17.5        Taxes; Fees.  Medis shall bear any and all taxes other than
applicable sales and use taxes, fees or other governmental charges applicable to
its operations under this Agreement.

 

17.6        Governing Laws.  This Agreement shall be interpreted in accordance
with the laws of the State of New York, United States of America, as if agreed
to and performed entirely within such State and Country.

 

17.7        Assignment; Subcontracts.   Kensington shall have the right, at its
sole discretion, to assign this Agreement or any of its rights hereunder to any
of its Affiliates or to a successor-in-interest to all or substantially all of
its capital stock, business or assets.  Medis may not assign any of its
obligations under this Agreement without the prior written consent of
Kensington.  Any attempted assignment, subcontract or transfer by either Party
in contravention of this Section 14.7 shall be void and of no effect.

 

17.8        Exhibits.  All exhibits attached to this Agreement are deemed for
all purposes to be incorporated into this Agreement as if fully set forth
herein.

 

17.9        Representation.  Medis represents and warrants that it has not
agreed to pay any commission, gift, compensation or other payment in connection
with the manufacture or sale of the Products.

 

Duly authorized representatives of the parties have executed and delivered this
Agreement as of the above Effective Date.

 

ACCO Brands, Inc.,

Medis Technologies Ltd.

through its

 

Kensington Technology Group

 

 

 

By:

/s/ PAUL EASTHOPE

 

By:

 /s/ ROBERT K. LIFTON

 

Name: Paul Easthope

Name: Robert K. Lifton

Title:  President

Title:   Chairman and CEO

 

 

17

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Exhibit A

 

Products

(Section 1.6)

 

 

 

 

Fuel Cell Power Packs

Recharge Packs

 

 

 

 

 

 

Exhibit B

 

Entities Ineligible for Distribution Rights

(Section 2.2.1)

 

[Subject to a request for confidential treatment; Separately filed with the
Commission]

 

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Exhibit C

 

Product Criteria

(Section 4.1)

 

 

Preliminary specification for Medis micro fuel cell powered portable devices
such as cellular phones, digital cameras and MP3 players.

 

1.             Purpose and scope of document:       The concept device described
in this document is a micro fuel cell power pack for portable electronic
devices. This document calls out general, mechanical and electrical requirements
and also provides information on anticipated reliability, environmental and
regulatory compliance factors that will govern future commercialization of the
device.

 

2.                                      Scope

Power Pack is a system assembled of Fuel Cell, cartridge, and electronic device.
[Subject to a request for confidential treatment; Separately filed with the
Commission]

 

The Power Pack is designed to meet the requirement majority of cellular phones,
digital cameras and MP3 players.

 

3.             General requirements:

 

[Subject to a request for confidential treatment; Separately filed with the
Commission]

 

4.             Electrical requirements:

 

[Subject to a request for confidential treatment; Separately filed with the
Commission]

 

5.                                      Mechanical requirements:

 

[Subject to a request for confidential treatment; Separately filed with the
Commission]

 

6.             Environmental & Full Regulatory compliance:

 

[Subject to a request for confidential treatment; Separately filed with the
Commission]

 

                The Power Pack will meet the UL standards.

 

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