EXHIBIT 10.2

 
DISTRIBUTION AGREEMENT
 
This Distribution Agreement (“Agreement”) is made and entered into as of October
29, 2006 (“Effective Date”), by and between Quasar Business Solutions, with
business offices at 2455 Dollarton Hwy, North Vancouver, BC V7H 1B1 (“QBS”) and
Medis Technologies Ltd., a Delaware corporation, with business offices at 805
3rd Avenue, New York, NY 10022 (“Medis”). QBS 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. QBS is in the business of developing, technology
products and solutions for mobile power and connectivity devices. Medis is
willing to appoint QBS, and QBS is willing to accept such appointment, as a
distributor and ecommerce partner 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 Medis 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 Medic, or created, developed or
conceived by QBS 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.
 
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
 

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1.6.  “Products” means (i) the devices identified in Exhibit A (including, but
not limited to, the finished goods in QBS-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, 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
QBS, and QBS hereby accepts the appointment, as a worldwide distributor and
exclusive ecommerce partner of the Products, and QBS 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 QBS 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 QBS under
Section 2.1 shall be “semi-exclusive,” in that Medis agrees as follows:
 
QBS has non exclusive worldwide distribution rights and is the exclusive
ecommerce partner of Medis Technologies.
 
2. Minimum Annual Purchase Targets. The Parties agree that QBS shall endeavor to
purchase a minimum of 1,000,000 units from Medis upon acceptance of this
agreement The purchase order shall become shippable in release quantities TBD by
QBS and Medis once Medis has obtained a UL Listing on the product.
 
2.4.  Failure to Meet Minimum Annual Purchase Target. If QBS fails in any Year
to meet an annual purchase target of 2,500,000 units per year (Minimum Annual
Purchase Target), then Merlin shall have the right, as Medis’s exclusive remedy,
to terminate, as applicable, thirty (30) days after the effective date of the
notice, as determined in accordance with Section 14.1.
 
2.5.  QBS Non-Compete Commitment. QBS agrees that it will not directly or
indirectly offer to sell, sell, distribute or otherwise transfer through its QBS
any liquid fuel cell product winch includes the same or similar functionality as
any of the Products, except with Medic’ prior written consent.
 
2.6.  Affiliates. QBS may, at its sole discretion and without Medis’s further
consent, extend any or all of the rights to Savenna Technologies or one or more
of its Affiliates. QBS shall provide Medis with prompt written notice of each
such extension.
 

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3.
Products

 
3.1.  QBS Branded Products. Products will be in the standard form that they are
sold generally by Medic, except for changes that are mutually agreed to in
writing by the Parties to reflect QBS or Savenna Technologies branding features.
The Parties currently intend that Products include both QBS’s and/or Savenna
Technologies and Medis’s logos and trade names, will be packaged as specified by
QBS, 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 QBS’s
Packaging or Marks to any third party without the consent of QBS.
 
3.2.  New Items; Right of First Refusal. The Parties will faunally meet at least
once per calendar quarter to identify future opportunities for new items that
incorporate Medic’ 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 QBS specifications, and where
existing in Medis’s 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 QBS in facilitating or
financing the development of such New Item. If QBS notifies Medis within
sixty (60) days of receipt of the specifications that QBS 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 QBS notifies Medis that it is not
interested in distributing the New Item, QBS fails to timely notify Medis of
QBS’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 QBS; however, before offering
distribution tights to the New Item to a third party on terms and conditions
more favorable to the third party than those last offered to QBS, Medis shall
first give QBS 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 appropriate test environments and against reasonable
performance criteria; and (iii) initiation of commercial production of the
Product Medis will keep QBS apprised of the status of development for each
Product, shall provide details reasonably requested by QBS with respect to each
Product, and shall facilitate QBS’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 UL Listing of each Product, Medis will provide QBS with at
least two (2) manufactured units of the Product that meet the final
specifications for the Product,
 

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together with final Packaging and labeling criteria agreed upon by the Parties.
Within thirty (30) days following receipt of such Product samples, QBS will
advise Medis whether QBS, in its sole discretion, accepts the Product, accepts
the Product subject to specified modifications, or rejects the Product. If QBS
fails to timely notify Medis of QBS ‘s decision or QBS rejects the Product,
Mortis shall have the right to terminate the Agreement by written notice to QBS,
whereupon neither Party shall have any farther liability to the other Party. If
QBS 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 QBS will purchase Products from Medis as finished goods
(“Finished Goods Sourcing”). Prior to the Product Acceptance Date for each
Product, the Parties will agree upon the arrangement under which QBS 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.  QBS 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, QBS agrees to
collaborate with Medis as reasonably requested by Medis to identify and select
manufacturers for each Product, evaluate production facilities, end generally
facilitate manufacture of the Products.
 
5.3.  Pricing
 
5.3.1  Initial Price. Prior to the Product Acceptance Date, the Parties will
negotiate a reasonable unit price for the first Product to be distributed by QBS
(the “Initial Price” for such Product) in an amount that takes into account the
broader logistics role undertaken by QBS in sourcing the Product In no event
will the Initial Price for the first Product be greater than $  *    per unit
(the “Price Target” for the first Product) and $  *    per unit for the Power
Management Cable, The Parties will engage in similar price negotiations to
determine the Initial Price and Price Target for each additional Product to be
distributed by QBS, 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 53.3 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, QBS 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 QBS all non-recurring engineering cost contributions, if
any, previously requested or approved in writing by Medis, attributable to the
Product development and paid by QBS pursuant to Section 5.2 and
 
* Subject to a request for confidential treatment; Separately filed with the
Commission.

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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 QBS 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 QBS’s Product
purchase. Medis shall automatically apply such best price to all QBS purchase
orders shipped after best pricing is triggered under this provision.
 
5.4.  Pricing Freedom. QBS shall be solely responsible for setting the prices it
charges to its customers.
 
5.5.  Payment Terms. QBS shall pay Medis for Products net sixty (60) days
following delivery of Product by Medis, F.O.B. QBS’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.  QBS’s Duties. During the Term of this Agreement, QBS shall in addition to
its other commitments set forth in this Agreement, and at its sole expense:
 
5.6.1  Product Promotion. Both parties shall use reasonable commercial efforts
to advertise, market and promote the Products in a manner consistent with the
initiatives and programs used for QBS ‘s other Products, including without
limitation, using due diligence to place Products in locations carrying other
QBS products; promoting the Products at trade shows and on QBS’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 QBS’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;
 

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5.6.5  Laws: inform Medis of potentially applicable regulatory requirements of
Laws (as defined in Section 14) of which QBS may become aware in jurisdictions
where QBS distributes the Product which requirements QBS 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 QBS Marks: utilize in the promotion of the Products only QBS Marks
and Design work that does not infringe or otherwise violate any proprietary
right or Intellectual Property Right of any third party.
 

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 QBS 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 QBS a non-exclusive, royalty-free, worldwide
right and license to use and reproduce Medis’s Marks on and in connection with
the Products, to use and reproduce Medis’s 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 county, any Mark of the other Party, or any imitation or
translation thereof; or any
 

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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 Panty’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.
 
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 Medis 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 QBS’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. QBS 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 QBS with respect to the Packaging of the
Products (including without limitation, labels or package designs) or QBS-owned
tooling, equipment or molds, and made by any employee or subcontractor of Medis
(collectively, the “QBS Works”) are the exclusive property of QBS and are
provided to QBS 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 QBS, to establish QBS’s Medis in the QBS Works, and all Intellectual Property
Rights therein, and to have each such employee and subcontractor who qualifies
as an inventor of any of the QBS Works, as determined by QBS, to promptly sign
all papers requested by QBS for purposes of filing patent applications for the
QBS 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 QBS.
 
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 Team 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 component, and all Enhancements to the Products, shall
be the sole and exclusive Property of Medis, except for the QBS Works, if any.
 

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7.
Representations And Warranties

 
. Medis represents and warrants that as of the Effective Data and as of the
Product Acceptance Date for each Product:
 
7.1.  Ownership. The Products (with the exception of the QBS Works) and the
Medis Marks are the result of Medis’s exclusive work and efforts and that Medis
has exclusive Medis of all rights, including proprietary rights and Intellectual
Property Rights, in all Products (with the exception of the QBS Works) and Medis
Marks.
 
7.2.  Assistance. Medis will take all reasonable actions and will provide all
reasonable assistance to QBS, as requested by QBS, to enable QBS 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 QBS
Works and QBS 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 QBS 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 QBS 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.
 

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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 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, pi-inaptly 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 QBS, QBS shall have the right to distribute all
Products in transit to QBS or its customers, to distribute all. Products in
QBS’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) QBS 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 QBS brand customization. QBS shall comply
with all other terms and conditions of this Agreement with respect to such
Products distributed pursuant to this provision.
 

10.
Indemnification

 
10.1.  Indemnified Claims. Medis shall indemnify and hold harmless QBS, 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 QBS’s
 

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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 QBS while the Product was in its control or custody, or in
connection with the Packaging of the Products by QBS, QBS Work, or QBS’s
distribution of the Product).
 
10.2.  Notice and Procedure. QBS shall promptly notify Medis in writing of any
Claims or amounts subject to indemnity and will render to Medis at Medis’s
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 QBS’s part
without the prier written consent of QBS, and no compromise or settlement is
authorized unless QBS is completely released of liability under the compromise
or settlement. Any counsel selected by Medis to defend QBS will be subject to
the reasonable approval of QBS. 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, QBS 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 QBS, Medis shall do in addition to its indemnity and defense
obligations, one of the following and at its expense: (i) procure for QBS 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 Products) 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.
 

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 QBS and its Affiliates as additional insureds.
 
11.2.  Certificate of Insurance. Medis agrees to furnish QBS 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 QBS.
 
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
 

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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, QBS 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 (ii) 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 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
 

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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 =segment 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.
 
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 QBS, all Products will be property classified, described, packaged,
marked and labeled, and otherwise be in property condition according to
applicable Laws. QBS shall be solely responsible for complying with all
applicable Laws with respect to QBS’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 Petty 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
 

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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 Pasty 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 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, 156 Floor
New York, NY 10022
Attention: Robert K. Lifton
Title: Chairman and Chief Executive Officer
Fax No: 212-935-9216
 

If to QBS:
Quasar Business Solutions Inc.

Suite 104- 2455 Dollarton Hwy North
Vancouver, BC V7H 1B1
Attn.: Michael J. More O’Ferrall
Fax No: 866-924-0974
 
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 QBS 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 QBS or to assume or to create any obligation or
responsibility, express or implied, on behalf of QBS. This Agreement shall not
be construed as constituting Medis and QBS 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. QBS 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 QBS. 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 Product.
 
Duly authorized representatives of the parties have executed and delivered this
Agreement as of the above Effective Date.
 
Quasar Business Solutions Inc.
 
 
Medis Technologies Ltd.
 
By:   /s/ Michael J. More O’ Ferrall 

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Name: Michael J. More O’ Ferrall
Title: President
 
By:  /s/ Robert K. Lifton

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Name: Robert K. Lifton
Title: Chairman & CEO

 
 

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EXHIBIT A
 
Products
(Section 1.6)
 
Medis 24/7 Fuel Cell Power Packs
Medis Power Management Cables
Medis “tips”
 

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LOGO [quasar-logo_14701.jpg] 
Quasar Business Solutions Inc.
104-2455 Dollarton Highway
North Vancounver, BC V7H 0A2

Quasar Business Solutions Inc
Purchase Order
 
Suite 104 - 2455 Dollarton Highway
North Vancouver, BC V7H 0A2
PH: 1-866-924-0973 Fax: 1-866-924-0974
 
P.O. Box # 102906
DATE: OCTOBER 29, 2006
 
VENDOR
 
Medis Technologies Ltd
805 Third Ave
New York, NY 10022
PH: 212-924-8484 Fax: 212-934-9216
Customer ID: MT 805
SHIP
TO
 
Quasar Business Solutions Inc
Suite 104 - 2455 Dollarton Hwy
North Vancouver, BC V7H 0A2
PH: 1-866-924-0973
Fax: 1-866-924-0974

Shipping Method
Shipping Terms
Delivery Date
Standard
Contact Michael J More O’Ferrall
TBD

QTY
ITEM #
DESCRIPTION
JOB
UNIT PRICE
LINE TOTAL
 
1,000,000
 
 
247-PP
 
 
Medis 24/7 Power Pack Fuel Cell
 
 
D
 
 
* USD
 
 
*
 
USD

 

       
SUBTOTAL
*    
 
USD
       
 
SALES TAX
         
 
TOTAL
 
 
*
 
USD

 

1.
Please send two copies of your invoice.

 

2.
Enter this order in accordance with the prices, terms, delivery method, and
specifications listed above.

 

3.
Please notify us immediately if you are unable to ship as specified.

 

4.
Send all correspondence to:

Michael J More O’Ferrall
Suite 104-2455 Dollarton Highway
North Vancouver, BC V7H 0A2
Phone 866-924-0973 Fax 866-924-0974 
/s/ Michael J. More O’Ferrall

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Authorized by: Michael J. More    Date 10/29/06
O’Ferrall 

 
* Subject to a request for confidential treatment; Separately filed with the
Commission.