COMPANY CONFIDENTIAL


                               STRATEGIC AGREEMENT


     THIS STRATEGIC AGREEMENT (the "SA"), dated April 5, 2001 is entered into by
and between, GENERAL DYNAMICS GOVERNMENT SYSTEMS CORPORATION, acting through its
Communication  Systems  Group,  a company having a place of business at 400 John
Quincy Rd., Taunton, Massachusetts, USA (hereinafter referred to as "GDCS"), and
MEDIS  TECHNOLOGIES  LTD., with a business address at 805 3RD Avenue,  New York,
New York  (hereinafter  referred to as  "MEDIS").  ("GDCS" and "MEDIS"  shall at
times  be  referred  to  individually  as a  "Party"  and  collectively  as  the
"Parties").

     WHEREAS,   GDCS  is  a  leading   United  States   government   contractor,
experienced,  INTER ALIA, in the  development,  manufacture and sale of military
communications systems and equipment for the United States Department of Defense
("DOD"); and


     WHEREAS, MORE Energy Ltd., of Israel, ("MORE"), a majority owned subsidiary
of  Medis,  has  developed  certain  unique  proprietary  technologies  for  the
development of fuel cells, in particular direct liquid methanol fuel cells ("DLM
Fuel Cells"); and


     WHEREAS,  Medis is interested in arranging,  to further  develop and supply
specific  applications  for  MORE's DLM Fuel Cell  technologies  to GDCS for DOD
applications; and

     WHEREAS, neither MEDIS nor MORE have currently established channels for DLM
Fuel Cell to the DOD market: and

     WHEREAS,  in order to  increase  competition  in the DOD  market for mobile
power supplies sources including, but not limited to, conventional  rechargeable
and  non-rechargeable  batteries,  fuel cells,  and other types of batteries and
power  supplies,  through  MEDIS and MORE's  DLM Fuel  Cells and GDCS  marketing
channels; and,

     WHEREAS,  the Parties accordingly seek to cooperate with one another in the
development, production, marketing and sale of military applications for the DLM
Fuel Cell technology of MORE to the DOD; and

     WHEREAS,  the Parties  therefore  desire to enter into an  agreement  under
which GDCS will market  MEDIS and MORE's DLM Fuel Cells to the DOD and MEDIS and
MORE shall support such marketing efforts and sell, supply, and support DLM Fuel
Cells purchased by GDCS for the DOD; and

     WHEREAS,  in view of the complementary  experience and capabilities of GDCS
and  MEDIS  and its  subsidiary  MORE,  and in  consideration  of the  foregoing
recitals and mutual covenants,  terms,  conditions,  and agreements  hereinafter
provided,  the  Parties  agree  to  cooperate  with  each  other,  based  on the
principles set forth in this Agreement.

     NOW THEREFORE, the Parties agree as follows:

1.   SCOPE OF COOPERATION

1.1 During the Term of this Agreement (as  established in Section 4) and subject
to the terms hereof,  the Parties agree to work  exclusively  with each other in
the area of DLM Fuel Cell  technologies  and  applications  for the DOD. Neither
Party will  enter  into an  agreement  with a third  party for the  development,
marketing or sale of an application of a DLM Fuel Cell for the DOD other than in
conjunction  with the  participation  and written  agreement of the other Party,
except  that  if a  Party  identifies  a DOD  requirement  for a DLM  Fuel  Cell
application  and  the  other  Party  declines,   in  writing,   to  pursue  that
requirement, then the former Party will be free to pursue that opportunity alone
or with a third Party, subject to the Confidentiality  Rights provisions of this
Agreement.

1.2 Except as otherwise  expressly  provided in paragraph 1.1 of this Agreement,
nothing  set forth  herein  shall be  construed  as  limiting  in any way either
Party's right to  independently  market and sell its products or services  other
than DLM Fuel Cells to the DOD or confer any right or impose any  obligation  or
restriction on the Parties with respect to any other program effort or marketing
activity at any time undertaken by the Parties hereto, jointly or separately.

2.   MARKETING

2.1 It is the  non-binding  intention  of the  Parties to  identify  one or more
programs or  requirements of the DOD for which a DLM Fuel Cell technology may be
responsive   and   competitive   and  to  jointly   bid  on  and   pursue   such
opportunity/ies.  GDCS has indicated that it may have the opportunity to propose
on a  non-competitive  basis the  addition  of DLM Fuel Cell  technology  for or
related to certain  products that may be purchased by certain parts of DOD under
a certain  existing  DOD prime  contract  for which GDCS  currently is the prime
contractor and the Parties have agreed to initiate their  cooperation under this
Agreement in the pursuit of that possibility. It is the intention of the Parties
that their respective project activity (as opposed to marketing  activity) under
this Agreement will be funded under DOD contracts and will not be funded by IR&D
of either Party without separate express written agreement of the Parties.

2.2 The Parties shall each designate a point of contact for the marketing effort
hereunder and they shall implement marketing activities as follows:

     2.2.1 GDCS will take primary  responsibility  for the marketing  activities
hereunder.  GDCS shall coordinate and consult with MEDIS in the development of a
marketing  plan (the  "Plan"),  with  respect  to DLM Fuel Cell  technology  and
products, in particular to define the specifications and schedules to be pursued
with DOD in  particular  matters  which are  expected  to include  DLM Fuel Cell
technology. GDCS shall submit a draft of the Plan to MEDIS within thirty days of
the Effective  Date of this  Agreement and the Parties will meet to agree on the
Plan. In the Plan,  GDCS shall,  INTER ALIA, set forth the specific DOD programs
or anticipated DOD requirements that GDCS currently  contemplates being suitable
for  utilization  of the DLM Fuel Cell  technology  for which  GDCS may submit a
proposal,  together with the justification for such proposal.  GDCS shall update
the Plan  periodically (at least every quarter) to reflect changes that may have
occurred  involving  either  the DLM Fuel  Cell  technology  development  or the
requirements  of the DOD.  GDCS will  submit  each  updated  Plan for review and
comment to MEDIS.

     2.2.2 MEDIS shall  promptly reply with comments to the Plan and any updates
to the Plan as submitted by GDCS.  MEDIS will provide on site technical  support
for GDCS presentations to the DOD as well as written  information to support the
GDCS  marketing  activities.  MEDIS will be entitled to participate at marketing
meetings with the DOD when deemed  appropriate  by MEDIS,  provided that the DOD
does not object.

     2.2.3.  The Plan shall  serve as a guide for the Parties to follow in order
to identify future programs or requirements of the DOD, current  developments of
the DLM Fuel Cells  technology  products,  and the respective  activities of the
Parties in connection herewith.

     2.2.4 The Parties senior  management will meet  periodically,  but not less
than once each  quarter  during  the first 18 months  hereof  and  semi-annually
thereafter, to review the implementation of the marketing activities hereunder.

     2.2.5  Each  Party  shall  bear  its own  costs  related  to its  marketing
activities hereunder.

3.   PROPOSALS AND CONTRACTING

3.1 All solicited or unsolicited Proposals that the Parties agree to submit that
will propose development and supply of specific applications for MORE's DLM fuel
cell technologies shall be prepared through the joint efforts of GDCS and MEDIS.
GDCS and MEDIS shall  mutually  agree upon all material  terms of each  Proposal
before  its  submission  to the  DOD,  as  well  as any  changes  thereto  after
submission  or after  entering  contracts  with the DOD.  For  purposes  hereof,
"material  terms" shall  include  pricing and terms of payment;  specifications;
schedules;  the addition of other team  members;  the  allocation of work share;
protection  of  proprietary  rights;  and the  allocation  and/or  limitation of
liability/responsibility.

3.2 GDCS shall act as prime  contractor for all proposals and contracts with the
DOD.  Under all proposals and contracts to which this Agreement  relates,  MEDIS
shall have design,  related system or product interface,  supply and maintenance
responsibility  for  all of the DLM  Fuel  Cell  elements  of any  system  being
proposed or provided,  including those resulting from any directed changes under
any contract.  All proposals  and resulting  contracts  that are covered by this
Agreement will require that all MORE technology and know how related to DLM Fuel
Cells,  including any improvements  thereto  achieved during  performance of any
contract  hereunder,  shall  remain the sole  property  of MORE.  MEDIS and MORE
recognize and agree that the U.S.  Government may acquire certain license rights
in accordance with applicable terms of Federal Acquisition  Regulations (FAR) or
Department of Defense  Federal  Acquisition  Regulation  Supplement  (DFARS) and
MEDIS will consider those  requirements  on a case by case basis as requested by
GDCS and advise GDCS of any exceptions  prior to any proposal being submitted to
the DOD.


3.3  Following  receipt  by MEDIS of a request  for  proposal  from GDCS and the
Parties  agreement  on the detailed  work  allocation,  MEDIS shall  deliver its
Sub-Proposal  to GDCS  within a  reasonable  time (OK) from  receipt of the GDCS
request in order for GDCS to incorporate the  Sub-Proposal  into its Proposal to
the DOD. Each  Sub-Proposal  shall be valid for the period of time stipulated in
the applicable proposal. GDCS may not make any changes to a Sub-Proposal without
MEDIS's prior written consent.


3.4 It is the Parties' intention that each Party will have maximum visibility of
the relationship  with the DOD through the Proposal period as well as the period
of contract  performance.  Accordingly,  and without limitation,  throughout the
Term of this SA and  continuing  thereafter  during  the  term of any  surviving
Contract, if any, each Party shall furnish to the other Party all correspondence
received  from the DOD that could  reasonably  be  expected to affect the rights
and/or  obligations  of the other Party under any  Proposal,  Prime  Contract or
Sub-Contract,  as soon as possible  following the first Party's  receipt of such
correspondence.  The foregoing shall not apply to classified communications, but
GDCS shall,  to the extent  permitted by  applicable  law,  provide MEDIS with a
written summary of any non-classified elements of such correspondence.

3.5 If  GDCS is  awarded  a Prime  Contract,  and  that  contract  includes  any
requirements for the supply of DLM Fuel Cells or use of DLM Fuel Cell technology
then Medis shall enter into a  Sub-Contract  with GDCS for its share of the work
set forth in and at the  prices and terms of  payment  proposed  by Medis in the
Medis Sub-Proposal which was incorporated into the GDCS proposal. GDCS and MEDIS
shall sign each Sub-Contract not later than thirty (30) days following signature
of the Prime Contract.  Each Sub-Contract shall be expressed to come into effect
on the effectiveness of the Prime Contract. The terms of each Sub-Contract shall
in  general  be on the  terms  and  conditions  MUTATIS  MUTANDIS  of the  Prime
Contract, based on the principle of "flow down", except that:

     3.5.1 GDCS  shall not be  permitted  to  exercise  any  rights or  remedies
against  MEDIS (such as  termination  for  convenience  or default,  or warranty
claims)  except to the extent DOD  exercises  corresponding  remedies  under the
related Prime Contract;

     3.5.2 MEDIS's  obligations  and/or liabilities under its Sub-Contract shall
not be more onerous  (pro rata,  based on MEDIS's  allocable  share of the Prime
Contract price) than the corresponding  obligations  and/or  liabilities of GDCS
under the Prime Contract.

4.   TERM

4.1 The duration and  effectivity  (the "Term") of this Agreement shall commence
on the date and year first above  written and will  terminate  upon the first of
the  following,  provided that the provisions of Article 6 and shall survive the
expiration of earlier termination of this Agreement:

     4.1.1 Mutual written  agreement of the Parties to terminate this Agreement;
or

     4.1.2 In the event the Parties do not agree on the  provisions of the Plan,
either Party may terminate this Agreement by written notice; or


     4.1.3 Three (3) years from the signature of this Agreement.;


     4.1.3  December 31 2003, if the Parties have not received a Prime  Contract
award from the DOD by such date;

     4.1.4 In the event of  Government  initiation  of  suspension  or debarment
proceedings against either Party.

4.2  Notwithstanding  the expiration of the Term of this Agreement in accordance
with  paragraph 4.1 above,  the terms hereof shall  continue to apply to (i) any
outstanding and valid Proposal and/or contract and (ii) all follow-on  contracts
to any existing  contracts with the DOD for  development  and supply of specific
applications for MORE's DLM fuel cell technologies.

4.3 In the event the U.S. Government disapproves MORE as a Subcontractor to GDCS
and the terms of the  Subcontract  between  GSC and MORE  cannot  be  reasonably
altered or  changed  to effect  approval  thereof  by the U.S.  Government,  any
obligation  to  pursue  the  development  and  supply  of  MORE's  DLM fuel cell
technologies in connection with the applicable proposal will terminate, provided
that the exclusivity and  confidentiality  provisions of this Agreement (Clauses
1.1  and  6)  shall  continue  to  apply  to  GSC  as to  that  and  other  such
opportunities covered by this Agreement,  but subject to Government direction to
utilize  a  source  of  supply  for  DLM or  comparable  technology  other  than
MEDIS/MORE  for a  particular  program(s)  . 4.4 The  terms  of any  subcontract
between  the  Parties  shall  remain  unaffected  by  the  termination  of  this
Agreement.

5.   EXPORT LICENSES AND APPROVALS

5.1 GDCS shall be  responsible  for seeking all US export  license and Technical
Assistance Agreement ("TAA") approvals from the US authorities.

5.2 MEDIS shall be responsible for seeking all required export licenses from the
Israel authorities.

5.3 Both Parties  will use  reasonable  commercial  efforts to obtain all of the
aforesaid licenses and approvals to facilitate the maximum implementation of the
purposes of this Agreement.

6.   CONFIDENTIAL INFORMATION

6.1 The term "Confidential Information" as used in this Agreement shall mean all
trade secrets and information  which is proprietary to either Party (in the case
of MORE,  fuel cell  technology  and know how)  including,  but not  limited to,
design data, drawings, specifications, models, prototypes, designs, construction
or  assembly,   computer   software,   technical,   commercial  and  operational
information concerning products,  information  concerning  manufacturing methods
and  techniques,  quality  control and test  methods,  cost and pricing data and
product  applications,  provided (i) such  information  is received by one party
from  the  other  party  as  provided  in  this  Section,  and  (ii)  is  marked
proprietary,  confidential,  or bears a  marking  of like  import,  or which the
disclosing party states in writing at the time of transmittal to, or receipt by,
the receiving party is to be considered  proprietary.  Information  disclosed in
other than written form shall be considered Confidential Information only to the
extent  that the  disclosing  Party  summarizes  the same in written  form which
clearly and conspicuously identifies the Confidential Information.  Such summary
shall be transmitted to the receiving  Party within thirty (30) calendar days of
the  non-written  disclosures.  Such writing shall be  sufficiently  specific to
enable  the  receiving  party  to  identify  the  information  considered  to be
proprietary by the disclosing party.

6.2 Each Party shall hold all Confidential Information disclosed to it in strict
confidence  and will not disclose or use the  Confidential  Information  for its
benefit or the benefit of any other  company or entity  anywhere in the world or
any other purpose other than for the purpose of carrying out the  cooperation as
expressly set forth in this Agreement. Notwithstanding the foregoing, each Party
may  disclose  Confidential  Information  of the other  Party if and only to the
extent  required  pursuant  to any legal  process or order  issued by any court,
PROVIDED prior notice is given to the other Party before any such  disclosure is
made in order to enable such Party to seek to obtain a protective order.

6.3.  The  restrictions  on  Confidential  Information  shall  not  apply if the
receiving Party demonstrates that the:

     6.3.1  information  was  already  in  the  public  domain  at the  time  of
disclosure; or

     6.3.2  information,  which  though  originally  confidential,  subsequently
becomes part of the public domain through no fault of the receiving Party,

     6.3.3  information was or is developed by either Party  independently  from
and without  access to  Confidential  Information of the  disclosing  Party,  as
evidenced  by  written  records  or  other  evidence  in the  possession  of the
receiving Party;

     6.3.4  information  is or was lawfully  received from a third party without
breach of this Agreement.

In each case, the receiving  Party shall notify the disclosing  Party in writing
of its intent to make any disclosure based on one of the above-listed exceptions
at least 30 days in advance  (including a description  of the  information to be
disclosed and the basis for the claimed exception).

6.4 The receiving Party shall maintain all Confidential  Information in the same
manner that such Party maintains its own Confidential Information, provided that
the standard of care required  shall be at is  reasonably  calculated to prevent
inadvertent   disclosure  or  unauthorized   use  thereof.   Any  disclosure  of
Confidential Information shall be limited to the receiving Party's employees who
have a need  to  know  such  Confidential  Information  in  performance  of this
Agreement.  The receiving  Party shall advise its  employees of its  obligations
pursuant  to  this   Agreement  in  regards  to  the  nature  and  treatment  of
Confidential Information.

6.5 GDCS hereby  acknowledges that it is not presently in possession of know how
or  core  technology  related  to  DLM  Fuel  Cells.  Accordingly,  Confidential
Information  disclosed by MORE in connection  with this Agreement and all of the
resulting  know  how,  technology,  data,  or  information  resulting  from  the
development  of and DLM fuel cell  application  or  technology  hereunder is and
shall remain the exclusive property of MORE. GDCS acknowledges that the MORE DLM
Fuel Cell  technology may be of an extremely  sensitive  proprietary  nature and
therefore GDCS shall refrain from  disassembling any fuel cell delivered to GDCS
hereunder and shall not make or authorize any other party to make any attempt to
reverse  engineer the DLM Fuel Cell technology of MORE or any parts or materials
contained  therein  without  the prior  express  written  consent of MEDIS.  The
Parties  acknowledge  that there may be  situations  when it may be necessary to
disassemble  MEDIS DLM Fuel Cells.  Such situations may arise under or relate to
proposal  preparation,  evaluation,  or  contract  performance  such  as but not
limited  to  technology   verification/validation  and/or  to  comply  with  DOD
requirements (e.g.,  safety assessment,  failure reporting and corrective action
(FRACA)).  In the event such circumstances  arise, the Parties hereby agree that
such activity shall be carried out by MORE under its  subcontract  and they will
discuss and work together in good faith to define the conditions and appropriate
confidentiality  procedures  to be followed to  safeguard  MEDIS's  Confidential
Information by GDCS in its oversight of this activity as Prime contractor.

6.6 Except if necessary for the  performance  of any  contracts or  subcontracts
related to this  Agreement,  at any time that the disclosing  Party may request,
but no later than seven (7)  calendar  days after such  request,  the  receiving
Party shall return the  Confidential  Information  to the  disclosing  Party and
shall  certify in  writing  that all copies  thereof  in the  receiving  Party's
possession have been destroyed.

6.7 If the  disclosing  Party at any time does not  require  performance  and/or
enforcement of any provision of this Agreement, this shall not be construed as a
waiver of its rights  under this  Agreement  for future,  substantially  similar
situations,  nor shall the  disclosing  Party not taking  any action  affect its
rights at some later date to enforce  these  rights under this  Agreement  for a
subsequent breach of any of the provisions of this Agreement.

6.8 Each Party acknowledges that a breach of any provision of this Agreement may
result in irreparable injury and continuing damage to the disclosing Party's for
which  there may be no  adequate  remedy at law.  In the event of any alleged or
anticipated  breach by the receiving  Party of any provision of this  Agreement,
the  disclosing  Party shall be entitled to seek  injunctive  relief and to such
other and further relief as may be proper.

7.   GOVERNING LAW AND DISPUTE RESOLUTION

7.1 This  Agreement  shall be  governed,  construed  and  interpreted  solely in
accordance with the laws of the State of New York.

7.2 Any disputes  arising out of this  Agreement or any  resulting  Sub Contract
which the Parties are not able to resolve  amicably,  may only be submitted  for
resolution to a court of competent jurisdiction located in the Southern District
of New York.

8.   GENERAL

8.1 Nothing in this Agreement shall constitute or be construed to create a joint
venture, pooling arrangement, partnership or formal business organization of any
kind. The Parties shall remain independent  contractors at all times and neither
party shall act as an agent of the other.  Nothing  herein shall be construed to
provide  for the  sharing of profits or loss  arising out of the efforts of both
Parties.

8.2 Notices shall be sent to the Parties at the addresses first set forth above.
Any person to whom  notice may be given  hereunder  may from time to time change
such  address by written  notice  through  the US mail or  equivalent  expedited
overnight service.

8.3 Neither Party may assign this Agreement, or any interest herein, without the
prior written consent of the other Party.  Notwithstanding the foregoing,  it is
intended  that MEDIS shall  carry-out  many  aspects of this  Agreement  through
directly through the assignment of tasks to MORE.

8.4 It is the Parties  intention to issue a mutually agreed form of news release
disclosing  the  creation of this  Agreement.  Such  release and any  subsequent
public announcement, advertisement or publicity relating to this Agreement shall
use reasonable  commercial efforts to fairly reflect both Parties'  contribution
in this Agreement.

8.5 This is the sole  agreement  between the  Parties as to the  subject  matter
covered   herein.   It  supersedes   and  cancels  all  prior   agreements   and
representations  between the  Parties.  Any  modification  or  amendment to this
Agreement must be made only by mutual written consent of the Parties.

8.6  In  no  event  shall  either  Party  be  liable  to  the  other  Party  for
consequential damages, including but not limited to lost profits, lost market or
business  opportunities,  or lost revenues, or incidental,  special, or punitive
damages  arising  under,  related  to,  or  resulting  from the  breach  of this
Agreement, regardless of legal or equitable theory, and despite timely notice of
the possibility of such damages.

8.7 MEDIS warrants that it has the requisite authority to bind MORE to the terms
and  conditions  of this  Agreement  and hereby  binds MORE to be subject to the
terms and conditions of this Agreement.

     IN WITNESS  WHEREOF,  the Parties  have caused  this  Agreement  to be duly
executed on this 5th day of April, 2001.

MEDIS TECHNOLOGIES LTD.                GENERAL DYNAMICS COMMUNICATION SYSTEMS

BY:      /s/ Robert K. Lifton          BY:     /s/ Gerard J. DeMuro
         --------------------------            -------------------------
NAME:    Robert K. Lifton              NAME:   Gerard J. DeMuro
TITLE:   Chairman and CEO              TITLE:  President