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.


 


11

















 


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.


 


12

















 


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

















 


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.


 


14

















 


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 


 


15

















 


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.


 


16

















 


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

















 


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]


 


18

















 


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.


 


19