**Exhibit10.3**

 

**NON-RECOURSESECURED PROMISSORY NOTE**

**Dated: April 11, 2003**

 

**$258,000**

 

FOR VALUERECEIVED, the undersigned (the “Borrower”) hereby promises to pay to theorder of Medis Technologies Ltd. (“Medis”), a Delaware corporation, or itsassigns (Medis and any subsequent holder of this Note being hereinaftersometimes referred to as the “Holder”), the lesser of (a) the unpaidprincipal amount of all loans made by Medis to the Borrower hereunder (whichshall not, in any event, exceed Two Hundred Fifty Eight Thousand Dollars($258,000)) and (b) Two Hundred Fifty Eight Thousand Dollars ($258,000), inlawful money of the United States of America, on December 31, 2006 (the “MaturityDate”). The Borrower further promises to pay interest on the unpaidprincipal balance of this Note from time to time outstanding at a rate equal tothe applicable federal rate, as defined in Section 1274(d) of the InternalRevenue Code of 1986, as amended, for mid-term loans, in effect on theborrowing date or dates thereof, compounded semi-annually, until the entireprincipal amount hereof has been paid in full. Interest hereunder shall bepayable annually in arrears on each anniversary of the date hereof. All accruedand unpaid interest shall be paid in full on the Maturity Date.

 

Payment of theprincipal of and interest on this Note is secured pursuant to the terms of acertain Pledge Agreement of even date herewith between Medis and the Borrower(the “Pledge Agreement”), pursuant to which the Borrower has pledgedCollateral (as defined therein) to Medis. Any Holder shall be entitled to thebenefits of the Pledge Agreement.

 

The Holder shallhave no recourse to any assets of the Borrower for the repayment of amounts dueunder this Note other than the Collateral under the Pledge Agreement and, ifthe proceeds of the Collateral are not sufficient to pay in full the amountsdue hereunder, the Borrower shall not be liable for the deficiency.

 

This Note issubject to the following further terms and conditions:

 

1.            All payments ofprincipal of and interest on this Note shall be made at the principal officesof Medis or at such other location either within or outside of the UnitedStates of America as may be designated from time to time in writing by noticegiven by the Holder to the Borrower. The Borrower may, at the Borrower’soption, prepay this Note in whole or in part at any time or from time to timewithout penalty or premium. Any prepayments of any portion of the principalamount of this Note shall be accompanied by payment of all accrued but unpaidinterest on that portion of the principal amount being prepaid.

 

2.            At the Holder’soption, payment or prepayment, as applicable, of principal of and interest onthis Note may also be made, in whole or in part, by delivery to the Holder of sharesof common stock of the Holder (“Shares”), including Pledged Shares,having a Fair Market Value on the day preceding the date of the transfer equalto the cash amount for which such Shares are substituted. As used in thepreceding sentence, the term Fair Market Value shall mean on any date theaverage of the high and low sales prices of the Shares on such date on theprincipal national securities exchange on which such shares are listed oradmitted to trading, or if such

 

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Shares are not so listed or admitted to trading, the arithmetic mean ofthe per Share closing bid price and per Share closing asked price on such dateas quoted on the National Association of Securities Dealers Automated QuotationSystem or such other market in which such prices are regularly quoted, or, ifthere have been no published bid or asked quotations with respect to Shares onsuch date, the Fair Market Value shall be the value established by the Board ofDirectors of the Holder in good faith.

 

3.            The Holder is herebyauthorized by the Borrower to record on the schedule annexed to this Note (oron a supplemental schedule thereto) the amount of each loan made by Medis tothe Borrower and the amount of each payment or prepayment of principal of suchloans received by the Holder, it being understood, however, that failure tomake any such notation shall not affect the rights of the Holder or theobligations of the Borrower hereunder in respect of this Note.

 

4.            (a)            The Borrower shall prepay this Note,together with accrued interest thereon, upon the bona fide sale to a party orparties having no affiliation, direct or indirect, with the Borrower, of any ofthe Pledged Shares, to the extent of 50% of the gross proceeds of such sale,less applicable brokerage commission and taxes (the “Net Sale Proceeds”). TheBorrower shall also prepay this Note to the extent of any cash dividends ordistributions paid upon the Pledged Shares, less any payment of applicabletaxes thereon.

 

(b)           Ifthe Borrower desires to sell any of the Pledged Shares, he shall give writtennotice (the “Notice”) to the Holder setting forth the number of Pledged Sharesto be sold, the proposed price per share if not a public sale “at market,” andto whom such Pledged Shares shall be sold if a private transaction and in suchinstance accompanied by the Borrower’s representation that any such sale willbe in a bona fide arm’s length transaction or transactions with a third partyor parties having no affiliation, direct or indirect, with the Borrower. Uponreceipt of the Notice, the Holder shall use its best efforts to sell suchPledged Shares on behalf of the Borrower, and upon receipt of the Net Proceedsof such sale, will remit to the Borrower 50% of the Net Sale Proceeds. If anysuch sale shall be a public sale, the Holder is hereby authorized in its solediscretion to select a securities broker-dealer to effect such sale.

 

5.            Notwithstanding anyother provision of this Note, the entire principal amount outstanding, and anyaccrued interest, shall be due and payable on the earliest of (a) the MaturityDate, or (b) six months following the termination of the Borrower’s employmentwith the Holder or any of its Affiliates (as defined in the Pledge Agreement).

 

6.            Any repayments madeunder this Note shall be first applied to the payment of any unpaid and accruedinterest and then to the payment of the principal amount outstanding hereunder.

 

7.            (a) Upon the failureof the Borrower to pay (x) the principal on the Note when and as the samebecomes due and payable, whether at maturity thereof, upon the occurrence of anevent requiring mandatory prepayment under Section 1(a) hereof, or upon theBorrower’s termination of employment requiring payment in full under Section 2hereof, or (y) the interest on the Note when and as the same becomes due andpayable, and such failure to pay principal or interest continues for ten (10)days; (b) upon the Borrower’s breach of the Pledge Agreement; or

 

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(c) if the Borrower shall file a petition in bankruptcy or for anarrangement or any similar relief pursuant to Title 11 of the United StatesCode or under any similar present or future federal law or the law of any otherjurisdiction or shall be adjudicated a bankrupt or insolvent, or consent to theappointment of or taking possession by a receiver, liquidator, assignee,trustee, custodian, sequestrator (or other similar official) of all or anysubstantial part of the Borrower’s property, or shall make a general assignmentfor the benefit of creditors, or shall admit in writing the Borrower’sinability to pay the Borrower’s debts generally as they become due, or shalltake any action in furtherance of any of the foregoing and such event is notcured within 60 days (each of the events described in clauses (a), (b) and (c)being referred to herein as an “Event of Default”), then, and in any suchevent, the Holder may declare, by written notice of the Event of Default givento the Borrower, the entire principal amount of this Note to be forthwith dueand payable, whereupon the entire principal amount of this Note outstanding andany accrued and unpaid interest hereunder shall become due and payable withoutpresentment, demand, protest, notice of dishonor and all other demands andnotices of any kind, all of which are hereby expressly waived.

 

8.            (a) The validity,performance and enforcement of this Note shall be governed by the laws of theState of New York, without giving effect to the principles of the conflicts oflaw thereof.

 

(b)           Anylitigation based hereon, or arising out of, under, or in connection with, thisNote shall be brought and maintained exclusively in the courts of the State ofNew York or in the United States District Court for the Southern District ofNew York.  The Borrower hereby expresslyand irrevocably submits to the personal jurisdiction of the courts of the Stateof New York and of the United States District Court for the Southern Districtof New York for the purpose of any such litigation as set forth above andirrevocably agrees to be bound by any judgment rendered thereby in connectionwith such litigation, subject to such Borrower’s right to contest such judgmentby motion or appeal on any grounds not expressly waived in thisSection 10(b).  The Borrower herebyirrevocably consents to the service of process by registered mail, postageprepaid, or by personal service within or without the State of New York.  The Borrower hereby expressly andirrevocably waives, to the fullest extent permitted by law, any objection whichit may have or hereafter may have to the laying of venue of any such litigationbrought in any such court referred to above and any claim that any suchlitigation has been brought in an inconvenient forum.  To the extent that the Borrower has or hereafter may acquire anyimmunity from jurisdiction of any court or from any legal process (whetherthrough service or notice, attachment prior to judgment, attachment in aid ofexecution or otherwise) with respect to the Borrower or the Borrower’sproperty, the Borrower hereby irrevocably waives such immunity in respect ofits obligations under this Note. The Borrower hereby expressly waives the rightto a trial by jury for the purpose of any such litigation as set forth above.

 

(c)           Ifthe date set for payment of principal or interest hereunder is a Saturday,Sunday or legal holiday, then such payment shall be due on the next succeedingbusiness day.

 

(d)           TheBorrower hereby waives presentment, demand, protest, notice of dishonor,diligence and all other notices, any release or discharge arising from anyextension of time, discharge of a prior party, release of any or all of anysecurity given from time to time for this Note, or other cause of release ordischarge other than actual payment in full hereof.

 

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(e)           TheBorrower shall not be deemed, by any act or omission, to have waived any of itsrights or remedies hereunder unless such waiver is in writing and signed by theHolder and then only to the extent specifically set forth in such writing.  A waiver with reference to one event shallnot be construed as continuing or as a bar to or waiver of any right or remedyas to a subsequent event.  No delay oromission of the Holder to exercise any right, whether before or after a defaulthereunder, shall impair any such right or shall be construed to be a waiver ofany right or default, and the acceptance at any time by the Holder of anypast-due amount shall not be deemed to be a waiver of the right to requireprompt payment when due of any other amounts then or thereafter due andpayable.

 

(f)            Tothe extent permitted by law, the remedies of the Holder as provided herein, orany one or more of them, or in law or in equity, shall be cumulative andconcurrent, and may be pursued singularly, successively or together at theHolder’s sole discretion, and may be exercised as often as occasion thereforshall occur.

 

(g)           Ifany provisions of this Note would require the Borrower to pay interest hereonat a rate exceeding the highest rate allowed by applicable law, the Borrowershall instead pay interest under this Note at the highest rate permitted byapplicable law.

 
|   | /s/ Gennadi Finkelshtain |
|--------|--------------------------|
|   | GENNADI  FINKELSHTAIN    |

 

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**LOAN ANDREPAYMENT SCHEDULE TO THE SECURED PROMISSORY NOTE**

 

This Note evidences loans in the principal amounts and made on thedates set forth below:

 
| **Date** |   | **Principal  Amount of  Loan** |   | **Principal  Amount  Repaid** |   | **Balance  Outstanding** |   |
|----------|--------|--------------------------------|--------|-------------------------------|--------|--------------------------|--------|

 

 

 

NOTE: Additional pages of this Loan and Repayment Scheduleto the Note may be attached to the Note by the Holder as may be necessary torecord the above information regarding each loan.

 

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