Document:

WWW.EXFILE.COM -- 13053 -- MEDIS TECHNOLOGIES LTD. -- EXHIBIT 10.1 TO FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2004

AMENDMENT TO LOAN AGREEMENT 

        Fourth
Amendment (this “Fourth Amendment”) dated as of October 18, 2004 between MEDIS
TECHNOLOGIES LTD. (the “Borrower”) and FLEET NATIONAL BANK, a Bank of America
company (the “Bank”). 

        WHEREAS,
the Borrower and the Bank are parties to a Loan Agreement dated as of December 29, 2000
(as heretofore amended, the “Agreement”); and 

        WHEREAS,
the Borrower and the Bank entered into the Third Amendment to the Agreement, dated as of
September 30, 2003, amending the definition of Termination Date to read July 1, 2005; and 

        WHEREAS,
the Borrower has requested that the Bank amend, and the Bank has agreed to amend certain
provisions of the Agreement. 

        NOW,
THEREFORE, the parties hereto agree as follows: 

          	1. 	  	
               All capitalized terms used herein, unless otherwise defined herein, have the
               same meanings provided therefore in the Agreement. 

               

          	2. 	  	
               The definition of Termination Date as defined in Section 1.1 (Defined Terms) of
               the Agreement is hereby amended in its entirety to read as follows: 

               

	  	        “Termination
Date” shall mean July 1, 2006 or, if such date is not a Business Day, the
Business Day next succeeding such date. 

          	3. 	  	
               Section 5.2(g) of the Agreement is hereby amended in its entirety to read as
          follows: 

               

          		    “(g)       
               On or before each June 30th and December 31st of each
               calendar year, deliver to the Bank a certificate executed by each Individual
               Guarantor, in form and substance satisfactory to the Bank, certifying as to
               their combined liquid net worth or that they collectively own unencumbered
               liquid assets of, and that they have combined liquid net worth of, at least
               $10,000,000.” 

               

          	4. 	  	
               Section 5.2 of the Agreement is hereby further amended by relettering paragraph
               (h) to be paragraph (i), and inserting the following new paragraph (h)
               immediately following paragraph (g), to read as follows: 

               

          		    “(h)       
               Immediately upon the Partnership Guarantor’s entering into any agreement
               for the sale of all or any part of the Premises or upon Partnership
               Guarantor’s receipt of any notice for the exercise of any option for the
               sale of all or any part of the Premises, deliver written notice thereof to the
               Bank; or” 

               

          	5. 	  	
               The Event of Default in Section 8.1(n) of the Agreement is hereby amended in its
               entirety to read as follows: 

               

          		    “(n)       
               at any time prior to the Cash Collateral Effective Date the Individual
               Guarantors do not collectively have unencumbered liquid assets of, and combined
               liquid net worth of, at least $10,000,000; or” 

               

          	6. 	  	
               Section 8.1 of the Agreement is hereby further amended by relettering paragraph
               (o) to be paragraph (p), and inserting the following new Event of Default
               immediately following paragraph (n), to read as follows: 

               

          		    “(o)       
               upon any sale (or the entering into any agreement for the sale) of all or part of the
Premises by the Partnership Guarantor, or the exercise (or the receipt of notice for such
exercise) of any option to purchase all or part of the Premises, whether received from any
lessee of the Premises or otherwise; or” 

               

          	7. 	  	
               The notice address for the Bank appearing in Section 10.1 of the Agreement is
               hereby amended in its entirety to read as follows: 

               

	 	“The Bank: 	
Bank of America
1185 Avenue of the Americas
New York, New York  10036

 Att:  Tanitha Boonyam, Vice President
Fax Number:  212-819-6166

	 	with a copy to:	
Herrick, Feinstein LLP

2 Park Avenue New York, New York 10016
 Att: Sol W. Bernstein, Esq.
 Fax Number:
212-592-1500" 

          	8. 	  	
               The Agreement is further amended by inserting the words “, a Bank of
               American company” immediately following all references to “Fleet
               National Bank”. 

               

          	9. 	  	
               The Borrower hereby represents and warrants to the Bank that: 

               

           (a)       
          Each and every of the representations and warranties set forth in the Agreement
          and/or the documents executed pursuant thereto or in connection therewith is
          true as of the date hereof and with the same effect as though made on the date
          hereof, and is hereby incorporated herein in full by reference as if fully
          restated herein in its entirety. 

           (b)       
          No Default or Event of Default and no event or condition which, with the giving
          of notice or lapse of time or both, would constitute such a Default or Event of
          Default, now exists or would exist. 

          	10. 	  	
               All obligations in connection with the Agreement are and shall continue to be
               (i) secured by the collateral referenced in the Agreement and more fully
               described in one or more pledge agreements in favor of the Bank and (ii)
               guaranteed by the Guarantors referenced in the Agreement pursuant to Guarantees
               in favor of the Bank. 

               

          	11. 	  	
               By their execution of this amendment in the space provided below, each of the
               guarantors indicated below hereby consent to this Fourth Amendment and reaffirm
               their continuing liability under their respective guarantees, in respect of the
               Agreement as amended hereby and all the documents, instruments and agreements
               executed pursuant thereto or in connection therewith, without offset, defense or
               counterclaim (any such offset, defense or counterclaim as may exist being hereby
               irrevocably waived by such guarantors). 

               

          	12. 	  	
               The amendments set forth herein are limited precisely as written and shall not
               be deemed to (a) be a consent to or a waiver of any other term or condition of
               the Agreement or any of the documents referred to therein or (b) prejudice any
               right or rights which the Bank may now have or may have in the future under or
               in connection with the Agreement or any documents referred to therein. Whenever
               the Agreement is referred to in the Agreement or any of the instruments,
               agreements or other documents or papers executed 

               

-2- 

 

          	 	  	
and delivered in connection
               therewith, it shall be deemed to mean the Agreement as modified by this Fourth
               Amendment. 

               

          	13. 	  	
               This Fourth Amendment shall be effective as of the date first above written;
               provided that  this Fourth Amendment shall not be effective unless and
               until (i) the Bank shall have received counterparts of this Fourth Amendment
               duly signed by the Borrower and Guarantors, (ii) the Borrower shall have paid
               the Bank an administrative fee in connection with this Fourth Amendment, which
               fee is $2,500.00 and (iii) the Bank shall have received evidence of such proper
               corporate organization, existence, authority and appropriate corporate
               proceedings with respect to the Borrower and the matters addressed by this
               Fourth Amendment and the documents, instruments and agreements executed pursuant
               hereto or in connection herewith, and such other certificates, instruments, and
               documents as the Bank shall reasonably request. 

               

          	14. 	  	
               This Fourth Amendment may be executed by the parties hereto individually or in
               any combination, in one or more counterparts, each of which shall be an original
               and all of which shall together constitute one and the same agreement. 

               

        IN
WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed
and delivered by their respective duly authorized officers as of the date first above
written. 

          	 	MEDIS TECHNOLOGIES LTD.

	 
	 	By: /s/ HOWARD WEINGROW

	 	        Name:  Howard Weingrow
	 	        Title:
	 
	 
	 	FLEET NATIONAL BANK,
    a Bank of America company
	 
	 	By: /s/ TANITHA BOONYAM

	 	        Name:  Tanitha Boonyam
	 	        Title:    Vice President

               

 

-3-

        Each
of the guarantors indicated below hereby consent to this Fourth Amendment and reaffirm
their continuing liability under their respective guarantees in respect of the Agreement
as amended hereby and all the documents, instruments and agreements executed pursuant
thereto or in connection therewith, without offset, defense or counterclaim (any such
offset, defense or counterclaim as may exist being hereby irrevocably waived by such
guarantors). 

          	 	PLAZA HOTEL MANAGEMENT COMPANY

	 
	 	By: /s/ HOWARD WEINGROW

	 	        Name:  Howard Weingrow
	 	        Title: Partner
	 
	 
	 
	 	    /s/ HOWARD WEINGROW

	 	Howard Weingrow, Individually
	 
	 
	 
	 	    /s/ ROBERT LIFTON

	 	Robert Lifton, Individually

               

-4-WWW.EXFILE.COM -- 13053 -- MEDIS TECHNOLOGIES LTD. -- EXHIBIT 10.2 TO FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2004

MEDIS TECHNOLOGIES LTD.1999

STOCK OPTION PLAN 

     1.    
          Purpose of the Plan. 

        The
purpose of the Medis Technologies Ltd. 1999 Stock Option Plan (the “Plan”) is to
promote the interests of Medis Technologies Ltd., a Delaware corporation (the
“Company”), and its stockholders by strengthening the Company’s ability to
attract and retain competent employees, to make service on the Board of Directors of the
Company (the “Board”) more attractive to present and prospective non-employee
directors of the Company and to provide a means to encourage stock ownership and
proprietary interest in the Company by officers, non-employee directors and valued
employees and other individuals upon whose judgment, initiative and efforts the financial
success and growth of the Company largely depend. The Plan became effective on July 13,
1999, by resolution of the Board, subject to ratification of the Plan by a majority vote
of the stockholders of the Company by written consent. 

     2.    
          Stock Subject to the Plan. 

             (a)       
          The total number of shares of the authorized but unissued or treasury shares of
          Common Stock, $.01 par value per share, of the Company (“Common
          Stock”) for which options and stock appreciation rights (“SARs”)
          may be granted under the Plan shall be 3,800,000 subject to adjustment as
          provided in Section 14 hereof, which shares may be of any class of Common Stock;
          provided, however, that such number of shares may from time to time be reduced
          to the extent that a corresponding number of issued and outstanding shares of
          Common Stock are purchased by the Company and set aside for issue upon the
          exercise of options. 

             (b)       
          If an option granted or assumed hereunder shall expire or terminate for any
          reason without having been exercised in full, the unpurchased shares subject
          thereto shall again be available for subsequent option grants under the Plan;
          provided, however, that shares as to which an option has been surrendered in
          connection with the exercise of a related SAR will not again be available for
          subsequent option or SAR grants under the Plan. 

             (c)       
          Stock issuable upon exercise of an option or SAR granted under the Plan may be
          subject to such restrictions on transfer, repurchase rights or other
          restrictions as shall be determined by the Board. 

     3.    
          Administration of the Plan. 

        The
Plan shall be administered by the Board. No member of the Board shall act upon any matter
exclusively affecting an option or SAR granted or to be granted to himself or herself
under the Plan. A majority of the members of the Board shall constitute a quorum, and any
action may be taken by a majority of those present and voting at any meeting. The decision
of the Board as to all questions of interpretation and application of the Plan shall be
final, binding and conclusive on all persons. The Board may, in its sole discretion, grant
options to purchase shares of Common Stock, grant SARs and issue shares upon exercise of
such options and SARs, as provided in the Plan. The Board shall have authority, subject to
the express provisions of the Plan, to construe the respective option and SAR agreements
and the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan,
to determine the terms and provisions of the respective option and SAR agreements, which
may but need not be identical, and to make all 

other determinations in the judgment of the
Board necessary or desirable for the administration of the Plan. The Board may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in any option
or SAR agreement in the manner and to the extent it shall deem expedient to carry the Plan
into effect and shall be the sole and final judge of such expediency. No director shall be
liable for any action or determination made in good faith. The Board may, in its
discretion, delegate its power, duties and responsibilities to a committee, consisting of
two or more members of the Board, all of whom are “Non-Employee Directors” (as
hereinafter defined). If a committee is so appointed, all references to the Board herein
shall mean and relate to such committee, unless the context otherwise requires. For the
purposes of the Plan, a director or member of such committee shall be deemed to be a
“Non-Employee Director” only if such person qualified as a “Non-Employee
Director” within the meaning of paragraph (b)(3)(i) of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as such
term is interpreted from time to time. 

     4.    
          Type of Options. 

        Options
granted pursuant to the Plan shall be authorized by action of the Board (or a committee
designated by the Board) and may be designated as either incentive stock options meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”), or non-qualified options which are not intended to meet the
requirements of Section 422 of the Code, the designation to be in the sole discretion of
the Board. Options designated as incentive stock options that fail to continue to meet the
requirements of Section 422 of the Code shall be redesignated as non-qualified options
automatically on the date of such failure to continue to meet the requirements of Section
422 of the Code without further action by the Board. 

     5.    
          Eligibility. 

        Options
designated as incentive stock options may be granted only to officers and key employees of
the Company or of any subsidiary corporation (herein called “subsidiary” or
“subsidiaries”), as defined in Section 424 of the Code and the Treasury
Regulations promulgated thereunder (the “Regulations”). Directors who are not
otherwise employees of the Company or a subsidiary shall not be eligible to be granted
incentive stock options pursuant to the Plan. SARs and options designated as non-qualified
options may be granted to (i) officers and key employees of the Company or of any of its
subsidiaries, or (ii) agents and directors of and consultants to the Company, whether or
not otherwise employees of the Company. 

        In
determining the eligibility of an individual to be granted an option or SAR, as well as in
determining the number of shares to be optioned to any individual, the Board shall take
into account the recommendation of the Company’s President, the position and
responsibilities of the individual being considered, the nature and value to the Company
or its subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and such other
factors as the Board may deem relevant. 

     6.    
          Restrictions on Incentive Stock Options. 

        Incentive
stock options (but not non-qualified options) granted under this Plan shall be subject to
the following restrictions: 

-2- 

             (a)       
          Limitation on Number of Shares. The aggregate fair market value of the shares of
          Common Stock with respect to which incentive stock options are granted,
          determined as of the date the incentive stock options are granted, exercisable
          for the first time by an individual during any calendar year shall not exceed
          $100,000. If an incentive stock option is granted pursuant to which the
          aggregate fair market value of shares with respect to which it first becomes
          exercisable in any calendar year by an individual exceeds such $100,000
          limitation, the portion of such option which is in excess of the $100,000
          limitation, and any such options issued subsequently in the same calendar year,
          shall be treated as a non-qualified option pursuant to section 422(d)(1) of the
          Code. In the event that an individual is eligible to participate in any other
          stock option plan of the Company or any parent or subsidiary of the Company
          which is also intended to comply with the provisions of Section 422 of the Code,
          such $100,000 limitation shall apply to the aggregate number of shares for which
          incentive stock options may be granted under this Plan and all such other plans. 

             (b)       
          Ten Percent (10%) Stockholder. If any employee to whom an incentive stock option
          is granted pursuant to the provisions of this Plan is on the date of grant the
          owner of stock (as determined under Section 424(d) of the Code) possessing more
          than 10% of the total combined voting power of all classes of stock of the
          Company or any parent or subsidiary of the Company, then the following special
          provisions shall be applicable to the incentive stock options granted to such
          individual: 

                 (i)       
          The option price per share subject to such incentive stock options shall be not
          less than 110% of the fair market value of the stock determined at the time such
          option was granted. In determining the fair market value under this clause (i),
          the provisions of Section 8 hereof shall apply. 

                 (ii)       
          The incentive stock option shall have a term expiring not more than five (5)
          years from the date of the granting thereof. 

     7.    
          Option Agreement. 

        Each
option and SAR shall be evidenced by an agreement (the “Agreement”) duly
executed on behalf of the Company and by the grantee to whom such option or SAR is
granted, which Agreement shall comply with and be subject to the terms and conditions of
the Plan. The Agreement may contain such other terms, provisions and conditions which are
not inconsistent with the Plan as may be determined by the Board, provided that options
designated as incentive stock options shall meet all of the conditions for incentive stock
options as defined in Section 422 of the Code. No option or SAR shall be granted within
the meaning of the Plan and no purported grant of any option or SAR shall be effective
until the Agreement shall have been duly executed on behalf of the Company and the
optionee. More than one option and SAR may be granted to an individual. 

     8.    
          Option Price. 

             (a)       
          The option price or prices of shares of Common Stock for options designated as
          non-qualified stock options shall be as determined by the Board. 

             (b)       
          Subject to the conditions set forth in Section 6(b) hereof, the option price or
          prices of shares of Common Stock for options designated as incentive stock
          options shall be at least the fair market value of such Common Stock at the time
          the option is granted as determined by the Board in accordance with clause (c)
          below. 

-3- 

             (c)       
          If the Common Stock is then listed on any national securities exchange, the fair
          market value shall be the mean between the high and low sales prices, if any, on
          the largest such exchange on the date of the grant of the option or, if none,
          shall be determined by taking a weighted average of the means between the
          highest and lowest sales on the nearest date before and the nearest date after
          the date of grant in accordance with Regulations Section 25.2512-2. If the
          Common Stock is not then listed on any such exchange, the fair market value
          shall be the mean between the closing “Bid” and the closing
          “Ask” prices, if any, as reported in the National Association of
          Securities Dealers Automated Quotation System (“NASDAQ”) for the date
          of the grant of the option, or, if none, shall be determined by taking a
          weighted average of the means between the highest and lowest sales on the
          nearest date before and the nearest date after the date of grant in accordance
          with Regulations Section 25.2512-2. If the Common Stock is not then either
          listed on any such exchange or quoted in NASDAQ, the fair market value shall be
          the mean between the average of the “Bid” prices, if any, as reported
          in the National Daily Quotation Service for the date of the grant of the option,
          or, if none, shall be determined by taking a weighted average of the means
          between the highest and lowest sales on the nearest date before and the nearest
          date after the date of grant in accordance with Regulations Section 25.2512-2.
          If the fair market value of the Common Stock cannot be determined under the
          preceding three sentences, it shall be determined in good faith by the Board in
          accordance with the Regulations promulgated under Section 422 of the Code. 

     9.    
          Manner of Payment; Manner of Exercise. 

             (a)       
          Options granted under the Plan may provide for the payment of the exercise price
          by delivery of (i) cash or a check payable to the order of the Company in an
          amount equal to the exercise price of such options, (ii) shares of Common Stock
          owned by the optionee having a fair market value equal in amount to the exercise
          price of such options, or (iii) any combination of (i) and (ii); provided,
          however, that payment of the exercise price by delivery of shares of Common
          Stock owned by such optionee may be made only upon the condition that such
          payment does not result in a charge to earnings for financial accounting
          purposes as determined by the Board, unless such condition is waived by the
          Board. The fair market value of any shares of Common Stock which may be
          delivered upon exercise of an option shall be determined by the Board in
          accordance with Section 8 hereof. 

             (b)       
          To the extent that the right to purchase shares under an option has accrued and
          is in effect, options may be exercised in full at one time or in part from time
          to time, by giving written notice, signed by the person or persons exercising
          the option, to the Company, stating the number of shares with respect to which
          the option is being exercised, accompanied by payment in full for such shares as
          provided in subparagraph (a) above. Upon such exercise, delivery of a
          certificate for paid-up non-assessable shares shall be made at the principal
          office of the Company to the person or persons exercising the option at such
          time, during ordinary business hours, after three (3) days but not more than
          ninety (90) days from the date of receipt of the notice by the Company, as shall
          be designated in such notice, or at such time, place and manner as may be agreed
          upon by the Company and the person or persons exercising the option. 

-4- 

     10.   
          Exercise of Options and SARs. 

        Each
option and SAR granted under the Plan shall, subject to Section 11(b) and Section 13
hereof, be exercisable at such time or times and during such period as shall be set forth
in the Agreement; provided, however, that no option or SAR granted under the Plan shall
have a term in excess of ten (10) years from the date of grant. To the extent that an
option or SAR is not exercised when it becomes initially exercisable, it shall not expire
but shall be carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less than one
hundred (100) full shares of Common Stock. The exercise of an option shall result in the
cancellation of the SAR to which it relates with respect to the same number of shares of
Common Stock as to which the option was exercised. 

     11.   
          Term of Options and SARs; Exercisability. 

             (a)       
          Term. 

                 (i)       
          Each option shall expire not more than ten (10) years from the date of the
          granting thereof, except as (a) otherwise provided pursuant to the provisions of
          Section 6(b) hereof, and (b) earlier termination as herein provided. 

                 (ii)       
          Except as otherwise provided in this Section 11, an option or SAR granted to any
          grantee who ceases to perform services for the Company or one of its
          subsidiaries shall terminate three months after the date such grantee ceases to
          perform services for the Company or one of its subsidiaries, or on the date on
          which the option or SAR expires by its terms, whichever occurs first. 

                 (iii)       
          If the grantee ceases to perform services for the Company because of dismissal
          for cause or because the grantee is in breach of any employment agreement, such
          option or SAR will terminate on the date the grantee ceases to perform services
          for the Company or one of its subsidiaries. 

                 (iv)       
          If the grantee ceases to perform services for the Company because the grantee
          has become permanently disabled (within the meaning of Section 22(e)(3) of the
          Code), such option or SAR shall terminate twelve months after the date such
          grantee ceases to perform services for the Company, or on the date on which the
          option or SAR expires by its terms, whichever occurs first. 

                 (v)       
          In the event of the death of any grantee, any option or SAR granted to such
          grantee shall terminate twelve months after the date of death, or on the date on
          which the option or SAR expires by its terms, whichever occurs first. 

          (b)       
Exercisability. 

                 (i)       
          Except as provided below, an option or SAR granted to a grantee who ceases to
          perform services for the Company or one of its subsidiaries shall be exercisable
          only to the extent that such option or SAR has accrued and is in effect on the
          date such grantee ceases to perform services for the Company or one of its
          subsidiaries. 

-5- 

                 (ii)       
          An option or SAR granted to a grantee who ceases to perform services for the
          Company or one of its subsidiaries because he or she has become permanently
          disabled (as defined above) shall be exercisable with respect to the full number
          of shares covered thereby, whether or not under the provisions of Section 10
          hereof the grantee was entitled to do so at the date he or she became
          permanently disabled, and may be exercised by a legal representative on behalf
          of the grantee. 

                 (iii)       
          In the event of the death of any grantee, the option or SAR granted to such
          grantee may be exercised with respect to the full number of shares covered
          thereby, whether or not under the provisions of Section 10 hereof the grantee
          was entitled to do so at the date of his or her death, by the estate of such
          grantee, or by any person or persons who acquired the right to exercise such
          option or SAR by bequest or inheritance or by reason of the death of such
          grantee. 

     12.   
          Options Not Transferable. 

        The
right of any grantee to exercise any option or SAR granted to him or her shall not be
assignable or transferable by such grantee other than by will or the laws of decent, and
any such option or SAR shall be exercisable during the lifetime of such grantee only by
him or her; provided, that the Board may, in its sole discretion from time to time, permit
a grantee, by expressly so providing in the related Agreement or in an amendment thereto,
to assign or transfer, without consideration (and only without consideration), any option
or SAR granted to him or her to such grantee’s children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, former spouse, siblings, nieces, nephews,
mother-in-law, father-in-law, sons-in-law, daughters-in-law, brothers-in-law, or
sisters-in-law, including adoptive relationships, any persons sharing the grantee’s
household (other than tenants or employees), to trusts in which such persons have more
than fifty percent (50%) of the beneficial interest, a foundation in which such persons
(or the grantee) controls the management of the assets, and any other entity in which such
persons (or the grantee) own more than fifty percent (50%) of the voting interests. Any
option or SAR granted under the Plan shall be null and void and without effect upon the
bankruptcy of the grantee to whom the option is granted, or upon any attempted assignment
or transfer except as herein provided, including without limitation, any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or other
disposition, attachment, trustee process or similar process, whether legal or equitable,
upon such option or SAR. 

     13.   
          Terms and Conditions of SARs. 

             (a)       
          An SAR may be granted separately or in connection with an option (either at the
          time of grant or at any time during the term of the option). 

             (b)       
          The exercise of an SAR granted in connection with an option shall result in the
          cancellation of the option to which it relates with respect to the same number
          of shares of Common Stock as to which the SAR was exercised. 

             (c)       
          An SAR granted in connection with an option shall be exercisable or transferable
          only to the extent that such related option is exercisable or transferable. 

             (d)       
          Upon the exercise of an SAR related to an option, the holder will be entitled to
          receive payment of an amount determined by multiplying: 

-6- 

                 (i)       
          the difference obtained by subtracting the purchase price of a share of Common
          Stock specified in the related option from the fair market value of a share of
          Common Stock on the date of exercise of such SAR (as determined by the Board in
          accordance with Section 8 hereof), by 

                 (ii)       
          the number of shares as to which such SAR is exercised. 

             (e)       
          An SAR granted without relationship to an option shall be exercisable as
          determined by the Board, but in no event after ten years from the date of grant. 

             (f)       
          An SAR granted without relationship to an option will entitle the holder, upon
          exercise of the SAR, to receive payment of an amount determined by multiplying: 

                 (i)       
          the difference obtained by subtracting the fair market value of a share of
          Common Stock on the date the SAR was granted from the fair market value of a
          share of Common Stock on the date of exercise of such SAR (as determined by the
          Board in accordance with Section 8 hereof), by 

                 (ii)       
          the number of shares as to which such SAR is exercised. 

             (g)       
          Notwithstanding subsections (d) and (f) above, the Board may limit the amount
          payable upon exercise of an SAR. Any such limitation shall be determined as of
          the date of grant and noted on the instrument evidencing the SAR granted. 

             (h)       
          At the discretion of the Board, payment of the amount determined under
          subsections (d) and (f) above may be made either in whole shares of Common Stock
          valued at their fair market value on the date of exercise of the SAR (as
          determined by the Board in accordance with Section 8 hereof), or solely in cash,
          or in a combination of cash and shares. If the Board decides to make full
          payment in shares of Common Stock and the amount payable results in a fractional
          share, payment for the fractional share shall be made in cash. 

             (i)       
          Neither an SAR nor an option granted in connection with an SAR granted to a
          person subject to Section 16(b) of the Exchange Act may be exercised before six
          months after the date of grant. 

     14.   
          Recapitalization, Reorganization and the Like. 

        In
the event that the outstanding shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company or of another
corporation by reason of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, or dividends payable in capital
stock, appropriate adjustment shall be made in accordance with Section 424(a) of the Code
in the number and kind of shares as to which options and SARs may be granted under the
Plan and as to which outstanding options and SARs or portions thereof then unexercised
shall be exercisable, to the end that the proportionate interest of the grantee shall be
maintained as before the occurrence of such event; such adjustment in outstanding options
and SARs shall be made without change in the total price applicable to the unexercised
portion of such options and SARs and with a corresponding adjustment in the exercise price
per share. 

-7- 

        In
addition, unless otherwise determined by the Board in its sole discretion, in the case of
any (i) sale or conveyance to another entity of all or substantially all of the property
and assets of the Company or (ii) Change in Control (as hereinafter defined) of the
Company, the purchaser(s) of the Company’s assets or stock may, in his, her or its
discretion, deliver to the optionee the same kind of consideration that is delivered to
the stockholders of the Company as a result of such sale, conveyance or Change in Control,
or the Board may cancel all outstanding options and SARs in exchange for consideration in
cash or in kind which consideration in both cases shall be equal in value to the value of
those shares of stock or other securities the optionee would have received had the option
been exercised (to the extent then exercisable) and no disposition of the shares acquired
upon such exercise been made prior to such sale, conveyance or Change in Control, less the
exercise price therefor. Upon receipt of such consideration, the options and SARs shall
immediately terminate and be of no further force and effect. The value of the stock or
other securities the grantee would have received if the option had been exercised shall be
determined in good faith by the Board, and in the case of shares of Common Stock, in
accordance with the provisions of Section 8 hereof. 

        The
Board shall also have the power and right to accelerate the exercisability of any options
or SARs, notwithstanding any limitations in this Plan or in the Agreement upon such a
sale, conveyance or Change in Control. Upon such acceleration, any options or portion
thereof originally designated as incentive stock options that no longer qualify as
incentive stock options under Section 422 of the Code as a result of such acceleration
shall be redesignated as non-qualified stock options. 

        A
“Change in Control” shall be deemed to have occurred if any person, or any two
or more persons acting as a group, and all affiliates of such person or persons, who prior
to such time owned less than fifty percent (50%) of the then outstanding Common Stock,
shall acquire such additional shares of Common Stock in one or more transactions, or
series of transactions, such that following such transaction or transactions, such person
or group and affiliates beneficially own fifty percent (50%) or more of the Common Stock
outstanding. 

        If
by reason of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation, the Board shall authorize the issuance or
assumption of a stock option or stock options in a transaction to which Section 424(a) of
the Code applies, then, notwithstanding any other provision of the Plan, the Board may
grant an option or options upon such terms and conditions as it may deem appropriate for
the purpose of assumption of the old option, or substitution of a new option for the old
option, in conformity with the provisions of such Section 424(a) of the Code and the
Regulations thereunder, and any such option shall not reduce the number of shares
otherwise available for issuance under the Plan. 

        No
fraction of a share shall be purchasable or deliverable upon the exercise of any option or
SAR, but in the event any adjustment hereunder in the number of shares covered by the
option or SAR shall cause such number to include a fraction of a share, such fraction
shall be adjusted to the nearest smaller whole number of shares. 

     15.   
          No Special Employment Rights. 

        Nothing
contained in the Plan or in any option or SAR granted under the Plan shall confer upon any
grantee any right with respect to the continuation of his or her employment by 

-8- 

the Company
(or any subsidiary) or interfere in any way with the right of the Company (or any
subsidiary), subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such employment or to increase or decrease the compensation of the
grantee from the rate in existence at the time of the grant of an option or SAR. Whether
an authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined in accordance with Regulations
Section 1.421-7(h)(2). 

16.    Withholding. 

        The
Company’s obligation to deliver shares upon the exercise of any non-qualified option
or SAR granted under the Plan shall be subject to the option holder’s satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements. The Company and optionee may agree to withhold shares of Common Stock
purchased upon exercise of an option or SAR to satisfy the above-mentioned withholding
requirements; provided, however, that no such agreement may be made by a grantee who is an
“officer” or “director” within the meaning of Section 16 of the
Exchange Act, except pursuant to a standing election to so withhold shares of Common Stock
purchased upon exercise of an option, such election to be made not less than six months
prior to such exercise and which election may be revoked only upon six months prior
written notice. 

     17.   
          Restrictions on Issuance of Shares. 

             (a)       
          Notwithstanding the provisions of Section 9 hereof, the Company may delay the
          issuance of shares covered by the exercise of an option or SAR and the delivery
          of a certificate for such shares until one of the following conditions shall be
          satisfied: 

                 (i)       
          The shares with respect to which such option or SAR has been exercised are at
          the time of the issue of such shares effectively registered or qualified under
          applicable Federal and state securities acts now in force or as hereafter
          amended; or 

                 (ii)       
          Counsel for the Company shall have given an opinion, which opinion shall not be
          unreasonably conditioned or withheld, that such shares are exempt from
          registration and qualification under applicable Federal and state securities
          acts now in force or as hereafter amended. 

             (b)       
          It is intended that all exercises of options and SARs shall be effective, and
          the Company shall use its best efforts to bring about compliance with the above
          conditions, within a reasonable time, except that the Company shall be under no
          obligation to qualify shares or to cause a registration statement or a
          post-effective amendment to any registration statement to be prepared for the
          purpose of covering the issue of shares in respect of which any option may be
          exercised, except as otherwise agreed to by the Company in writing. 

     18.   
          Purchase for Investment; Rights of Holder on Subsequent Registration. 

        Unless
the shares to be issued upon exercise of an option or SAR granted under the Plan have been
effectively registered under the Securities Act of 1933, as amended (the “1933
Act”), the Company shall be under no obligation to issue any shares covered by any
option or SAR unless the person who exercises such option, in whole or in part, shall give
a written representation and undertaking to the Company which is satisfactory in form and
scope to 

-9- 

counsel for the Company and upon which, in the opinion of such counsel, the
Company may reasonably rely, that he or she is acquiring the shares issued pursuant to
such exercise of the option or SAR for his or her own account as an investment and not
with a view to, or for sale in connection with, the distribution of any such shares, and
that he or she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the 1933 Act, or any other
applicable law, and that if shares are issued without such registration, a legend to this
effect may be endorsed upon the securities so issued. 

        In
the event that the Company shall, nevertheless, deem it necessary or desirable to register
under the 1933 Act or other applicable statutes any shares with respect to which an option
or SAR shall have been exercised, or to qualify any such shares for exemption from the
1933 Act or other applicable statutes, then the Company may take such action and may
require from each grantee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary prospectus or
offering circular as is reasonably necessary for such purpose and may require reasonable
indemnity to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information so
furnished and caused by any untrue statement of any material fact therein or caused by the
omission to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which they were
made. 

     19.   
          Loans. 

        At
the discretion of the Board, the Company may loan to the optionee some or all of the
purchase price of the shares acquired upon exercise of an option granted under the Plan. 

     20.   
          Modification of Outstanding Options and SARs. 

        Subject
to limitations contained herein, the Board may authorize the amendment of any outstanding
option or SAR with the consent of the grantee when and subject to such conditions as are
deemed to be in the best interests of the Company and in accordance with the purposes of
the Plan. 

     21.   
          Termination and Amendment of Plan. 

        Unless
sooner terminated as herein provided, the Plan shall terminate on June 30, 2009. The Board
may at any time terminate the Plan or make such modification or amendment thereof as it
deems advisable; provided, however, that (i) the Board may not, without approval by a
majority vote of the stockholders of the Company, increase the maximum number of shares
for which options and SARs may be granted or change the designation of the class of
persons eligible to receive options and SARs under the Plan, and (ii) any such
modification or amendment of the Plan shall be approved by a majority vote of the
stockholders of the Company to the extent that such stockholder approval is necessary to
comply with applicable provisions of the Code, rules promulgated pursuant to Section 16 of
the Exchange Act, applicable state law, or applicable National Association of Securities
Dealers, Inc. or exchange listing requirements. Termination or any modification or
amendment of the Plan shall not, without the consent of an optionee, affect his or her
rights under an option or SAR theretofore granted to him or her. 

-10- 

     22.   
          Limitation of Rights in the Underlying Shares. 

        A
holder of an option or SAR shall not be deemed for any purpose to be a stockholder of the
Company with respect to such option or SAR except to the extent that such option or SAR
shall have been exercised with respect thereto and, in addition, a stock certificate shall
have been issued theretofore and delivered to the holder. 

     23.   
          Notices. 

        Any
communication or notice required or permitted to be given under the Plan shall be in
writing, and mailed by registered or certified mail or delivered by hand, if to the
Company, to its principal place of business, attention: Chairman, and, if to the holder of
an option or SAR, to the address as appearing on the records of the Company. 

-11- 

MEDIS
TECHNOLOGIES LTD. 

APPENDIX
A—ISRAEL 

TO THE 1999 STOCK
OPTION PLAN 

1.     GENERAL 

     1.1.    
          This appendix (the “Appendix”) shall apply only to Optionees (as
          defined below) who are residents of the state of Israel or those who are deemed
          to be residents of the state of Israel for the payment of tax. The provisions
          specified hereunder shall form an integral part of Medis Technologies Ltd.
          1999 Stock Option Plan (the “Plan”), which applies to the issuance of
          shares and Options (as defined below) to purchase shares of Common Stock (the
          “Shares”) of Medis Technologies Ltd. (the “Company”). 

     1.2.    
          This Appendix is effective with respect to shares and Options granted as of
          January 1, 2003 and shall comply with Amendment no. 132 of the Israeli
          Tax Ordinance. 

     1.3.    
          This Appendix is to be read as a continuation of the Plan and only modifies
          shares and Options granted to Israeli Optionees so that they comply with the
          requirements set by the Israeli law in general, and in particular with the
          provisions of Section 102 (as specified herein), as may be amended or
          replaced from time to time. For the avoidance of doubt, this Appendix does not
          add to or modify the Plan in respect of any other category of Optionees. 

     1.4.    
          The Plan and this Appendix are complimentary to each other and shall be deemed
          as one. 

     1.5.    
          Any capitalized terms not specifically defined in this Appendix shall be
          construed according to the interpretation given to it in the Plan. 

2.     DEFINITIONS 

     2.1.    
          “Affiliate” means any “employing company” within the meaning
          of Section 102(a) of the Ordinance. 

     2.2.    
          “Approved 102 Option” means an Option granted pursuant to
          Section 102(b) of the Ordinance and held in trust by a Trustee for the
          benefit of the Optionee. 

     2.3.    
          “Capital Gain Option” or “CGO” means an Approved 102 Option
          elected and designated by the Company to qualify under the capital gain tax
          treatment in accordance with the provisions of Section 102(b)(2) of the
          Ordinance. 

     2.4.    
          “Controlling Shareholder” shall have the meaning ascribed to it in
          Section 32(9) of the Ordinance. 

     2.5.    
          “Employee” means a person who is employed by the Company or its
          Affiliates, including an individual who is serving as a director or an office
          holder, but excluding any Controlling Shareholder. 

     2.6.    
          “ITA” means the Israeli Tax Authorities. 

-12- 

     2.7.    
          “Non-Employee” means a consultant, Controlling Shareholder or any
          other person who is not an Employee. 

     2.8.    
          “Ordinary Income Option” or “OIO” means an Approved 102
          Option elected and designated by the Company to qualify under the ordinary
          income tax treatment in accordance with the provisions of Section 102(b)(1)
          of the Ordinance. 

     2.9.    
          “102 Option” means any Option granted to Employees pursuant to
          Section 102 of the Ordinance. 

     2.10.    
          “3(i) Option” means an Option granted pursuant to
          Section 3(i) of the Ordinance to any person who is a Non- Employee. 

     2.11.    
          “Option” means an option to purchase one or more Shares of the Company
          pursuant to the Plan and the Appendix. 

     2.12.    
          “Optionee” means a person who receives or holds an Option or a share
          under the Plan. 

     2.13.    
          “Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961
          as now in effect or as hereafter amended. 

     2.14.    
          “Section 102” means section 102 of the Ordinance and any
          regulations, rules, orders or procedures promulgated thereunder as now in effect
          or as hereafter amended. 

     2.15.    
          “Trustee” means any individual appointed by the Company to serve as a
          trustee and approved by the ITA, all in accordance with the provisions of
          Section 102(a) of the Ordinance. 

     2.16.    
          “Unapproved 102 Option” means an Option granted pursuant to
          Section 102(c) of the Ordinance and not held in trust by a Trustee. 

3.     ISSUANCE OF OPTIONS 

     3.1.    
          Employees may only be granted 102 Options; and (ii) Non-Employees and/or
          Controlling Shareholders may only be granted 3(i) Options. 

     3.2.    
          The Company may designate Options granted to Employees pursuant to
          Section 102 as Unapproved 102 Options or Approved 102 Options. 

     3.3.    
          The grant of Approved 102 Options shall be made under this Appendix adopted by
          the Board, and shall be conditioned upon the approval of this Appendix by the
          ITA. 

     3.4.    
          Approved 102 Options may either be classified as Capital Gain Options
          (“CGOs”) or Ordinary Income Options (“OIOs”). 

     3.5.    
          No Approved 102 Options may be granted under this Appendix to any eligible
          Employee, unless and until, the Company’s election of the type of Approved
          102 Options as CGO or OIO granted to Employees (the “Election”), is
          appropriately filed with the ITA. Such Election shall become effective beginning
          the first date of grant of an Approved 102 Option under this Appendix and shall
          remain in effect until the end of the year following the year during which the
          Company first granted Approved 102 Options. The Election shall obligate the
          Company to grant

-13- 

only the type of Approved 102 Option it has elected, and shall
          apply to all Optionees who were granted Approved 102 Options during the period
          indicated herein, all in accordance with the provisions of Section 102(g)
          of the Ordinance. For the avoidance of doubt, such Election shall not prevent
          the Company from granting Unapproved 102 Options simultaneously. 

     3.6.    
          All Approved 102 Options must be held in trust by a Trustee, as described in
          Section 4 below. 

     3.7.    
          For the avoidance of doubt, the designation of Unapproved 102 Options and
          Approved 102 Options shall be subject to the terms and conditions set forth in
          Section 102. 

4.     TRUSTEE 

     4.1.    
          Approved 102 Options which shall be granted under this Appendix and/or any
          Shares allocated or issued upon exercise of such Approved 102 Options and/or
          other shares received subsequently following any realization of rights,
          including without limitation bonus shares, shall be allocated or issued to the
          Trustee and held for the benefit of the Optionees for such period of time as
          required by Section 102 or any regulations, rules or orders or procedures
          promulgated thereunder (the “Holding Period”). In the case the
          requirements for Approved 102 Options are not met, then the Approved 102 Options
          may be regarded as Unapproved 102 Options, all in accordance with the provisions
          of Section 102. 

     4.2.    
          Notwithstanding anything to the contrary, the Trustee shall not release any
          Shares allocated or issued upon exercise of Approved 102 Options prior to the
          full payment of the Optionee’s tax liabilities arising from Approved 102
          Options which were granted to him and/or any Shares allocated or issued upon
          exercise of such Options. 

     4.3.    
          With respect to any Approved 102 Option, subject to the provisions of
          Section 102 and any rules or regulation or orders or procedures promulgated
          thereunder, an Optionee shall not be entitled to sell or release from trust any
          Share received upon the exercise of an Approved 102 Option and/or any share
          received subsequently following any realization of rights, including without
          limitation, bonus shares, until the lapse of the Holding Period required under
          Section 102 of the Ordinance. Notwithstanding the above, if any such sale
          or release occurs during the Holding Period, the sanctions under
          Section 102 of the Ordinance and under any rules or regulation or orders or
          procedures promulgated thereunder shall apply to and shall be borne by such
          Optionee. 

     4.4.    
          Upon receipt of Approved 102 Option, the Optionee will sign an undertaking to
          release the Trustee from any liability in respect of any action or decision duly
          taken and bona fide executed in relation with this Appendix, or any Approved 102
          Option or Share granted to him thereunder. 

5.     THE
OPTIONS 

        The
terms and conditions upon which the Options shall be issued and exercised, shall be as
specified in the Agreement to be executed pursuant to the Plan and to this Appendix. Each
Agreement shall state, inter alia, the number of Shares to which the Option relates, the
type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a
3(i) Option), the vesting dates and the exercise price. 

-14- 

6.     FAIR MARKET VALUE FOR TAX PURPOSE 

        With
respect to CGOs, without derogating from Section 8 of the Plan and solely for the
purpose of determining the tax liability pursuant to Section 102(b)(3) of the
Ordinance, if at the Date of Grant the Company’s Shares are listed on any established
stock exchange or a national market system or if the Company’s Shares will be
registered for trading within ninety (90) days following the Date of Grant, the Fair
Market Value of the Shares at the Date of Grant shall be determined in accordance with the
average value of the closing sales price of the Company’s Shares on the thirty
(30) trading days preceding the Date of Grant or on the thirty (30) trading days
following the date of registration for trading, as the case may be. 

7.     ASSIGNABILITY AND SALE OF OPTIONS 

        Subject
to the provisions of Section 12 of the Plan, as long as Options or Shares purchased
pursuant thereto are held by the Trustee on behalf of the Optionee, all rights of the
Optionee over the Shares are personal, and may only be transferred, assigned, pledged or
mortgaged, in accordance with the provisions of Section 102. 

8.     INTEGRATION OF SECTION 102 AND TAX ASSESSING OFFICER'S PERMIT 

     8.1.    
          With regards to Approved 102 Options, the provisions of the Plan and/or the
          Appendix and/or the Agreement shall be subject to the provisions of
          Section 102 and the Tax Assessing Officer’s permit, and the said
          provisions and permit shall be deemed an integral part of the Plan and of the
          Appendix and of the Agreement. 

     8.2.    
          Any provision of Section 102 and/or the said permit which is necessary in
          order to receive and/or to keep any tax benefit pursuant to Section 102,
          which is not expressly specified in the Plan or the Appendix or the Agreement,
          shall be considered binding upon the Company and the Optionees. 

9.     DIVIDEND 

                The
Optionee shall be entitled to receive dividends, if such are distributed by the Company,
with respect to all Shares (but excluding, for avoidance of any doubt, any unexercised
Options) allocated or issued upon the exercise of Options, subject to the withholding of
taxes as required under Section 102. 

10.   TAX
CONSEQUENCES 

     10.1.    
          Any tax consequences arising from the grant or exercise of any Option, from the
          payment for Shares covered thereby or from any other event or act (of the
          Company, and/or its Affiliates, and the Trustee or the Optionee), hereunder,
          shall be borne solely by the Optionee. The Company and/or its Affiliates, and/or
          the Trustee shall withhold taxes according to the requirements under the
          applicable laws, rules, and regulations, including withholding taxes at source.
          Furthermore, the Optionee shall agree to indemnify the Company and/or its
          Affiliates and/or the Trustee and hold them harmless against and from any and
          all liability for any such tax or interest or penalty thereon, including without
          limitation, liabilities relating to the necessity to withhold, or to have
          withheld, any such tax from any payment made to the Optionee. 

-15- 

     10.2.    
          The Company and/or, when applicable, the Trustee shall not be required to
          release any share certificate to any Optionee until all required payments have
          been fully made. 

     10.3.    
          With respect to Unapproved 102 Option, if the Optionee ceases to be employed by
          the Company or any Affiliate, the Optionee shall extend to the Company and/or
          its Affiliate a security or guarantee for the payment of tax due at the time of
          sale of Shares, all in accordance with the provisions of Section 102 and
          the rules, regulation or orders promulgated thereunder. 

-16- 

FORM OF STOCK OPTION
AGREEMENT FOR OFFICERS AND EMPLOYEES 

MEDIS TECHNOLOGIES LTD.
1999 STOCK OPTION PLAN  

STOCK OPTION AGREEMENT 

    AGREEMENT, dated
as of ________,200_, between Medis Technologies Ltd., a Delaware corporation (the
“Company”), and __________ (the “Optionee”). 

        W
I T N E S S E T H: 

    WHEREAS, as
of July 13, 1999, the Board of Directors of the Company (the “Board”) adopted
the Medis Technologies Ltd. 1999 Stock Option Plan (the “Plan”), as amended on
June 21, 2001, June 12, 2002, June 24, 2003 and June 30, 2004, which Plan authorizes the
grant of options to purchase shares of common stock, $.01 par value (“Common
Stock”), of the Company to directors, officers and employees of the Company and to
other individuals; and 

    WHEREAS,
the Board has determined that it would be in the best interests of the Company to grant
the option documented herein. 

    NOW,
THEREFORE, the parties hereto hereby agree as follows: 

         1.       
          Grant of Option. Subject to the terms and conditions of the Plan and as
          set forth herein, the Company hereby grants to the Optionee, as of date hereof,
          an option (the “Option”) to purchase from the Company all or any part
          of an aggregate number of ______ shares of Common Stock (the “Optioned
          Shares”) 

         2.       
          Installment Exercise. Subject to such further limitations as are provided
          in the Plan and as set forth herein, the Option shall become exercisable at a
          per share price of $____ (“Option Price”), the Optionee having the
          right hereunder to purchase from the Company the indicated number of Optioned
          Shares upon exercise of the Option, on and after such dates, in cumulative
          fashion: 

                Exercise Date        Non-Qualified Optioned Shares
        Incentive Optioned Shares

        _______    
                       _______
           
                        _______

Only those Optioned Shares indicated
above as “Incentive Optioned Shares” are intended by the parties hereto to be,
and be treated as, “incentive stock options” (as such term is defined under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)). The
Option may not be exercised with respect to less than 100 Optioned Shares (or the Optioned
Shares then subject to purchase under the Option, if less than 100 shares) or for any
fractional shares. 

         3.       
          Termination of Option. (a) The Option, to the extent not previously
          exercised, shall terminate and become null and void on ____________ (the
          “Option Expiration”). 

-17- 

         (b)       
          Subject to the provisions of Section 4 hereof, and except as otherwise provided
          in this Section 3, upon the Optionee’s ceasing for any reason to be
          employed by the Company (such occurrence being a “termination of the
          Optionee’s employment”), the Option, to the extent not previously
          exercised, shall terminate and become null and void three months after such
          termination of the Optionee’s employment, or upon the Option Expiration,
          whichever occurs first. 

         (c)       
          Upon a termination of the Optionee’s employment for “cause” (as
          determined by the Board in its sole discretion), the Option, to the extent not
          previously exercised, shall terminate and become null and void immediately upon
          such termination of the Optionee’s employment. 

         (d)       
          Upon a termination of the Optionee’s employment by reason of permanent
          disability (within the meaning of Section 22(e)(3) of the Code) or by reason of
          the death of the Optionee, the Option, to the extent not previously exercised,
          shall terminate and become null and void twelve months after such termination of
          the Optionee’s employment, or upon the Option Expiration, whichever occurs
          first. 

         4.       
          Exercisability. (a) Except as otherwise provided in this Section 4, upon
          a termination of the Optionee’s employment, the Option shall be exercisable
          only to the extent that the Option has accrued and is in effect on the date of
          such termination of the Optionee’s employment. 

         (b)       
          Upon a termination of the Optionee’s employment by reason of permanent
          disability (as defined above) or by reason of the death of the Optionee, the
          Option shall immediately upon the date of such termination of the
          Optionee’s employment become exercisable with respect to the full number of
          Optioned Shares not previously exercised, whether or not under the provisions of
          Section 2 hereof the Optionee was entitled to do so on such date. To the extent
          exercisable, the Option may be exercised by a legal representative on behalf of
          the Optionee in the event of such permanent disability, or, in the case of the
          death of the Optionee, by the estate of the Optionee or by any person or persons
          who acquired the right to exercise the Option by bequest or inheritance or by
          reason of the death of the Optionee. 

         5.       
          Manner of Exercise. (a) The Option may be exercised in full at one time
          or in part from time to time for the number of Optioned Shares then exercisable
          by giving written notice, signed by the person exercising the Option, to the
          Company, stating the number of Optioned Shares with respect to which the Option
          is being exercised and the date of exercise thereof, which date shall be at
          least five days after the giving of such notice. 

         (b)       
          Full payment by the Optionee of the Option Price for the Optioned Shares
          purchased shall be made on or before the exercise date specified in the notice
          of exercise by delivery of (i) cash or a check payable to the order of the
          Company in an amount equal to such Option Price, (ii) shares of Common Stock
          owned by the Optionee having a fair market value equal in amount to such Option
          Price, or (iii) any combination of the preceding clauses (i) and (ii). 

         (c)       
          The Company shall be under no obligation to issue any Optioned Shares unless the
          person exercising the Option, in whole or in part, shall give a written
          representation and

-18- 

undertaking to the Company which is satisfactory in form and
          substance to counsel for the Company and upon which, in the opinion of such
          counsel, the Company may reasonably rely, that he or she is acquiring such
          Optioned Shares for his or her own account as an investment and not with a view
          to, or for sale in connection with, the distribution of any such Optioned
          Shares, and that he or she will make no transfer of the same except in
          compliance with any rules and regulations in force at the time of such transfer
          under the Securities Act of 1933, or any other applicable law. 

         (d)       
          Upon exercise of the Option in the manner prescribed by this Section 5, delivery
          of a certificate for the Optioned Shares then being purchased shall be made at
          the principal office of the Company to the person exercising the Option within a
          reasonable time after the date of exercise specified in the notice of exercise. 

         6.       
          Non-Transferability of Option. The Option shall not be assignable or
          transferable by the Optionee other than by will or the laws of descent, and
          shall be exercisable during the lifetime of the Optionee only by the Optionee.
          The Option shall terminate and become null and void immediately upon the
          bankruptcy of the Optionee, or upon any attempted assignment or transfer except
          as herein provided, including without limitation, any purported assignment,
          whether voluntary or by operation of law, pledge, hypothecation or other
          disposition, attachment, trustee process or similar process, whether legal or
          equitable, upon the Option. 

         7.       
          No Special Employment Rights. Neither the granting of the Option nor its
          exercise shall be construed to confer upon the Optionee any right with respect
          to the continuation of his or her employment by the Company (or any subsidiary
          of the Company) or interfere in any way with the right of the Company (or any
          subsidiary of the Company), subject to the terms of any separate employment
          agreement to the contrary, at any time to terminate such employment or to
          increase or decrease the compensation of the Optionee from the rate in existence
          as of the date hereof. 

         8.       
          No Rights of Stockholder. The Optionee shall not be deemed for any
          purpose to be a stockholder of the Company with respect to the Option except to
          the extent that the Option shall have been exercised with respect thereto and,
          in addition, a stock certificate shall have been issued theretofore and
          delivered to the Optionee. 

         9.       
          Amendment. Subject to the terms and conditions of the Plan, the Board or
          a committee appointed by the Board to administer the Plan (the
          “Committee”), whichever shall then have authority to administer the
          Plan, may amend this Agreement with the consent of the Optionee when and subject
          to such conditions as are deemed to be in the best interests of the Company and
          in accordance with the purposes of the Plan. 

         10.       
          Notices. Any communication or notice required or permitted to be given
          hereunder shall be in writing, and, if to the Company, to its principal place of
          business, attention: Secretary, and, if to the Optionee, to the address as
          appearing on the records of the Company. Such communication or notice shall be
          deemed given if and when (a) properly addressed and posted by registered or
          certified mail, postage prepaid, or (b) delivered by hand. 

         11.       
          Incorporation of Plan by Reference. The Option is granted pursuant to the
          terms of the Plan, the terms of which are incorporated herein by reference, and
          the Option shall in all

-19- 

respects be interpreted in accordance with the Plan. The
          Board or the Committee, whichever shall then have authority to administer the
          Plan, shall interpret and construe the Plan and this Agreement, and their
          interpretations and determinations shall be conclusive and binding upon the
          parties hereto and any other person claiming an interest hereunder, with respect
          to any issue arising hereunder or thereunder. 

         12.       
          Governing Law. The validity, construction and interpretation of this
          Agreement shall be governed by and determined in accordance with the laws of the
          State of New York. 

    IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date above
written.

          	 	MEDIS TECHNOLOGIES LTD.

	 
	 	By: 

	 	        Name:  
	 	        Title:
	 
	 
	 	OPTIONEE:
	 
	 	

	 	        Name:

               

-20- 

FORM OF STOCK OPTION
AGREEMENT FOR NON-EMPLOYEE DIRECTORS 

MEDIS TECHNOLOGIES LTD.
1999 STOCK OPTION PLAN 

STOCK OPTION AGREEMENT 

    AGREEMENT, dated
as of _________,200_, between Medis Technologies Ltd., a Delaware corporation (the
“Company”), and _____________ (the “Optionee”). 

    W
I T N E S S E T H: 

    WHEREAS, as
of July 13, 1999, the Board of Directors of the Company (the “Board”) adopted
the Medis Technologies Ltd. 1999 Stock Option Plan (the “Plan”), as amended on
June 21, 2001, June 12, 2002, June 24, 2003 and June 30, 2004, which Plan authorizes the
grant of options to purchase shares of common stock, $.01 par value (“Common
Stock”), of the Company to directors, officers and employees of the Company and to
other individuals; and 

    WHEREAS,
the Board has determined that it would be in the best interests of the Company to grant
the option documented herein. 

    NOW,
THEREFORE, the parties hereto hereby agree as follows: 

         1.       
          Grant of Option. Subject to the terms and conditions of the Plan and as
          set forth herein, the Company hereby grants to the Optionee, as of date hereof,
          an option (the “Option”) to purchase from the Company all or any part
          of an aggregate number of ______ shares of Common Stock (the “Optioned
          Shares”) 

         2.       
          Installment Exercise. Subject to such further limitations as are provided
          in the Plan and as set forth herein, the Option shall become exercisable at a
          per share price of $____ (“Option Price”), the Optionee having the
          right hereunder to purchase from the Company the indicated number of Optioned
          Shares upon exercise of the Option, on and after such dates, in cumulative
          fashion: 

                Exercise Date        Non-Qualified Optioned Shares
        Incentive Optioned Shares

        _______    
                       _______
           
                        _______

Only those Optioned Shares indicated
above as “Incentive Optioned Shares” are intended by the parties hereto to be,
and be treated as, “incentive stock options” (as such term is defined under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)). The
Option may not be exercised with respect to less than 100 Optioned Shares (or the Optioned
Shares then subject to purchase under the Option, if less than 100 shares) or for any
fractional shares. 

-21- 

         3.       
          Termination of Option. (a) Except as described in Section 3(b), the
          Option, to the extent not previously exercised, shall terminate and become null
          and void on _______ (the “Option Expiration”). 

         (b)       
          Upon the permanent disability of the Optionee (within the meaning of Section
          22(e)(3) of the Code) or by reason of the death of the Optionee, the Option, to
          the extent not previously exercised, shall terminate and become null and void
          twelve (12) months after such permanent disability or death, or upon the Option
          Expiration, whichever occurs first. 

         4.       
          Exercisability. To the extent exercisable, the Option may be exercised by
          a legal representative on behalf of the Optionee in the event of the permanent
          disability of the Optionee, or, in the case of the death of the Optionee, by the
          estate of the Optionee or by any person or persons who acquired the right to
          exercise the Option by bequest or inheritance or by reason of the death of the
          Optionee. 

         5.       
          Manner of Exercise. (a) The Option may be exercised in full at one time
          or in part from time to time for the number of Optioned Shares then exercisable
          by giving written notice, signed by the person exercising the Option, to the
          Company, stating the number of Optioned Shares with respect to which the Option
          is being exercised and the date of exercise thereof, which date shall be at
          least five days after the giving of such notice. 

         (b)       
          Full payment by the Optionee of the Option Price for the Optioned Shares
          purchased shall be made on or before the exercise date specified in the notice
          of exercise by delivery of (i) cash or a check payable to the order of the
          Company in an amount equal to such Option Price, (ii) shares of Common Stock
          owned by the Optionee having a fair market value equal in amount to such Option
          Price, or (iii) any combination of the preceding clauses (i) and (ii). 

         (c)       
          The Company shall be under no obligation to issue any Optioned Shares unless the
          person exercising the Option, in whole or in part, shall give a written
          representation and undertaking to the Company which is satisfactory in form and
          substance to counsel for the Company and upon which, in the opinion of such
          counsel, the Company may reasonably rely, that he or she is acquiring such
          Optioned Shares for his or her own account as an investment and not with a view
          to, or for sale in connection with, the distribution of any such Optioned
          Shares, and that he or she will make no transfer of the same except in
          compliance with any rules and regulations in force at the time of such transfer
          under the Securities Act of 1933, or any other applicable law. 

         (d)       
          Upon exercise of the Option in the manner prescribed by this Section 5, delivery
          of a certificate for the Optioned Shares then being purchased shall be made at
          the principal office of the Company to the person exercising the Option within a
          reasonable time after the date of exercise specified in the notice of exercise. 

         6.       
          Non-Transferability of Option. The Option shall not be assignable or
          transferable by the Optionee other than by will or the laws of descent, and
          shall be exercisable during the lifetime of the Optionee only by the Optionee.
          The Option shall terminate and become null and void immediately upon the
          bankruptcy of the Optionee, or upon any attempted assignment or transfer except
          as herein provided, including without limitation, any purported assignment,

-22- 

          whether voluntary or by operation of law, pledge, hypothecation or other
          disposition, attachment, trustee process or similar process, whether legal or
          equitable, upon the Option. 

         7.       
          No Special Employment Rights. Neither the granting of the Option nor its
          exercise shall be construed to confer upon the Optionee any right with respect
          to employment by the Company (or any subsidiary of the Company). 

         8.       
          No Rights of Stockholder. The Optionee shall not be deemed for any
          purpose to be a stockholder of the Company with respect to the Option except to
          the extent that the Option shall have been exercised with respect thereto and,
          in addition, a stock certificate shall have been issued theretofore and
          delivered to the Optionee. 

         9.       
          Amendment. Subject to the terms and conditions of the Plan, the Board or
          a committee appointed by the Board to administer the Plan (the
          “Committee”), whichever shall then have authority to administer the
          Plan, may amend this Agreement with the consent of the Optionee when and subject
          to such conditions as are deemed to be in the best interests of the Company and
          in accordance with the purposes of the Plan, except that the Board or the
          Committee may unilaterally extend the expiration date of the Option without the
          consent of the Optionee. 

         10.       
          Notices. Any communication or notice required or permitted to be given
          hereunder shall be in writing, and, if to the Company, to its principal place of
          business, attention: Secretary, and, if to the Optionee, to the address as
          appearing on the records of the Company. Such communication or notice shall be
          deemed given if and when (a) properly addressed and posted by registered or
          certified mail, postage prepaid, or (b) delivered by hand. 

         11.       
          Incorporation of Plan by Reference. The Option is granted pursuant to the
          terms of the Plan, the terms of which are incorporated herein by reference, and
          the Option shall in all respects be interpreted in accordance with the Plan. The
          Board or the Committee, whichever shall then have authority to administer the
          Plan, shall interpret and construe the Plan and this Agreement, and their
          interpretations and determinations shall be conclusive and binding upon the
          parties hereto and any other person claiming an interest hereunder, with respect
          to any issue arising hereunder or thereunder. 

         12.       
          Governing Law. The validity, construction and interpretation of this
          Agreement shall be governed by and determined in accordance with the laws of the
          State of New York. 

[SIGNATURES ON NEXT
PAGE] 

-23- 

        IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date above
written. 

          	 	MEDIS TECHNOLOGIES LTD.

	 
	 	By: 

	 	        Name:  
	 	        Title:
	 
	 
	 	OPTIONEE:
	 
	 	

	 	        Name:

               

-24-

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