Document:

Exhibit 10.4

 

PLEDGE AGREEMENT
(this “Pledge Agreement”), dated as of April 11, 2003, made by
Gennadi Finkelshtain (the “Pledgor”) in favor of Medis Technologies
Ltd., a Delaware corporation (the “Lender”).

 

 

The Pledgor and
the Lender have heretofore entered into that certain Agreement dated November
9, 2000 (the “Option Agreement”), whereby the Pledgor granted to the
Lender the option to purchase seventy (70) shares of More Energy Ltd. owned by
the Pledgor (the “Option”);

 

Pursuant to an
amendment to the Option Agreement dated March 14, 2003, the Lender exercised
the Option and paid the exercise price thereof by the issuance of an aggregate
of 120,000 shares of the common stock of the Lender, evidenced by certificate
numbers MDS2996 and MDS2997 (the “Pledged Shares”), and the Pledgor has
agreed to pledge the Pledged Shares to the Lender pursuant to the terms and
conditions of this Pledge Agreement;

 

The receipt of the
Pledged Shares by the Pledgor has caused the Pledgor to incur certain tax
obligations under the laws of Israel of which the Pledgor is a citizen and a
resident (the “Taxes”);

 

The Pledgor has
asked the Lender to borrow, and the Lender has agreed to loan up to Two Hundred
Fifty Eight Thousand Dollars ($258,000) (the “Loan”) to the Pledgor so as
to permit the Pledgor to pay the Taxes;

 

To evidence the
Loan, the Pledgor has executed and delivered to the Lender a Non-Recourse
Secured Promissory Note, dated the date hereof (the “Note”); and

 

To induce the
Lender to consummate the Loan, the Pledgor has agreed to enter into this Pledge
Agreement.

 

NOW, THEREFORE,
for good and valuable consideration the receipt of which is hereby
acknowledged, and in order to induce the Lender to make the loan evidenced by
the Note, the Pledgor agrees, for the benefit of the Lender, as follows:

 

ARTICLE
I.

DEFINITIONS

 

SECTION 1.1.  Certain Terms.  The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):

 

“Affiliate”
means, with respect to any person, any other person that, directly or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such person. 
Any Relative (for this purpose, “Relative” means a spouse, former
spouse, child, parent, parent of spouse, sibling or grandchild) of an
individual shall be deemed to be an Affiliate of such individual for purposes
hereof.  Neither the Lender nor any
person controlled by the Lender shall be deemed to be an Affiliate of any
holder of the Lender’s capital stock.

 

 

“Collateral”
is defined in Section 2.1.

 

“Distributions”
means all stock dividends, liquidating dividends, shares of stock resulting
from (or in connection with the exercise of) stock splits, reclassifications,
warrants, options, non-cash dividends, mergers or consolidations, and all other
distributions on or with respect to any Pledged Shares, but shall not include
Dividends.

 

“Dividends”
means cash dividends or cash distributions with respect to any Pledged Shares.

 

“Documents”
collectively, means the Note, this Pledge Agreement and each other agreement,
certificate, document or instrument delivered in connection therewith.

 

“Lender” is
defined in the preamble.

 

“Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (including, without limitation, any conditional sale or other title
retention agreement or lease in the nature thereof), any sale of receivables
with recourse against the Pledgor or any affiliate thereof, any filing or
agreement to file a financing statement as debtor under the U.C.C. or any
similar statute other than to reflect ownership by a third party of property
leased to the Pledgor under a lease which is not in the nature of a conditional
sale or title retention agreement, or any subordination arrangement in favor of
another person (other than any subordination arising in the ordinary course of
business).

 

“Loan” is
defined in the fourth recital.

 

“Note” is
defined in the fifth recital.

 

“Option” is
defined in the first recital.

 

“Option
Agreement” is defined in the first recital.

 

“Pledged Shares”
is defined in the second recital.

 

“Pledgor”
is defined in the preamble.

 

“Secured
Obligations” means all obligations (monetary or otherwise, whether absolute
or contingent, matured or unmatured, direct or indirect, choate or inchoate,
sole, joint, several or joint and several, due or to become due, heretofore or
hereafter contracted or acquired) of the Pledgor arising under or in connection
with the Note and this Pledge Agreement including (i) all obligations for
principal or interest under the Note, whether incurred on the date hereof,
(ii) following the occurrence and during the continuance of an Event of
Default (as defined in the Note), all costs (including reasonable attorneys’
fees) incurred in connection with the enforcement of the Note or this Pledge
Agreement and all advances made by the Lender for the maintenance, protection,
preservation or enforcement of, or realization upon, the Collateral.

 

“Taxes” is
defined in the third recital.

 

2

 

“U.C.C.”
means the Uniform Commercial Code as in effect in the State of New York or, as
the context may require, in any other jurisdiction the laws of which may apply
to all or a portion of the Collateral in which a security interest is granted
hereunder.

 

SECTION 1.2.  Note Definitions.  Unless otherwise defined herein, capitalized
terms used in this Pledge Agreement and not otherwise defined herein, including
its preamble and recitals, have the meanings provided in the Note.

 

ARTICLE
II.

PLEDGE

 

SECTION 2.1.        Grant of Security Interest.  As collateral security for the prompt
payment in full when due of the Secured Obligations, the Pledgor hereby
pledges, and grants to the Lender, a continuing security interest in all of
Pledgor’s right, title and interest in and to all of the following property
(the “Collateral”):

 

(a)           the Pledged Shares;

 

(b)           Distributions and other payments and
rights with respect to any Pledged Shares;

 

(c)           all proceeds of any of the foregoing;
and

 

(d)           any other property that the Pledgor,
in his sole and absolute discretion, after written notice to the Lender,
pledges to the Lender at any time and from time to time at his option.

 

SECTION 2.2.        Security for Obligations.  This Pledge Agreement and the Collateral
granted herewith secure the payment and performance in full of the Secured
Obligations.

 

SECTION 2.3.        Delivery of Collateral.  All certificates or instruments representing
or evidencing any Collateral, including all Pledged Shares, shall be delivered
to the Lender or a mutually acceptable designee of Lender and held by or on
behalf of the Lender pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank, all in form and substance satisfactory to
the Lender or the Lender’s designee.

 

The Pledgor agrees
that the Lender shall be entitled to receive and retain, and the Pledgor shall
be deemed to have delivered, as security hereunder to the Lender, any and all
additional shares of capital stock or other securities of the Lender which
would otherwise be issued to the Pledgor in consideration of the Note or
otherwise issued, distributed or otherwise delivered to the Pledgor in respect
of the Pledged Shares.

 

SECTION 2.4.        Dividends on Pledged Shares.  In the event that any Dividend is to be paid
on any Pledged Share, such Dividend shall be paid directly to the Pledgor to
repay amounts outstanding under the Note pursuant to Section 1 thereof.

 

SECTION 2.5.        Continuing Security Interest;
Transfer of Note.  This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall:

 

3

 

(a)           remain in full force and effect until
payment in full of all Secured Obligations;

 

(b)           be binding upon the Pledgor and its
successors, transferees and assigns; and

 

(c)           inure, together with the rights and
remedies of the Lender hereunder, to the benefit of the Lender.

 

Without limiting
the foregoing clause (c), the Lender may assign or otherwise transfer (in
whole or in part) the Note held by it to any other person or entity, and such
other person or entity shall thereupon become vested with all the rights and
benefits in respect thereof granted to the Lender under this Pledge Agreement,
subject, however, to any contrary provisions in such assignment or transfer.  Upon the payment in full of all Secured
Obligations, the security interest granted herein shall automatically terminate
and all rights to the Collateral shall revert to the Pledgor.  Upon any such termination, the Lender will,
at the sole expense of the Pledgor, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all
certificates and instruments representing or evidencing the Pledged Shares of
the Pledgor with respect to which the security interest herein has terminated,
together with all other Collateral of the Pledgor with respect to which the
security interest herein has terminated which is held by the Lender hereunder,
and execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.  Notwithstanding anything to the contrary herein, the security
interest granted herein in any Pledged Shares shall not terminate with respect
to such Pledged Shares, and the Pledged Shares shall continue to be held by the
Lender, until the Pledgor has satisfied its obligation to pay to the Lender any
applicable federal, state or local income taxes or other amounts required by
law to be withheld by the Lender with respect to such Pledged Shares.

 

SECTION 2.6.        Security Interest Absolute.  All rights of the Lender and the security
interests granted to the Lender hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of:

 

(a)           any lack of validity or
enforceability of the Note or any other Document or any instrument or document
relating thereto;

 

(b)           the failure of the Lender:

 

(i)            to assert any claim or demand or to
enforce any right or remedy against the Pledgor or any other person under the
provisions of the Note or otherwise; or

 

(ii)           to exercise any right or remedy
against any other guarantor of, or collateral securing, any of the Secured
Obligations;

 

(c)           any change in the time, manner or
place of payment of, or in any other term of, all or any of the Secured
Obligations or any other extension, compromise or renewal of any of the Secured
Obligations;

 

(d)           any reduction, limitation, impairment
or termination of any of the Secured Obligations for any reason, including any
claim of waiver, release, surrender, alteration or

4

 

compromise, and shall not be subject to (and the Pledgor hereby waives
any right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or occurrence
affecting, any of the Secured Obligations or otherwise;

 

(e)           any amendment to, rescission, waiver,
or other modification of, or any consent to departure from, any of the terms of
the Note or any other Document or any instrument or document relating thereto;

 

(f)            any addition, exchange, release,
surrender or nonperfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to departure
from any guaranty, for any of the Secured Obligations; or

 

(g)           any other circumstances which might
otherwise constitute a defense (other than the defense of payment in full of
the Secured Obligations) available to, or a legal or equitable discharge of,
the Pledgor, any surety or any guarantor.

 

ARTICLE
III.

REPRESENTATIONS
AND WARRANTIES

 

SECTION 3.1.        Warranties, etc.  The Pledgor represents and warrants to the
Lender, as at the date of each pledge and delivery hereunder, by the Pledgor to
the Lender of any Collateral, as set forth in this Article:

 

(a)           Ownership,
No Liens, etc.  The Pledgor is the
legal and beneficial owner of, and has good and valid title to (and has full
right and authority to pledge and assign) such Collateral, free and clear of
all Liens, except the Lien granted pursuant hereto in favor of the Lender.

 

(b)           Valid
Security Interest.  The delivery by
the Pledgor of such Pledged Shares to the Lender is effective to create a
valid, perfected, first priority security interest in such Collateral and all
proceeds thereof, securing the Secured Obligations, and no filing or other
action will be necessary to perfect or protect such security interest.  All the Pledged Shares issued by the Lender
are “certificated securities” as that term is defined in Section 8-102 of
the U.C.C.

 

(c)           Execution,
etc.  This Pledge Agreement has been
duly executed and delivered by the Pledgor, and constitutes a legal, valid and
binding obligation of the Pledgor, enforceable against the Pledgor in
accordance with its terms.  No
authorization, approval, or other action by, and no notice or filing with, any
governmental authority, regulatory body or any other person is required either:  (i) for the pledge by the Pledgor of
any Collateral pursuant to this Pledge Agreement or for the due execution,
delivery and performance of this Pledge Agreement by the Pledgor; or
(ii) for the disposition of such Pledged Shares pursuant to the exercise
by the Lender of the remedies in this Pledge Agreement except by laws affecting
the offering and sale of securities generally.

 

(d)           No
Contravention.  The execution,
delivery and performance by the Pledgor of this Pledge Agreement and compliance
by the Pledgor with all of the provisions hereof does not and will not
contravene any law or any order of any court or governmental

5

 

authority or agency applicable to or binding on the Pledgor or any of
the Pledgor’s properties, or contravene the provisions of, or constitute a
default (or event of default) with or without the passage of time, by the
Pledgor under, or result in the creation of any Lien upon the property of the
Pledgor under any material mortgage, contract or other agreement or instrument
to which the Pledgor is a party, or by which the Pledgor or any of the
Pledgor’s property is bound or affected.

 

ARTICLE
IV.

COVENANTS

 

SECTION 4.1.        Protect Collateral, Further
Assurances, etc.  The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral except in favor of the Lender hereunder.  The Pledgor agrees that at any time, and from time to time, at
the expense of the Lender, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Lender may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Lender to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.

 

SECTION 4.2.        Stock Powers, etc.  The Pledgor agrees that (a) all Pledged
Shares delivered by the Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed, undated blank stock powers, or other equivalent instruments
of transfer acceptable to the Lender and (b) in the event that any capital
stock constituting Collateral is deemed pursuant to Section 2.3 to be
delivered to the Lender, such Pledgor shall duly execute, upon the request of
the Lender, undated blank stock powers or other equivalent instruments of
transfer acceptable to the Lender.  The
Pledgor will, from time to time upon the request of the Lender, promptly
deliver to the Lender such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Lender, with respect to the
Collateral as the Lender may reasonably request and will, from time to time
upon the request of the Lender after the occurrence and during the continuance
of any Event of Default, promptly transfer any Pledged Shares or other shares
of capital stock constituting Collateral into the name of the Lender or any
nominee designated by the Lender.

 

SECTION 4.3.        Continuous Pledge.  Subject to Section 2.4, the Pledgor
will, at all times, keep pledged to the Lender pursuant hereto all Pledged
Shares and all other shares of capital stock constituting Collateral, all
Dividends and Distributions with respect thereto, and all other Collateral and
other securities, instruments, proceeds, and rights from time to time received
by or distributable to the Pledgor in respect of any Collateral.

 

SECTION 4.4.        Dividends and Distributions.  The Pledgor agrees:

 

(a)           Without any request therefor by the
Lender (properly endorsed where required hereby or requested by the Lender), the
Lender shall be entitled to receive and retain all Distributions and all
proceeds of the Collateral, all of which shall be held by the Lender as
additional Collateral for use in accordance with Section 5.3.

 

(b)           In the event that any Dividends,
Distributions, cash payments or proceeds constituting Collateral are held by
the Pledgor but which the Lender is then entitled to receive

6

 

and retain, such Dividends, Distributions, payments or proceeds shall,
pending delivery to the Lender, be held by the Pledgor separate and apart from
its other property in trust for the Lender.

 

SECTION 4.5.         Payment
of Taxes.  The Pledgor agrees that
the proceeds of the Loan shall be used solely to pay the Taxes.

 

ARTICLE
V.

REMEDIES

 

SECTION 5.1.  Certain Remedies.  If any Event of Default shall have occurred
and be continuing, notwithstanding any other provision herein or in any other
instrument, agreement or other document to the contrary, Lender’s sole and
exclusive recourse and remedy with respect to the Secured Obligations, this
Pledge Agreement and the Note shall be to proceed solely against the Collateral
as provided herein, without any personal liability of any kind to the Pledgor,
and subject to the following:

 

(a)           The Lender may exercise solely in
respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it solely in respect to the Collateral,
all the rights and remedies of a secured party on default under the U.C.C.
(whether or not the U.C.C. applies to the affected Collateral) and also may,
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Lender’s offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Lender may deem commercially reasonable.  The Lender may, to the extent permitted by
Section 9-610 of the U.C.C., be the purchaser of any of the Collateral so sold
and the obligations of the Pledgor to the Lender may be applied as a credit
against the purchase price.  The Pledgor
agrees that, to the extent notice of sale shall be required by law, at least 15
days’ prior notice to the Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification.  The Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. 
Upon any such sale, the Lender shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold.  Each purchaser (including the Lender) at any
such sale shall hold the Collateral so sold absolutely free from any claim or
right of whatsoever kind, including any equity or right of redemption of the
Pledgor, and the Pledgor hereby specifically waives, to the extent it may
lawfully do so, all rights of redemption, stay or appraisal which it has or may
have under any rule of law or statute now existing or hereafter adopted.

 

(b)           The Lender may:

 

(i)            transfer all or any part of the
Collateral in the name of the Lender or its nominee, with or without disclosing
that such Collateral is subject to the lien and security interest hereunder;

 

(ii)           notify the parties obligated on any
of the Collateral to make payment to the Lender of any amount due or to become
due thereunder;

 

7

 

(iii)          enforce collection of any of the
Collateral by suit or otherwise, and surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any obligations of any nature of any party
with respect thereto;

 

(iv)          endorse any checks, drafts, or other
writings in the name of the Pledgor constituting Collateral;

 

(v)           take control of any proceeds of the
Collateral; and

 

(vi)          execute (in the name, place and stead
of the Pledgor) endorsements, assignments, stock powers and other instruments
of conveyance or transfer with respect to all or any of the Collateral.

 

SECTION 5.2.          Compliance with Restrictions.  The Pledgor agrees that in any sale of any
of the Collateral whenever any Event of Default shall have occurred and be
continuing, the Lender is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary to avoid any violation of applicable law (including compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or to obtain any required approval of the sale or of the purchaser
by any governmental regulatory authority or official or any third party, and
the Pledgor further agrees that such compliance shall not result in such sale
being considered or deemed not to have been made in a commercially reasonable
manner, nor shall the Lender be liable nor accountable to the Pledgor for any
discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.

 

SECTION 5.3.        Application of Collateral Proceeds.  If any Event of Default shall have occurred
and be continuing, all cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon, all or any part of the
Collateral shall promptly be applied (after payment of any amounts payable to
the Lender pursuant to Section 5.4) by the Lender against the Secured
Obligations.  Any surplus of such cash
or cash proceeds held by the Lender and remaining after payment in full of all
the Secured Obligations, shall be promptly paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.

 

SECTION 5.4.        Indemnity and Expenses.  The Lender shall be entitled to be
indemnified and held harmless from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender’s gross negligence or willful misconduct.  The Lender shall be entitled to the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Lender may
incur in connection with:

 

(a)           this
Pledge Agreement or any instrument or document relating thereto;

 

(b)           the
custody, preservation, use, or operation of, or the sale of, collection from,
or other realization upon, any of the Collateral;

 

8

 

(c)           the
exercise or enforcement of any of the rights of the Lender hereunder; or

 

(d)           the
failure by the Pledgor to perform or observe any of the provisions hereof.

 

ARTICLE
VI.

MISCELLANEOUS
PROVISIONS

 

SECTION 6.1.        Amendments, etc.  No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Lender, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.

 

SECTION 6.2.        Protection of Collateral.  The Lender may from time to time, at its
option, perform any act which the Pledgor agrees hereunder to perform and which
the Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default) and the Lender
may from time to time take any other action which the Lender reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein, it being understood and agreed
that in each such case all costs and expenses incurred by the Lender in
connection therewith shall be payable to the Lender pursuant to
Section 5.4.

 

SECTION 6.3.        Addresses for Notices.  All notices and other communications
provided for hereunder shall be in writing and will be deemed to have been duly
given if delivered or mailed in accordance with the Note.

 

SECTION 6.4.        Section Captions.  The headings of sections and paragraphs of
this Pledge Agreement are inserted for convenience only and shall not be deemed
to constitute part of this Pledge Agreement or to affect the construction hereof.

 

SECTION 6.5.        Counterparts.  This Pledge Agreement may be executed by the
parties hereto in one or more counterparts, each of which shall for all
purposes be deemed to be an original and all of which together shall constitute
one and the same instrument.

 

SECTION 6.6.        Governing Law, Entire Agreement, etc.  The validity, performance and enforcement of
this Pledge Agreement, unless expressly provided to the contrary, shall be
governed by the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof, except to the extent that the validity
or perfection of the security interest hereunder, or remedies hereunder, in
respect of any particular collateral are governed by the laws of a jurisdiction
other than the State of New York.  The
Note and this Pledge Agreement constitute the entire agreement among the
parties hereto and supersede any prior agreements and understandings, oral or
written, between the parties hereto, with respect to the subject matter hereof.

 

SECTION 6.7.        Forum Selection and Consent to
Jurisdiction.  Any litigation based
hereon, or arising out of, under, or in connection with, this Pledge Agreement
shall be brought

9

 

and maintained exclusively in the courts of the State of New York or in
the United States District Court for the Southern District of New York.  The Pledgor hereby expressly and irrevocably
submits to the personal jurisdiction of the courts of the State of New York and
of the United States District Court for the Southern District of New York for
the purpose of any such litigation as set forth above and irrevocably agrees to
be bound by any judgment rendered thereby in connection with such litigation,
subject to such Pledgor’s right to contest such judgment by motion or appeal on
any grounds not expressly waived in this Section 6.7.  The Pledgor hereby irrevocably consents to
the service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. 
The Pledgor hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum.  To the extent that
the Pledgor has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
the Pledgor or the Pledgor’s property, the Pledgor hereby irrevocably waives
such immunity in respect of its obligations under this Pledge Agreement.

 

IN WITNESS
WHEREOF, the parties hereto have duly executed and delivered this Pledge
Agreement as of the day and year first above written.

 

	
   

  	
  /s/ Gennadi
  Finkelshtain

  
	
   

  	
  GENNADI
  FINKELSHTAIN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEDIS TECHNOLOGIES LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

10Exhibit
10.5

 

AGREEMENT
NO.                   
DATED MAY 5, 2003

 

This Agreement is made on May 5th 2003
between MEDIS TECHNOLOGIES LTD., a Delaware company (hereinafter the “SELLER”)
and GENERAL DYNAMICS C4 Systems, Incorporated, a Delaware company, (hereinafter
the “PURCHASER”) (collectively hereinafter “the Parties”).

 

WHEREAS, the SELLER is developing a unique direct
liquid fuel system to power portable electronics devices, which is planned to
be a secondary power system (the “Power Pack”); and

 

WHEREAS, the Purchaser is developing a certain
ruggedized PDA system (the “Military PDA”) for military use for which Purchaser
requires a secondary charging device; and

 

WHEREAS, the Parties desire to cooperate in the
development of an pre-production prototype of a specific application of the
Power Pack for Purchaser’s Military PDA, generally in accordance with the
technical requirements set forth in Annex 1 to this Agreement (the
‘“Specifications”),

 

NOW THEREFORE, it is hereby agreed and declared by and
between the parties as follows;

 

ARTICLE
1   OBJECT

 

The SELLER agrees to use
commercially reasonable efforts to design and develop the pre-production
prototype Power Pack for the Military PDA generally in accordance with the
Specifications and the Program Schedule set forth in Annex 2 (“SOW”) and the
Purchaser agrees to make payments to the Seller in accordance with the payment
milestones set forth herein, all in accordance wrath the terms and conditions
hereinafter specified. For purposes of final acceptance, the pre-production
prototype is defined as a qualifiable product, subject to final design
iterations that may be implemented by Seller after the field-testing process is
completed.

 

ARTICLE
2   PRICES AND PAYMENT TERMS

 

2.1                                 The
total purchase price of this Agreement is Five Hundred Thousand United States
Dollars (US$ 500,000), it being understood and agreed that the purchase price
may not cover the entire costs of Seller in the performance of this Agreement.

 

2.2                                 The
total purchase price shall be paid as follows:

 

(A)                              An
initial payment based upon Medis providing its preliminary detailed product
specification one week after Agreement signature US$ 100,000 (This is covered
in 2.3 so redundant).

 

(B)                                Upon
completion of Milestone 1 in the SOW, an additional payment of US$ 50,000;

 

(C)                                Upon
completion of Milestone 2 in the SOW, but no sooner than January 10, 2004 an
additional payment of US$ 100,000;

 

 

(D)                               Upon
completion of Milestone 3 in the SOW, but no sooner than January 10, 2004 an
additional payment of US$ 25,000;

 

(E)                                 Upon
completion of Milestone 4 in the SOW, but no sooner than January 10, 2004 an
additional payment of US$ 25,000;

 

(F)                                 Upon
completion of Milestone 5 in the SOW, but no sooner than January 10, 2004 an
additional payment of US$ 50,000;

 

(G)                                Upon
completion of Milestone 6 in the SOW, but no sooner than January 10, 2005 an
additional payment of US$ 50,000;

 

(H)                               Upon
completion of Milestone 7 in the SOW, but no sooner than January 10, 2005 an
additional payment of US$ 50,000;

 

(I)                                    Upon
completion of Milestone 8 in the SOW, but no sooner than January 10, 2005 an
additional payment of US$ 50,000.

 

2.3                                 All
payments will be made net thirty (30) days from receipt of invoice and
Certificate of Milestone Completion signed by Seller’s Program Manager. All
payments will be made in freely transferable United States dollars net and free
from any withholding or other taxes to the account of Seller designated by
Seller to purchaser in writing from time to time. In the event Purchaser
secures third party funding in support of this development effort or allocated
additional internal R&D funds, Purchaser agrees to accelerate milestone
payments to the extent possible based upon actual completion dates.

 

ARTICLE
3   INSPECTION AND TESTS

 

3.1                                 Inspection
and acceptance of the deliverables shall be carried out in accordance with
Seller’s quality assurance requirements for such goods and Seller’s standard
certificate of inspection and acceptance shall be issued with respect to same.

 

3.2                                 The
Purchaser may send representatives to observe the activity of Seller in the
development and test of the pre-production prototype to be delivered hereunder.
The Seller shall provide all the requisite facilities for this purpose to the
Purchaser’s representatives. Subject to proprietary elements of the activity,
the Purchaser’s representatives will have full access to the relevant
documentation and facilities in this regard. The Purchaser’s representatives
will act as observers only and will not be held responsible for the quality of
inspection and acceptance of materials. The Purchaser representatives shall
abide by the security requirements in force at Seller’s facilities.

 

3.3                                 All
the traveling, board and lodging expenses of the Purchaser’s representatives
shall be directly paid for by the Purchaser, though Seller will upon request
assist in the administrative aspects of any such visit.

 

3.4                                 The
Purchaser shall notify the Seller about the arrival of its representatives to
the Seller’s country at least 7 days in advance.

 

2

 

ARTICLE
4   WARRANTY

 

4.1                                 The
Seller warrants that the pre-production prototype to be supplied under this
Agreement shall be free from defects in materials and workmanship at the time
of delivery of same to Purchaser. Notwithstanding the above, it is understood
that the final product under this Agreement is a pre-production prototype and
not a final production quality product. If within ninety (90) days of the
delivery of a prototype, it is proved defective or deficient in accordance with
this Warranty, Seller shall replace or repair such items free of any charge to
Purchaser.

 

4.2                                 In
case of any discrepancy in quality as required under 4.1 above the Purchaser
shall give Seller written notice within the warranty period specified above and
return the engineering prototype to Seller for repair. After which Seller shall
return the repaired item to Purchaser. The balance of the warranty period shall
apply to the repaired item starting from the date of Purchaser’s written notice
to Seller.

 

4.3                               This
Warranty is Purchaser’s sole remedy in the event of defect in the
pre-production engineering prototype to be supplied under this Agreement and is
in lieu of any other warranty express or implied (including warranty of
merchantability or fitness for a particular purpose). Seller’s sole
responsibility in the event of such defect shall be to repair or replace the
affected item as sot forth above. In no event will either Party have any
liability in connection with this Agreement for any incidental or consequential
damages.

 

ARTICLE
5   FORCE MAJEURE

 

Force Majeure in this
Agreement shall mean any circumstances beyond the reasonable control of the
affected Party, preventing complete or partial fulfillment by such Party of its
obligations under this Agreement and shall include without limitation fire,
acts of nature, war, military operations of any character, blockade, and the
like. The time stipulated for fulfillment of the respective obligations shall
be automatically extended for a period, equal to that during which such
circumstances remain in force, provided that a written notice is sent by the
Party for whom it becomes difficult to meet its obligations not later than 14
days from the occurrence of any such circumstances and similarly another notice
of its cessation is sent on cessation.

 

ARTICLE
6   CANCELLATION OF AGREEMENT

 

6.1                                 The
Purchaser shall have the right to cancel this Agreement for its convenience by
thirty (30) days written notice to Seller in which went Purchaser shall only be
obligated to pay to Seller the amount of the next Milestone payment that would
be due save for such cancellation.

 

6.2                                 The
Purchaser will be entitled to cancel this Agreement for default if Seller fails
to use commercially reasonable efforts to meet the Milestones set forth herein.
In such case, Purchaser will be entitled as its sole remedy to a refund of any
monies paid to Seller hereunder to the date of such cancellation.

 

3

 

ARTICLE
7   COMING INTO FORCE

 

This agreement will come
into force immediately upon the occurrence of the following:

 

(A)                              the
date of signing by both Parties;

 

ARTICLE
8   LAW AND DISPUTE RESOLUTION

 

8.1                                 This
Agreement shall be governed and interpreted in accordance with the laws of the
State of New York.

 

8.2                                 Any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof and indicated as such in writing by any one of the contracting
Parties to the other and which the Parties cannot settle by direct negotiations
shall be settled by arbitration in New York City in accordance with the Rule of
Arbitration and Conciliation of the American Arbitration Association. The
arbitration shall be held before a sole arbitrator.

 

ARTICLE
9   ADDRESSES AND COMMUNICATIONS

 

All communications to the
Purchaser are to be addressed to:

 

General Dynamics C4
Systems, Inc

 

	
  Attention:

  	
  Michael Harris, Contracts Manager

  
	
  Fax

  	
  (508) 880-1623

  
	
  Email:

  	
  michael.harris@gdc4s.com

  

 

All communications to the
SELLER to be addressed to:

 

Medis Technologies Ltd.

805 Third Avenue, 15th Floor

N.Y., N.Y. 10022

Attention:  Robert Lifton, CEO

Fax:  212-744-0385

Email:  robertl@broadviewnet.net

 

Copy to:

 

More Energy Ltd.

14 Shabazi Street, PO Box 132

Yehud Israel 56101

Attention:  Gennadi Finkelshtain, General Manger

Fax:  972 3 632 1671

Email:  more@medisel.co.il
and jweiss@medisel.co.il

 

ARTICLE
10   RIGHTS IN KNOW HOW AND DATA

 

It is agreed that Seller
will at all times maintain exclusive right and ownership over the know how and
data related to its direct liquid fuel cell technology (“Seller Know How”),
whether 

 

4

 

preexisting this
Agreement or whether developed in part by Seller’s efforts expended under this
Agreement, as well as exclusive ownership over any new related data based upon
or derived from Seller Know How, regardless of the Party generating such new
data.

 

ARTICLE
11   Reserved

 

ARTICLE
12   LIABILITIES

 

Each Party shall take
full and sole responsibility for any injury to its personnel and to any damage
to its property however caused and each Party hereunder indemnifies and holds
the other Party harmless, to the full extent lawful, from and against any
losses, claims, expenses (including legal expenses), damages or liabilities
related to any personal injury to the indemnifying party’s personnel agents or
representatives or damage to the indemnifying Party’s property arising in
connection with the signature and/or performance of this Agreement.

 

ARTICLE
13   Exclusive Marketing Rights

 

In consideration of
entering into this joint covenant Seller (Medis Technologies, Ltd. and its
subsidiaries, including but not limited to More Energy Ltd) hereby grants to
Purchaser, with respect to Seller’s DLFC technology, the exclusive marketing
and sales right for the US Department of Defense and Department of Homeland
Security from the date of execution of this Agreement through the period ending
31 December 2006, provided that Purchaser uses commercially reasonable efforts
during such time to identify and actively promote opportunities for marketing
and selling applications of the DLFC technology in those markets.

 

ARTICLE
14   OTHER CONDITIONS

 

14.1                           After
the signing of the Agreement, all previous negotiations and correspondence
relating to the provisions herein shall become null and void.

 

14.2                           Any
alterations and additions to this Agreement shall be valid only if they are
given in writing and are signed by the persons authorized by both Parties for
this purpose.

 

14.3                           Neither
Party shall have the right to assign to a third person or firm their rights and
obligations arising out of this Agreement or in connection therewith, without
the consent in writing of the other Party.

 

14.4                           The
Parties understand that the Purchaser intends to fund milestone payments under
this Agreement using internal funding and, if available, funding provided by
one or more third parties, but channeled through the Purchaser. The use of
third party funding shall have no affect on the terms of this Agreement, which
shall remain in full force and effect.

 

5

 

14.5                           This
Agreement has been signed in two originals - one has been retained by the
Purchaser and the other by the Seller.

 

	
   

  	
  FOR THE SELLER:

  	
   

  	
  FOR THE PURCHASER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Medis Technologies Ltd.:

  	
   

  	
  General Dynamics C4 Systems, Inc

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Robert K. Lifton

  	
   

  	
  BY:

  	
   /s/ Michael J. Harris

  	
  5/5/03

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NAME:

  	
   

  	
  Robert K. Lifton

  	
   

  	
  NAME:

  	
   

  	
  Michael J. Harris

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TITLE:

  	
   

  	
  Chairman and CEO

  	
   

  	
  TITLE:

  	
   

  	
  Sr. Manager of
  Contracts

  
											

 

6

 

Statement
Of Work And Schedule

Medis Technologies, acting through More Energy Ltd./GD

 

The following sets forth the activities and goals of
the Parties in the development by More of a Power Pack for the ruggedized PDA
of GDC4S.

 

A.     More will use reasonable commercial efforts to develop and test
the Power pack discussed hereunder.

 

B.      Each party will designate a Program manager and point of
contact. The parties will carry out periodic program management reviews to
discuss the progress of the development efforts by More in accordance with the
Schedule below.

 

C.      The development effort by More, and support by GD, as well as
the Schedule for same, shall generally be as follows;

 

(1)        Milestone 1 (ARO + 6 weeks) — Definition
of Power Pack specification and test plan;

 

(2)        Milestone 2 (ARO + 5 months) —
Preliminary Design Review (to include implementation of independent
orientation; power management system, and selection of cartridge implementation
design); One week prior to PDR More will deliver draft Preliminary Design to
GD;

 

(3)        Milestone 3 (ARO + 7 months) — Testing
begins on first Prototype in More facility (GD representative may observe);

 

(4)        Milestone 4 (ARO + 9 months) —
Completion of tests and report of results to GD.

 

(5)        Milestone 5 (ARO + 10 months) — Updated
Design and PMR at GD.

 

(6)        Milestone 6 (ARO + 13) Delivery of final
prototype for testing at GD.

 

(7)        Milestone 7 (ARO + 14 months) — PMR at
GD on test results and final iteration program definition.

 

(8)        Milestone 8 (ARO + 17) Delivery of
pre-production prototype for field testing with customer.

 

It is agreed that the
dates hereinabove set forth are based on the receipt by Seller of payments that
correspond to the Milestone dates. If those payments are delayed for any
reason, the Seller, in addition to any other rights it might have, will be
entitled to modify this schedule by written notice to Purchaser.

 

6/3/2002

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]