Document:

Exhibit 10.75

 

EMPLOYMENT AGREEMENT

Amended and Restated as of February 24, 2004

 

This agreement, dated as of February 24, 2004 is entered into
between Nextel Partners Operating Corp., a Delaware corporation, Nextel
Partners, Inc., a Delaware corporation (collectively the “Company”), and Barry
L. Rowan, (“Executive”).

 

WHEREAS, the Company desires to employ Executive and to enter into an
agreement embodying the terms of such employment (the “Agreement”), and
Executive desires to accept such employment and enter into this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive, intending to be legally bound, hereby
agree as follows:

 

1.                                       Employment.

 

(a)          Agreement to Employ.  Upon the terms and subject to the conditions
hereof, the Company shall employ Executive as Vice President, Chief Financial
Officer and Treasurer of Nextel Partners, Inc. and Nextel Partners Operating
Corp. until the Expiration Date (as defined in Section 1(b)), any date to
which this Agreement shall have been extended pursuant to section 1(b) or
any earlier termination of this Agreement pursuant to the provisions
hereof.  Executive’s office shall be
located in the Seattle, Washington metropolitan area.  During the term of his employment hereunder, Executive will
devote substantially all of his business time to the performance of his duties
hereunder.

 

(b)         Employment Period.  Unless earlier terminated pursuant to the
provisions hereof, the initial term of Executive’s employment with the Company
shall be for a period of one year commencing on the date of this Agreement and
continuing until February 24, 2005 (the “Expiration Date”).  The term of this Agreement shall
automatically extend for successive one-year terms commencing on the Expiration
Date unless Executive or the Company’s Board of Directors provides written
notice to the other party at least thirty (30) calendar days prior to the end
of the then current term indicating that the party giving notice does not wish
to extend the Agreement.  In such event,
the Agreement shall terminate at the end of the then current term.

 

2.                                       Responsibility.  Executive shall be responsible for
supervising the establishment, maintenance and operation of all financial and
accounting functions at the Company and for such other duties commensurate with
his position that may be assigned from time to time by the Company’s board of
directors or the Company’s chief executive officer (to the extent not
inconsistent with the duties assigned to him by the board of directors).   Executive shall report directly to the
chief executive officer and shall be subject to his supervision and the overall
supervision of the board of directors of the Company.

 

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3.                                       Compensation
and Benefits.

 

(a)          Salary, Bonus and Benefits.

 

(i)             The
Company shall pay Executive a base salary in the annual amount of $285,000
payable bi-weekly or in such other manner as is consistent with the Company’s
normal payroll practices.

 

(ii)          The
Company shall (subject to the review and approval by the compensation committee
of the board of directors) establish a performance based program pursuant to
which Executive shall receive, if performance targets are met, an additional
annual cash payment of up to one hundred percent (100%) of Executive’s then
current base salary (or such higher amount as the  compensation committee may approve).

 

(iii)       The
Company shall offer to Executive a benefits package equivalent to that provided
to the Company’s other employees and senior-level executives (including,
without limitation, participation in the Company’s medical, dental, vision,
life and disability insurance programs, the Company’s 401(k) plan, the
Company’s stock purchase program, and such other plans or programs as may be
made available).  In addition, the
Company shall maintain a life insurance policy on the life of Executive and
payable upon death of the Executive to a beneficiary or beneficiaries
designated by Executive, in an amount not less than $500,000.

 

(iv)      For
so long as this Agreement is renewed, the compensation committee of the board
of directors shall each year on or before the anniversary date of this
Agreement review the Executive’s base salary and bonus payment in light of the
performance of Executive and the Company, and may increase (but not decrease)
such base salary and bonus payment by an amount it determines to be
appropriate.

 

(b)         Expenses.  Executive shall maintain his own automobile
and shall carry liability insurance in the minimum amount of $300,000.  The Company shall reimburse Executive
monthly for business use of his automobile at the prevailing IRS rate per
mile.  Executive shall also be
reimbursed monthly for all other reasonable out-of-pocket expenses incurred or
paid by Executive while representing the Company or conducting Company
business.  Executive shall be
responsible for maintaining records reasonably satisfactory to support all
claimed business usage of his automobile and to substantiate all out-of-pocket
expenses incurred for which reimbursement is sought and shall furnish such
records to the Company in accordance with its policies.

 

(c)          Vacation.  Executive shall be entitled to 15 vacation
days each calendar year, any or all of which may be carried over into a new
calendar year, for a maximum accrual of 30 days.  Executive shall also be entitled to any paid or unpaid holidays
provided by the Company in accordance with its generally applicable personnel
policies.  Upon termination of
Executive’s services under this Agreement, Executive will

 

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be paid for unused and accrued
vacation time earned through the last completed day of service.

 

(d)         Indemnification.  The Company shall indemnify and hold
Executive harmless in accordance with the terms of the Company’s certificate of
incorporation and bylaws, in each case as in effect on the date hereof.

 

(e)          D&O Insurance.  The Company shall maintain directors and
officers’ liability insurance coverage covering Executive in amounts customary
for similarly situated companies in the telecommunications industry and with
reputable insurers.  All such policies
shall provide for coverage to Executive on the same terms and conditions
applicable to the coverage provided under such policies to the Company’s other
directors and officers.

 

4.                                       Nondisclosure
of Proprietary and Confidential Information.

 

(a)          Confidential
Information.  Executive agrees to
refrain (whether during or after his employment with the Company) from
disclosing or using, except as permitted by this Agreement or otherwise
authorized by the Company’s board of directors, any secrets or confidential
information with respect to the Company or any of the Company’s direct or
indirect wholly owned subsidiaries (collectively the “Covered Entities”),
including without limitation its trade secrets, patents, affairs, business
plans, strategic, commercial or financial information other than information
that is or becomes publicly available through no fault of Executive (the
“Confidential Information”). 
Confidential Information may be used solely for the benefit of the
Company, and Executive shall not make any other use of such information.  Executive agrees that all materials relating
to the business of any Covered Entity that are provided or made available to
Executive, or created by Executive, during the course of Executive’s services
to the Company shall be and remain the property of the Company and/or the
applicable Covered Entity (subject to the terms of any separate agreement
between the Company and/or the affected Covered Entity), whether or not such
materials constitute or contain Confidential Information, and all copies of
such materials shall be returned to the Company immediately upon the
termination of Executive’s services to the Company.  In the event that the Company notifies the Executive that it has
entered into a confidentiality agreement with a Covered Entity or with any
affiliate of the Company with respect to confidential information provided to
the Company, the Executive shall comply with such reasonable obligations
thereunder as are applicable to the Executive.

 

(b)         Innovations;
Inventions.  Executive hereby sells,
transfers and assigns to the Company all right, title and interest of Executive
in and to any and all inventions, ideas, disclosures and improvements of any
kind or nature whatsoever, whether patented or unpatented, and any and all
copyrightable materials, in either case whether made or conceived in whole or
in part by Executive alone or together with others during the initial term of
this Agreement or any renewal term, that (i) relate to any methods, designs,
products, processes, apparatus, service or devices sold, leased used or under
construction or development by the Company or the Covered Entities, (ii) relate
to the business,

 

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functions or operations of the
Company or the Covered Entities, or (iii) arise from, in whole or in part, the
efforts of Executive on behalf of the Company. 
Executive will communicate and disclose to the Company promptly all
information, data and details pertaining to any inventions, ideas, disclosures
and improvements described above, in such form or format as the Company may
reasonably request.  During the term of
this Agreement or any renewal term and thereafter, Executive will execute,
acknowledge or deliver to the Company (at the Company’s expense) such formal
transfers and assignments and such other papers and documents as may be
required of Executive to permit the Company to file and prosecute any patent
applications the Company desires to file and prosecute relating to any of the
foregoing, and, as to copyrightable material, to obtain copyright thereon.

 

(c)          Notwithstanding the
foregoing provisions of this Section 4 or any other provision of this
Agreement, nothing in this Agreement shall
prohibit or restrict Executive from: (i) providing information to, or
testifying or otherwise assisting in any investigation or proceeding brought by
any federal regulatory or law enforcement agency or legislative body, or any
self-regulatory organization; (ii) providing information to or assisting in an
investigation by the Company’s designated legal, compliance and/or human
resources officers; or (iii) testifying, participating or otherwise assisting
in a proceeding relating to an alleged violation of any federal, state or
municipal law relating to fraud or any rule or regulation of the Securities and
Exchange Commission or any self-regulatory organization.

 

5.                                       Non-Competition;
Non-Solicitation.

 

(a)          In view of the unique
value to the Company of Executive’s services and because of the Confidential
Information to be obtained by or disclosed to Executive as described above,
Executive agrees that, during the term of this Agreement and for a period of one
year thereafter, provided that this Agreement is not terminated by the Company
without Cause (as defined below) or by the Executive for Good Reason (as
defined below):

 

(i)             Executive
will not directly or indirectly assist or become associated with any wireless
voice communication service provider in any business of such provider that
competes in any of the markets of any of the Covered Entities, whether as a
principal, partner, employee, consultant or shareholder (other than as a holder
of less than 5% of the outstanding voting shares of any publicly traded
company);

 

(ii)          Executive
will not directly or indirectly solicit for employment or employ any employee
of any of the Covered Entities, unless such solicited person shall have ceased
to be employed by any such entity for a period of at least six months; and

 

(iii)       Executive
will not directly or indirectly solicit business from customers of any of the
Covered Entities, provided that the foregoing shall not restrict Executive or
any entity with which Executive is associated from soliciting or doing business
with any customer of any of the Covered Entities, if such solicitation does not

 

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interfere with any business relationship
between such solicited customer and any of the Covered Entities.

 

(b)         If Executive violates any
provision of Section 4 or Section 5(a), the Company shall be entitled
to receive provable damages caused by such breach, provided that Executive
shall not be liable for indirect, special, consequential or punitive damages
(it being understood and agreed that this remedy is in addition to, and not a
limitation on, any injunctive relief or other rights or remedies to which the
Company is or may be entitled to at law or in equity).  Executive acknowledges and agrees that the
Company’s (and as applicable, each Covered Entity’s) remedies at law for a
breach of any provision of Section 4 or Section 5(a) would be
inadequate and, in recognition of this fact, Executive agrees that, in the event
of such a breach, in addition to any remedies at law, the Company and, as to
Section 4, each Covered Entity, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available. 
As provided in Section 10(i) hereof, the equitable remedies
referenced in this Section 5(b) shall be in addition to, and not in substitution
for or exclusion of, any other remedies available at law or in equity for any
breach of either or both of Sections 4 or 5. 
Executive and the Company each specifically acknowledge and agree that
the provisions of Sections 4 and 5 are for the express benefit of each Covered
Entity and that (i) no waiver, amendment or other modification of Sections 4 or
5 with respect to a Covered Entity shall be effective unless it has been
consented to in writing by such Covered Entity, and (ii) each such Covered
Entity shall be entitled to enforce the provisions of Section 4 and/or 5
hereof (as appropriate) as fully and with the same rights and effect as if such
Covered Entity were a signatory party to this Agreement.

 

(c)          If any provisions of
Section 4 or Section 5(a) are held to be invalid or unenforceable, the
remaining provisions shall nevertheless continue to be valid and enforceable as
though the invalid or unenforceable parts had not been included.

 

6.                                       Noncontravention.  Executive represents and warrants to the
Company that Executive is free to enter into this Agreement and has no
commitment, arrangement or understanding to or with any party that restrains or
is in conflict with Executive’s performance of the covenants, services and
duties provided for in this Agreement. 
Executive agrees to indemnify the Company and to hold it harmless
against any and all liabilities or claims arising out of any unauthorized act
or acts by Executive that, the foregoing representation and warranty to the
contrary notwithstanding, are in violation, or constitute a breach of, any such
commitment, arrangement or understanding.

 

7.                                       Termination.  This Agreement shall automatically terminate
(and the term of this Agreement shall thereupon terminate) upon the occurrence
of any one of the following events:

 

(a)          Death.  This Agreement shall terminate upon the
death of Executive.

 

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(b)         Disability.  This Agreement shall terminate upon the
Executive’s disability if Executive shall have been incapacitated from illness,
accident or other disability and unable to perform his normal duties hereunder
for a cumulative period of three months in any period of six consecutive
months, and no reasonable accommodation being available, upon either party
giving the other party not less than 30 days’ written notice.  In the event of a disagreement over the
nature of Executive’s disability or the determination of whether Executive is
disabled, Executive agrees to be examined by a licensed physician that is
mutually agreeable to Executive and the Company.

 

(c)          Expiration of the
Agreement.  This Agreement shall
terminate upon the Expiration Date or the scheduled expiration date of any
renewal or extension thereof in compliance with Section 1(b).

 

(d)         Termination by the
Company With Cause.  This Agreement
shall terminate upon the Company’s termination of Executive for Cause.

 

(e)          Voluntary Termination
by Executive.  This Agreement shall
terminate upon Executive’s voluntary resignation; provided, that Executive
shall provide the Company with no less than 30 days’ written notice; provided,
further, that such voluntary resignation shall not relieve or release Executive
from any breach of this Agreement at or prior to the time of such resignation.

 

(f)            Termination by the
Company Without Cause.  This
Agreement shall terminate upon the Company’s termination of Executive for any
reason other than for Cause; provided, that the Company shall provide Executive
with no less than 30 days’ written notice of any such termination.  For purposes of this Agreement, the
Company’s failure to renew the Agreement for any subsequent one-year term shall
be deemed to be a termination of Executive without Cause.

 

(g)         Termination by
Executive for Good Reason.  Upon the
occurrence of any event or the existence of any condition or circumstance
constituting Good Reason, Executive may by notice to the Board of Directors,
deem a constructive termination of this Agreement to have occurred.

 

8.                                       Effect of
Termination.

 

(a)          Upon termination of this
Agreement pursuant to Sections 7(a) through (e), the Company shall compensate
Executive (or, in the event of Executive’s death, his surviving spouse, if any,
or his estate), for (x) accrued but unused vacation time, (y) any base salary
earned, but unpaid, for services rendered to the Company on or prior to the
date of termination and (z) amounts which the Executive is otherwise entitled
to receive under the terms of or in accordance with any plan, policy, practice
or program of, or contract or agreement with the Company (including, without
limitation, the plans and program made available to Executive pursuant to
Section 3(a)(iii)), as in effect immediately prior to the date of such
termination, at or subsequent to the date of termination without regard to the
performance by Executive of further services or the

 

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resolution of any contingency,
but subject to any and all rights, remedies and claims of the Company against
Executive.

 

(b)         If Executive resigns for
Good Reason pursuant to Section 7(g) or his employment with the Company is
terminated without Cause pursuant to 7(f), the Company shall thereupon pay
Executive the following amounts and benefits as severance benefits: (i) all
amounts payable pursuant to Section 8(a), and (ii) a lump sum equal to one
year’s base salary hereunder plus an amount equal to the most recent annual
bonus, if any, received by Executive pursuant to Section 3(a)(ii), and
(iii) continued coverage for one year under the Company’s benefit plans made
available to Executive in accordance with Section 3(a)(iii) (other than
the Company’s 401(k) and stock purchase plans) on the same terms as other
similarly situated employees of the Company. 
If coverage under one or more of the Company’s benefit plans may not be
continued because such continuation would adversely affect the tax-qualified
status of such benefit plans, Company may pay Executive a cash payment that is
the equal to the value of such continued coverage.

 

(c)          In the event there is a
“Change in Control of the Company” (as that term is defined in that certain
Restricted Stock Purchase Agreement between Executive and Nextel Partners, Inc.
dated July 17, 2003) prior to January 1, 2008, the Company shall pay
to Executive a one-time lump sum payment in the amount of $350,000 at the close
of the change of control transaction; provided, however, that in the event that
Executive receives the $350,000 payment and subsequently becomes eligible for
severance payment pursuant to this Agreement or any other employment agreement
then in effect, any severance payment owed under this Agreement or such other
employment agreement then in effect shall be reduced by the $350,000.  In such event, Executive shall not be
required to refund all or any portion of the $350,000 payment even if such
payment exceeds any severance to which the Executive becomes entitled.  The provisions of this section 8(c)
shall become null and void on and after January 1, 2008.

 

9.                                       Definitions.  As used herein, the following terms shall
have the following meanings set forth below:

 

“Cause” means (i) Executive’s conviction of a
felony evidencing criminal dishonesty or moral turpitude, (ii) a willful and
material breach of Executive’s duty of loyalty to the Company or (iii) after 20
business days following Executive’s receipt of written notice from the Company
specifying the particulars in reasonable detail, Executive’s failure to comply
with or to cure, as applicable (A) a willful and material refusal to comply
with specific written directions of the board of directors (or specific written
directions of the chief executive officer) that are otherwise consistent with
Executive’s employment agreement with the Company or any of their respective
subsidiaries and capable of being performed by him or (B) a willful and
material breach of Executive’s duty of due care to the Company.

 

“Good Reason” means (i) a material adverse
change in Executive’s duties, responsibilities or reporting relationships, (ii)
a relocation of Executive’s principal office to a location more than 30 miles
away from his then current office, (iii) a reduction of

 

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salary not agreed to by Executive, or a
material diminution of other employee benefits (other than any change in
employee benefits approved by the board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, or (iv) a material breach by the
Company of other obligations under Executive’s employment agreement with the
Company or a subsidiary of the Company that are not cured after 20 business
days following the Company’s receipt of a written notification from Executive
specifying the particulars in reasonable detail.

 

10.                                 Miscellaneous.

 

(a)          Company
Representations. The Company represents and warrants to Executive that as
of the date of this Agreement it is not aware of any facts that could preclude
the Executive from making the certifications required by Sections 302 and 906
of the Sarbanes-Oxley Act of 2002, and rules thereunder, or that could give
rise to a forfeiture of bonus or other incentive/equity compensation under
Section 304 of the Act.

 

(b)         Merger; Amendment.  This Agreement, that certain Restricted
Stock Purchase Agreement to be dated August 18, 2003 (the “RSPA”), those
certain Stock Option Agreements (Senior Manager) dated July 17, 2003 and
to be dated August 18, 2003 (the “Stock Option Agreements”), and that
certain Offer Letter dated July 17, 2003 addressed to Barry L. Rowan (the
“Offer Letter”) constitute the entire agreements between the parties and
supercede and replace all prior agreements with respect to the terms and
conditions of Executive’s employment with the Company, and may be changed,
extended or modified only by an agreement in writing signed by the
parties.  All additional terms and
conditions contained in the Offer Letter and not set forth in this Employment
Agreement, the Stock Option Agreements or the RSPA are hereby incorporated into
this Employment Agreement and made a part hereof.  To the extent there are any inconsistent terms and conditions in
the Offer Letter on the one hand and either this Employment Agreement, the
Stock Option Agreements or the RSPA on the other hand, the terms and conditions
of this Employment Agreement, the Stock Option Agreements or the RSPA, as the
case may be, shall prevail over any inconsistent terms and conditions contained
in the Offer Letter.  For purposes of
this Section 10, a reference to this “Agreement” shall be deemed to be a
reference to both the Employment Agreement and the Offer Letter, except where
otherwise explicitly noted to the contrary.

 

(c)          Assignment.  The rights and obligations of the Company in
this Agreement shall inure to its benefit and be binding upon its successors in
interest (whether by merger, consolidation, reorganization, sale of stock or
assets or otherwise).    This Agreement
shall also inure to the benefit of Executive’s heirs, executors, administrators
and legal representatives.  This
Agreement, being for the personal services of Executive, shall not be
assignable by Executive.

 

(d)         Waiver of Breach.  The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any party.

 

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(e)          Arbitration.  Except as otherwise provided herein, any
controversies or claims arising out of, or relating to this Agreement or the
breach thereof, shall be settled by arbitration in accordance with the
commercial rules of the American Arbitration Association, which decision shall
be final and binding on the parties, and judgment upon the award rendered shall
be entered in any court having jurisdiction thereof.  Any party may demand such arbitration in accordance with the procedures
set out in those rules.  The arbitration
shall be conducted in Seattle, Washington, or such other location as may be
mutually agreed upon by the parties. 
The arbitrator shall be selected in a manner that is mutually agreed
upon by the parties.  The arbitrator
shall not award special, consequential, or punitive damages.  In the event of any arbitration proceeding
hereunder, the Company will (x) pay the fees and expenses of the arbitrator and
(y) advance the Executive’s documented out-of-pocket costs (including
reasonable counsel fees and expenses) on a current basis, provided, that if
Executive is determined not to be the substantially prevailing party on the
matters submitted for arbitration (which determination shall be made by the
arbitrator and included in his or her decision), Executive will promptly
reimburse the Company for any expenses so advanced.  Executive acknowledges that the Company is agreeing to make
advances to him pursuant to the preceding sentence in consideration of his
agreement to reimburse the Company for any such advances to the extent required
by the preceding sentence.  The Company
will in all events pay its own costs (including counsel fees and expenses) in
connection with any arbitration proceeding hereunder.

 

(f)            Notices.  All notices given hereunder shall be in
writing and shall be deemed to have been duly given and received (i) when
delivered personally, with receipt acknowledged in writing by the recipient,
(ii) on the tenth business day after being sent by registered or certified mail
(postage paid, return receipt requested), (iii) one business day after being
sent by a reputable overnight delivery service, postage or delivery charges
prepaid, or (iv) on the date on which a facsimile is transmitted, in each case
to the parties at their respective addresses stated below; provided, that if
the intended recipient of any notice hereunder refuses to acknowledge receipt
thereof in writing, such notice shall be deemed to have been given on the date
of such refusal.  Any party may change
its address for notice by giving notice of the new address to the other party
in accordance with the provisions of this paragraph.

 

If to the Company:

 

Nextel Partners, Inc.

4500 Carillon Point

Kirkland, WA 98033

Attention: General Counsel

Facsimile: 425-576-3650

 

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If to Executive:

 

Barry L. Rowan

1050 91st
Ave., N.E.,

Belleview,
Washington 98004

 

(f)            Severability.  The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and the Agreement shall be construed in all respects as though such
invalid or unenforceable provision were omitted.

 

(g)         Survival.  The provisions of Sections 3(d), 4, 5, 8 and
10 shall survive any termination of this Agreement.

 

(h)         Governing Law.  This Agreement shall be interpreted
according to the internal laws of the State of Washington, without regard to
choice of law rules that would result in the application of the laws of another
state.

 

(i)             Remedies Cumulative.  All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or the
beginning of the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by such
party.

 

(j)             Waiver of Jury
Trial.  Each of the parties hereto
hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or related to this Agreement or the transactions
contemplated hereby.

 

[SIGNATURES
PAGE FOLLOWS]

 

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

 

	
   

  	
  NEXTEL PARTNERS OPERATING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN
  CHAPPLE

  	
   

  
	
   

  	
  Title: President, Chief Executive Officer
  and

  
	
   

  	
  Chairman of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEXTEL PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN
  CHAPPLE

  	
   

  
	
   

  	
  Title: President, Chief Executive Officer
  and

  
	
   

  	
  Chairman of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ BARRY L. ROWAN

  	
   

  
	
   

  	
  Barry L. Rowan

  
					

 

11Exhibit
10.1

 

Flextronics
Product and Manufacturing Development Agreement

 

This Product and Manufacturing Development Agreement (“Agreement”) is made as of May 3, 2004, between Medis
Technologies Ltd, having its place of business at 805 Third Ave, New York, NY
10022 (“Client”) and Flextronics International Ltd. having its place of
business at

 

 

1 Hatahasia
Street, Ramat Gavriel Industrial Zone, Migdal-Haemek 23108, Israel
(“Flextronics”).

 

 

Client has created specifications for fuel
cell products it desires to have manufactured in a low-volume New Product
Introduction (NPI) manufacturing environment (“Product Introduction
Center”).  Flextronics has developed
processes and practices for providing such services for many different electronic applications, and at
Client’s request desires to provide said services in accordance with Client’s
specifications. The parties agree as follows:

 

1.0    SCOPE, SERVICES, LICENSE.  This Agreement sets forth the terms and
conditions for the low-volume manufacturing, limited manufacturing and test
engineering, associated logistics and rework activities related to the Client’s
products or assemblies (“Products”) described in the written designs and
specifications of Client (“Specifications”). 
This Agreement does not apply to higher-volume manufacturing activities
occurring outside the Product Introduction Center.  Any agreement related to such manufacturing must be separately
negotiated between the parties.

 

Flextronics agrees to use
reasonable commercial efforts to perform the services (hereinafter “Services”)
pursuant to purchase orders or changes thereto issued by Client and accepted by
Flextronics.  Services shall mean the
items detailed in the Client’s written specifications attached hereto
(hereinafter “Statement of Services”) in Exhibit 1 or added later as defined in
the paragraph herein titled “Additional Services”.

 

Client grants Flextronics a non-exclusive license during the term of
this Agreement to use all of Client’s patents, trade secrets and other
intellectual property required to perform Flextronics’ obligations under this
Agreement.

 

2.0    Payment For
Services and Expenses.  Flextronics will invoice
Client and Client shall pay, in accordance with the terms stated in “Schedule
of Fees” herein (in Exhibit 2), the amount of such invoices submitted by
Flextronics.  In the event that Client
fails or refuses, for any reason, to make any payment due Flextronics pursuant
to this Agreement, and in the event such payment remains delinquent for a
period of thirty (30) days from and after the due date thereof, Flextronics may
after providing written notification to the Client’s representative (see
Section 7) stop all Services under this Agreement and retain all work in
process until all outstanding invoices are paid in full.  To the extent that Flextronics project
personnel cannot be reassigned to other billable work during such stoppage
and/or in the event restart cost are incurred, additional fees may be due and
payable before the Services can resume.

 

As set forth in the Schedule of Fees, Client shall reimburse
Flextronics at cost for all reasonable expenses incurred by Flextronics in the
performance of Services.

 

Client agrees to pay all invoices in U.S. Dollars within thirty (30)
days of the date of the invoice.  Client
agrees to pay one and one-half percent (1.5%) monthly interest on all late
payments.  

 

 

Furthermore, if Client is late with payments, or Flextronics has
reasonable cause to believe Client may not be able to pay, Flextronics may
require prepayment or after providing written notification to the Client’s
representative (see Section 7) delay shipments or suspend Services until
assurances of payment satisfactory to Flextronics are received.

 

3.0           Materials Related To Services.  There are
three classes of materials covered by this contract:

 

1)             “Inventory” is the set of components,
boards, materials and supplies purchased with Client authorization by
Flextronics, or its designee, to be used by Flextronics to perform the
Services, and

 

2)             “Consigned Materials” is the set of
boards, materials and supplies provided by the Client to be used by Flextronics
to perform the Services, and

 

3)             “Total Inventory” is the set of
“Inventory” purchased by Flextronics plus “Consigned Materials” provided by the
Client.

 

A predictable and meaningful forecast against a stable bill of
materials (“BOM”) for the Product may not be immediately available and
Flextronics will therefore use written or email authorization from Client to
initiate procurement activities.  The
authorization will include a reference to a current BOM or list of
materials.  Client hereby authorizes
Flextronics to procure Inventory to perform the Services with two exceptions:

 

1)             Flextronics will not purchase materials
that the Client has specified in writing will be consigned, and

 

2)             Purchases in excess of $25,000 on behalf
of Client require the Client’s explicit written or email approval before being
placed.  Client will respond within
three (3) business days to these requests.

 

In the event Client provides Consigned Materials,
Client agrees to consign adequate quantities to timely manufacture Products and
agrees to cover any production-related attrition at Customer’s sole expense.
Title to Consigned Materials remains at all times with Client and Flextronics
has no obligation to purchase the Consigned Materials.  Flextronics shall ensure that such Consigned
Materials will be allocated part numbers to indicate Client’s ownership.  Flextronics will bear responsibility for any
damage or loss of Consigned Materials related to non-production causes while
they are on the premises of Flextronics. 
Upon reasonable notice, Client may observe the warehouse space in which
the Consigned Materials are stored.

 

Client agrees to pay Flextronics a fee, to be
negotiated later, of not less than [Subject
to a request for confidential treatment; Separately filed with the Commission]
or more than [Subject to a request for
confidential treatment; Separately filed with the Commission] of the
value of the Consigned Materials. 
During 2004 and 2005, Client expects that the value of the Consigned
Materials will exceed the value of Inventory purchased by Flextronics on the
Client’s behalf.  The value of each item
in the Consigned Materials list will be updated not more frequently than every
four (4) months by Client to reflect price adjustments realized by the Client.

 

2

 

Client will be responsible for the Total Inventory, including Total
Inventory that may become excess or obsolete for several reasons, including,
without limitation, the following:

 

a.         Total Inventory purchased before a
Product design is complete in order to secure supply; such Total Inventory may
include Total Inventory with long lead times,

b.        Total Inventory in excess of requirements because of
minimum lot sizes available from suppliers,

c.         Total Inventory in excess of requirements in order to
achieve price targets,

d.        Total Inventory purchased in excess of current
requirements in order to establish a supply line and stockpile Total Inventory
for a later volume production ramp, or,

e.         Total Inventory purchased and later made obsolete by
Client’s design changes.

 

Client will pay Flextronics a monthly carrying fee of [Subject to a request for confidential treatment; Separately filed with
the Commission]  of the purchased value (excluding expediting fees) for all Inventory
(Note: not Total Inventory) that has been held by Flextronics for longer than
thirty (30) days from receipt at Flextronics’ facility and is not covered by a
PO backlog deliverable in the next thirty (30) days.

 

Client
agrees to pay any expedite charges required by suppliers to receive Inventory
prior to the end of the normal procurement lead-time of Inventory.  Such charges may include broker fees.  The term “lead time” in this Section shall mean the
lead time recorded on Flextronics’ MRP system at the time of procurement of
Inventory or at the time of the cancellation of the purchase order or
termination of this Agreement whichever is greater.

 

Flextronics will provide the Total Inventory status (including
Inventory procurement status) any time a reasonable request is received from
Client and the status will include on hand, receipt date, on order, and excess
and obsolete.  Client may then request
actions to limit Client’s liability for Inventory.  Flextronics will then use commercially reasonable efforts to
mitigate the liability of Client for Inventory.

 

In the event that any Inventory remains at the completion of the
Services in the Statement of Work or thirty (30) days after either party
earlier terminates this Agreement, Client agrees to pay all reasonable shipping
fees as well as a material handling fee capped at [Subject to a request for confidential treatment; Separately filed with
the Commission]  of the listed value of the Inventory. 
These fees are due and payable prior to Flextronics’ shipping the
Inventory elsewhere.  Additionally,
Client agrees to the disposal of the Inventory in the following manner:

 

i.            Inventory will be offered to a production facility
selected by Client.  If Flextronics is
required to sell the Inventory at a cost lower than its standard cost, Client
will pay any difference between this standard cost used in the production
facility and Flextronics’ standard cost.

 

ii.         Client may request that Flextronics return Inventory
to the supplier.  In this case, Client
will pay any supplier return fees such as a re-stocking charge.

 

iii.      Client will buy all remaining Inventory including
Inventory which is non-returnable, non-cancelable, or not sold pursuant to (i)
and (ii) above and will pay a price equal to Inventory cost.

 

3

 

Upon request, Consigned Materials and/or capital equipment purchased or
provided by Client shall be returned to the Client with no additional or
“special” fees excepting reasonable shipping charges.

 

The term “cost” in this
section shall mean the cost represented on the bill of materials supporting the
most current Product price at the time of cancellation or termination or, if
the cost of an item of Inventory is not on a bill of materials for the Product,
than the amount actually paid for said item.

 

4.0    Confidential
Information.  During the term of this Agreement and for
three (3) years thereafter each party will not, disclose without the permission
of the other party any of the other party’s information which is conspicuously
marked to indicate its confidential or proprietary nature or which the other
party has otherwise instructed in writing to maintain as confidential.  This paragraph shall not apply to any
information which is publicly available or which is available from a third
party without similar restrictions on disclosure. Upon written request of a
party, the other shall return all such confidential information of the
requesting party and shall destroy all copies thereof.  In the event the parties have executed an
agreement related to confidential information prior to this agreement the terms
and conditions of that agreement shall govern confidential information.

 

5.0    Relationship Of
Parties, Nonsolicitation.  Nothing in this Agreement
shall be construed to constitute a partnership, joint venture, agency, or
employment relationship between Client and Flextronics or Flextronics’
employees or contractors.  It is
understood that Flextronics shall at all times remain an independent contractor
and that Client shall in no event be liable for the debts, liabilities, or
other obligations of Flextronics.

 

Each of the parties hereto agrees that, during the term of this
Agreement and for a period of six (6) months following termination of this
Agreement, neither party will, except with the other party’s prior written
approval, solicit, offer employment to, or contract with the other party’s
employees or contractors.  In the event
an employee or contractor of a party becomes an employee of the other party in
contravention of this section, then the other party shall promptly pay to the
party a sum equaling seventy-five percent (75%) of the said employee or
contractor’s annual base salary to be paid by said other party.

 

6.0    New Developments. 
Except for Flextronics’ existing intellectual property including,
without limitation, Flextronics’ design tools, methodologies, software,
algorithms, or other means that may be used to design production means or the
processes by which products are manufactured, assembled, or tested, Flextronics
agrees that all designs, plans, reports, specifications, drawings, schematics,
prototypes, models, inventions, copyrights, and all other information and items
made or conceived by Flextronics or by its employees, contract personnel, or
agents during the course of this Agreement and related to the Products and
Services shall be and are assigned to Client as its sole and exclusive
property.  Upon Client’s request
Flextronics agrees to assist Client, at Client’s expense, to obtain patents for
any such inventions, including the disclosure of all pertinent information and
data with respect thereto, the execution of all applications, specifications,
oaths, and assignments, and all other instruments and papers which Client shall
deem necessary to apply for and to assign or convey to Client, its successors
and assigns or nominees, the sole and exclusive right, title and interest in
such inventions, copyrights, applications and patents.  Flextronics agrees to obtain or has obtained
written assurances from its employees and contract personnel of their agreement
to substantially the same terms as contained herein with regard to confidential
information and such new developments.

 

4

 

7.0    Client
Representative.
The Client Representative shall represent Client during the performance of this
Agreement with respect to the Services and deliverables defined herein, and has
authority to execute modifications or additions to this Agreement as defined in
the paragraph herein titled “Additional Services”.  Client may change its Client Representative upon 10 days prior
written notice to Flextronics.  Erik
Toomre, Director of Operations, will be the initial Client Representative.

 

8.0    Liability and
Indemnification.  Client and Flextronics hereby acknowledge
and agree that: (1) the Services to be performed hereunder by Flextronics may
be incorporated into a product, process or service to be developed by Client,
(2) Client is responsible for final review, testing, and approval of all
features of the Product and the results of the Services, and (3) Client has
provided Flextronics with data, information and/or Specifications regarding the
Product and the Services which have been used by and relied upon by Flextronics
without independent verification or investigation.  Accordingly, Client shall defend, indemnify, and hold
Flextronics, its affiliated companies, officers, directors, employees, and
agents (“Indemnified Parties”) harmless from any obligations, costs, claims,
judgments, losses, expenses and liabilities (including reasonable attorneys
fees) incurred in connection with any such claim or alleged claim suffered or
incurred by any of the Indemnified Parties as a result of any third party claim
or threatened claim which arises in connection with the Services, Flextronics’
performance under this Agreement, or any Product, process or service of Client,
including but not limited to any claim that any results from the Services
infringe any third party’s copyright, patent, trademark, or other intellectual
property rights. This section shall survive termination or expiration of this
Agreement.

 

9.0    Product
Acceptance and Warranties.

 

9.1                   Product Acceptance.  The Products delivered by Flextronics will be inspected and
tested as required by Customer within ten (10) days of receipt.  If Products are found to be defective in
material or workmanship, Customer has the right to reject such Products during
said period.  Products not rejected
during said period will be deemed accepted. 
Customer may return defective Products, freight collect, after obtaining
a return material authorization number from Flextronics to be displayed on the
shipping container and completing a failure report.  Rejected Products will be promptly repaired or replaced, at
Flextronics’s option, and returned freight pre-paid. Customer shall bear all of
the risk, and all costs and expenses, associated with Products that have been
returned to Flextronics for which there is no defect found.  If the Product is source inspected by
Customer prior to shipment, Customer will inspect goods five (5) days prior to
the requested shipment date.

 

9.2                     Express
Limited Warranty. 
Flextronics warrants that the Products will have been manufactured in
accordance with Customer’s applicable Specifications and will be free from
defects in workmanship for a period of ninety (90) days from the date of
shipment.  Materials are warranted to the
same extent that the original manufacturer warrants the Materials.  This express limited warranty does not apply
to (a) Materials consigned or supplied by Customer to Flextronics; (b) defects
resulting from Customer’s Specifications or the design of the Products; (c)
Product that has been abused, damaged, altered or misused by any person or
entity after title passes to Customer. 
With respect to first articles, prototypes, pre-production units, test
units or other similar Products, Flextronics makes no representations or
warranties whatsoever.  Notwithstanding
anything else in this Agreement, 

 

5

 

                                    Flextronics
assumes no liability for or obligation related to the performance, accuracy,
Specifications, failure to meet Specifications or defects of or due to tooling,
designs or instructions produced or supplied by Customer and Customer shall be
liable for costs or expenses incurred by Flextronics related thereto.  Upon any failure of a Product to comply with
the above warranty, Flextronics’s sole obligation, and Customer’s sole remedy,
is for Flextronics, at its option, to promptly repair or replace such unit and
return it to Customer freight prepaid. 
Customer shall return Products covered by the warranty freight pre-paid
after completing a failure report and obtaining a return material authorization
number from Flextronics to be displayed on the shipping container.  Customer shall bear all of the risk, and all
costs and expenses, associated with Products that have been returned to
Flextronics for which there is no defect found.  Customer will provide its own warranties directly to any of its
end users or other third parties. 
Customer will not pass through to end users or other third parties the
warranties made by Flextronics under this Agreement.  Furthermore, Customer will not make any representations to end
users or other third parties on behalf of Flextronics, and Customer will
expressly indicate that the end users and third parties must look solely to
Customer in connection with any problems, warranty claim or other matters
concerning the Product.

 

FLEXTRONICS
MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS, IMPLIED,
STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH
CUSTOMER, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR
CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

 

 

 

 

 

10.0  Enforcement of
Agreement.  If the scope of any of the provisions of
this Agreement is too broad in any respect whatsoever to permit enforcement to
its full extent, then such provisions shall be enforced to the maximum extent
permitted by law, and the parties hereto consent and agree that such scope may
be judicially modified accordingly and that the whole of such provisions of
this Agreement shall not thereby fail, but that the scope of such provisions
shall be curtailed only to the extent necessary to conform to law.

 

11.0  Additional
Services.  Client and Flextronics agree:

 

6

 

11.1     The fees quoted herein, whether on a “time
and materials” basis or a “fixed price” basis, are contingent upon the accuracy
and completeness of the Specifications and key assumptions, and the performance
of Client’s responsibilities, as described in this Agreement.  Additional fees will be due if Flextronics
is required to perform Additional Services or incur additional out-of-pocket
costs due to (1) changes in scope or Specifications, (2) invalid assumptions,
(3) failure of Client or a subcontractor of Client’s to perform its
responsibilities under this Agreement, or (4) extension of any milestone
completion schedule due to causes outside of Flextronics’ control. If
Flextronics identifies a requirement for Additional Services, it will notify
Client as soon as practical, and will receive Client’s written approval before
continuing.

 

11.2     Additional fees at Flextronics’ standard
hourly billing rates, plus any out-of-pocket costs incurred by Flextronics,
will be due if Flextronics must stop Services due to delays caused by Client or
a subcontractor of Client’s failure to perform its responsibilities, to the
extent that Flextronics project personnel cannot be reassigned to other
billable work.

 

11.3     It is the intention that specific work
packages will be covered by Addendums to Exhibit 1 of this Agreement.  Each Addendum will have a description of
work to be performed, deliverables and a price quotation.  Additionally, each Addendum will not be
considered accepted unless countersigned by both parties.

 

Examples include: a)
manufacturing of a specific product, b) rework activities covering the return
of product from a customer and its repair or replacement, c) logistics services
involved in sending manufactured product directly to a customer, and d) failure
analysis and rework associated with “fixing” product diagnosed as
non-conforming in the manufacturing and test steps of a product.

 

12.0  Notices. 
Notices to the parties should be addressed as follows:

 

	
  Medis
  Technologies Ltd:

  	
   

  	
  Flextronics:

  
	
  805 Third Ave

  New York, NY 10022

  Attn: President

  	
   

  	
  2090 Fortune Drive

  San Jose CA 95131

  attn: President

  

 

13.0  Assignment. 
Neither this Agreement, nor any duties or obligations under this
Agreement may be assigned by either party without the prior written consent of
the other party.  Except for this
prohibition on assignment, this Agreement shall be binding upon and inure to
the benefit of the heirs, successors, and assigns of the parties hereto.

 

14.0  Term and
Termination.  The term of this Agreement shall be from the
date first mentioned above until the Services have been completed in accordance
with the Statement of Work unless otherwise terminated or canceled as provided
herein.  Client can cancel the project
at any time upon written notice to Flextronics.  In the event of cancellation prior to completion of the Services,
Client shall pay Flextronics all outstanding invoices and shall compensate
Flextronics for all work in progress and out-of-pocket costs incurred up to the
date of cancellation plus reasonable shut-down costs.  Flextronics agrees to deliver all results of Services paid for up
to the time of cancellation.  In the
event that Flextronics cannot deliver under this Agreement due to causes beyond
its control, Client will compensate Flextronics for work performed at
Flextronics’s standard hourly billing rates quoted in Schedule of Fees, and for
out-of-pocket costs incurred prior to the date of stoppage.  In the event that Client cannot perform
under this Agreement through causes beyond its control, Flextronics will be
responsible for the return of payments 

 

7

 

made prior to the date of stoppage that are in excess
of work performed and out-of-pocket costs incurred.  No such termination or cancellation shall affect the obligations
of the parties under the sections herein titled “Confidential Information” and
“New Developments”.

 

15.0  Dispute
Resolution.  Before invoking the binding dispute
mechanism set forth in this Agreement, the parties shall first participate in
mediation of any dispute arising under this Agreement. If such mediation is not
concluded within forty-five (45) days from the date of the notice of breach by
one of the parties, then any controversy or claim relating to this Agreement
(whether contract, tort, or both), or the breach of this Agreement, other than
claims for a temporary restraining order, order to show cause or other
extraordinary, equitable relief for which monetary damages are inadequate,
shall be arbitrated by and in accordance with the then existing commercial arbitration
rules of the American Arbitration Association. 
Judgment on the award rendered by such arbitrator(s) may be entered in
any court having jurisdiction.  If such
arbitration is not convened within seventy-five (75) days from the date of the
notice of breach by one of the parties, then either party may file a lawsuit to
resolve the dispute.  Any dispute that
arises under or relates to this Agreement shall be resolved in Santa Clara
County, California, or if necessary, in the state and federal courts located in
Santa Clara.  This Agreement, and any
dispute arising from the relationship between the parties to this Agreement,
shall be governed by California law, excluding its choice of law principles.  The parties consent to the exclusive
jurisdiction of the State and Federal courts in Santa Clara County,
California.  In any litigation,
arbitration, or other proceeding by which one party either seeks to enforce its
rights under this Agreement (whether in contract, tort, or both) or seeks a
declaration of any rights or obligations under this Agreement, the prevailing
party shall be awarded reasonable attorney fees, together with any costs and
expenses, to resolve the dispute and to enforce the final judgment.

 

16.0 Sales Tax.      Should all or any portion of the Services
performed by Flextronics under this Agreement be deemed, at any time, by the
California State Board of Equalization to be taxable as a result of any
determination, audit, regulation, or statute; Flextronics shall invoice Client
for such taxes and Client shall promptly pay all such invoices submitted by
Flextronics.

 

17.0
Complete Agreement.  This Agreement contains the entire agreement
between the parties hereto with respect to the matters covered herein.  No other agreements (other than a precedent
agreement related to confidential information), represented by or on behalf of
the parties hereto or by their employees, contract personnel, or agents, or
contained in any sales materials or brochures, shall be deemed to bind the
parties hereto with respect to the subject matter hereof.  Client acknowledges that it is entering into
this Agreement solely on the basis of the representations contained herein.

 

 

IN
WITNESS WHEREOF, the
parties hereto have signed this Agreement as of the date indicated below.

 

	
  Medis
  Technologies Ltd.:

  	
   

  	
  FLEXTRONICS International, Ltd.:

  
	
   

  	
   

  	
   

  
	
  /s/ 

  	
   

  	
  /s/ 

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
							

 

8

 

EXHIBIT
1

 

STATEMENT
OF SERVICES

 

 

Power
Pack Industrialization

Phase
1 Proposal

Prepared for Medis Technologies Ltd.

Quote Number PTX2246

 

 

Contact Name: 
Michelle Rush

 

Medis
Technologies Ltd.

805
Third Avenue, 15th Floor

New
York, NY 10022

 

 

 

 

CONFIDENTIAL

 

Flextronics Design

Rev 1

April 28, 2004

 

9

 

Revision
History

 

	
  Revision

  	
   

  	
  Release  Date

  	
   

  	
  Description

  	
   

  	
  Author

  	
   

  	
  Approval

  	
   

  
	
  1

  	
   

  	
  4/28/04

  	
   

  	
  Initial Release

  	
   

  	
  JR

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

10

 

	
  1

  	
  PROJECT
  OVERVIEW

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
  STATEMENT OF
  WORK

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Scope

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Tasks

  	
   

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Assumptions

  	
   

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Deliverables

  	
   

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Project Assignments

  	
   

  
	
   

  	
   

  	
   

  
	
  3

  	
  SCHEDULE

  	
   

  
	
   

  	
   

  	
   

  
	
  4

  	
  QUOTATION

  	
   

  
	
   

  	
   

  	
   

  
	
  5

  	
  TERMS
  AND CONDITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  6

  	
  CHANGE APPROVAL AND
  RISK MANAGEMENT

  	
   

  

 

 

Project Overview

Flextronics understands
that Medis’ initial target market is in the US.  However, Medis’ R&D
and technical team is presently based in Israel.  Based on our observation
of our most successful customers, we strongly recommend that Medis’ build a
small but strong product development, procurement and operations team in the
next months.  This team should be organizationally separated from Medis’
base R&D team in Israel.  Elements of this team should be based in Medis’
primary markets.

 

In order to best support Medis’ existing
structure, Flextronics Israel will be Medis’ primary point of contact in the
early stages of the product, supported by Flextronics world-wide
resources.  As Medis’ build out Medis’ own operational team in North
America and identify an optimal manufacturing strategy, Flextronics will match
Medis’ structure with resources in appropriate locations.

 

Moreover, as Medis’ major OEM customers begin to
engage in the products integrated with tablet PC, PDA or
military products, Flextronics will provide resources from each of our centers
of excellence in such products to support Medis’ in these efforts.

 

From discussions with Medis and a review of the provided materials,
Flextronics believes that a multiple phase approach as outlined below is
appropriate for the industrialization and volume production launch 

 

11

 

of the Power Pack Fuel Cell Cartridge We believe that the needs for the
product launch are dynamic and will evolve over the next few months.  Flextronics is prepared to provide support
in a number of tactical areas including design, tooling, compliance, build and
test.  On a more strategic level we can
assist with optimizing the Power Pack units for volume production.

 

New
Product Introduction Phases

Phase
1 Analysis and Planning

Phase
2 Design and Supply of Tooling

Phase
3 Development of Volume Manufacturing and Test Processes for both low and high
volumes

Phase
4 Low Volume Manufacturing

Phase
5 Logistics & Distribution

Phase
6 Product Transfer to High Volume Manufacturing

 

The specific focus
of this proposal is limited to the Phase 1 activities which will form the
foundation of the subsequent phases leading to volume production.  As efforts with Medis proceeds, proposals
for the later phases will be prepared.

 

12

 

Statement
of Work

Scope

This proposal covers the
analysis and planning activities (Phase 1) of the product launch.

 

Tasks

•                  Review existing design in
detail with respect to opportunities to reduce cost of unit or production
process as well as improvements in quality or performance.

•                  Understand the existing  build
process

•                  Understand design validation test requirements

•                  Understand environmental, compliance & certification requirements

•                  Perform design for manufacturability analysis of existing design

•                  Perform mold flow analysis of existing design to optimize tooling
design

•                  Prepare specification document for production cartridges

•                  Review supply chain

•                  Develop strategy for volume manufacturing, assembly and production test
processes.  Assembly technology includes
consideration of

    a. Electrode framing - injection molding,
ultrasonic welding, etc.

    b. Cartridge assembly & valve assembly

    c. Safety issues (seals and glue)

    d. Testing and QC.

•                  Develop strategy for New Product Introduction

•                  Provide production pricing estimates

 

Optional activities that Flextronics could assist with
include:

 

•                  Structural and Thermal Analysis using Ansys (Structural) and Icepak
(Thermal) of existing product

•                  Analysis of chemical compatibility of materials and fuel leading to
selection of materials for production units. A key issue is the KOH
environment. Candidates today are PE, PP, PVC, and ABS.

•                  Develop industrial design concepts for appearance and operation of unit
with attention to finish, packaging and labeling

 

Assumptions

•                  Medis to provide appropriate
documentation and design materials in a timely manner

•                  Medis to provide access to technical
staff for questions and discussion

 

Deliverables

Flextronics will
deliver the following items at the completion of phase I.

•                  Product Specification

•                  Test Requirements

•                  DFM Analysis

•                  Mold Flow Analysis

•                  Volume manufacturing and test strategy

•                  Production price estimates

•                  New Product Introduction Plan

•                  Tooling phase proposal

•                  Low volume manufacturing proposal

 

Project
Assignments

Upon
receipt of an order to begin the project, Flextronics will assign staffing to
the project as follows:

 

13

 

	
  Skill Set

  	
   

  	
  Location

  	
   

  	
  Loading

  
	
  Project
  Manager

  	
   

  	
  US

  	
   

  	
  50%

  
	
  Project
  Manager

  	
   

  	
  Israel

  	
   

  	
  50%

  
	
  Mechanical
  Engineer

  	
   

  	
  Israel

  	
   

  	
  75%

  
	
  Mechanical
  Engineer

  	
   

  	
  US

  	
   

  	
  50%

  
	
  Manufacturing
  Engineer

  	
   

  	
  Israel

  	
   

  	
  75%

  
	
  Manufacturing
  Engineer

  	
   

  	
  US

  	
   

  	
  50%

  
	
  Compliance
  Engineer

  	
   

  	
  US

  	
   

  	
  1
  Week Effort

  
	
  Electrical
  Engineer

  	
   

  	
  Israel

  	
   

  	
  50%

  

 

Total
effort is estimated at [Subject to a
request for confidential treatment; Separately filed with the Commission].

 

14

 

Schedule

Flextronics can begin work on Phase I within one to
two weeks from receipt of approval to start.  
Phase I is estimated at a duration of [Subject to
a request for confidential treatment; Separately filed with the Commission]. 
However, depending on the efforts involved in the specific tasks phase 1
may take longer.

The following table presents high level milestones for
the project:

	
  Milestone

  	
   

  	
  Completion

  
	
  Detailed
  technical review at Medis facilities in Israel

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  DFM
  Analysis complete

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Mold
  Flow complete

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Preliminary
  Design Review & Project Status Presentation

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Delivery
  of initial production product specification

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Review
  & update of product spec

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Presentation
  on volume assembly and test strategy

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Tooling
  phase proposal

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  
	
  Low
  volume manufacturing phase proposal

  	
   

  	
  [Subject to a request for
  confidential treatment; Separately filed with the Commission]

  

 

 

Quotation

This proposal is quoted
as a time and materials program.  For
efforts by Flextronics’ staff, the rate will be [Subject to
a request for confidential treatment; Separately filed with the Commission]. 
With the assumption of 45 hours/person per week the total estimated
labor fees for Phase 1 is estimated at [Subject to
a request for confidential treatment; Separately filed with the Commission].  
Flextronics will invoice for actual time spent.

Travel (as approved by Medis in advance) will be invoiced at cost plus
5%.

 

15

 

Terms
and Conditions

 

1)             This quotation is valid for 30 days from
date of issue.

 

2)             Please reference this quotation on any
resultant Purchase Order documents.

 

3)             In the event the project is cancelled or
a “Stop Work” is issued by Medis at any time, Flextronics has the right to
invoice for all work done to date, all equipment or services purchased or on
order, and work in progress on a time and materials basis.  This will be done according to Flextronics
standard rates and markup in effect at the time of the cancellation or stop
work.  For all prototype or production
type orders, cancellations are not allowed within 30 days of scheduled
delivery.  If a cancellation or “Stop
Work” order is received, Flextronics will be entitled to immediately invoice
Medis for the full price of all product scheduled for delivery within 30 days.
Medis will also be invoiced for raw material inventory and work in progress
beyond the 30 day window.

 

Change
Approval and Risk Management

Flextronics will be
working under a Change Approval and Risk Management procedure for this
program.  In essence, all changes
requested by Medis,  following release
of the purchase order, will be subject to the Change Approval process.  This process will include an acknowledgment
from Flextronics of a request to deviate from the original released project
scope.  This acknowledgment will include
the requested deviation and the impact of this change in cost and overall program
timing.  A signed approval from the
Medis Program Manager and the Medis Management representative will then be
required to complete the final approval of this change.  A commitment from Flextronics is to have a
submission of this Change Approval within 48 hours of the request.

 

16

 

EXHIBIT
2

 

SCHEDULE
OF FEES

 

Hourly
billing rates for representative Flextronics contributors:

 

	
  Functional Area

  	
   

  	
  Hourly Rate

  
	
  Electrical Engineer

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Logistics Associate
  (Shipping & Receiving, Inventory)

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Manufacturing Engineer

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Manufacturing Associate
  (Assembly, Test, Pack Out, Inspection)

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
   

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Materials Sourcing

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Mechanical Engineer

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Product Manager

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Project or Program Manager

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Technician (including
  Failure Analysis and/or Rework)

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  
	
  Test Engineer

  	
   

  	
  [Subject
  to a request for confidential treatment; Separately filed with the
  Commission]

  

 

Note: 
This is not meant to be an exhaustive list of contributors and
Flextronics will perform the Services as it alone deems appropriate.  However, contributions made by individuals
in the functional areas above will be billed at the rate shown.

 

Travel
Expenses

 

Reasonable travel expenses will be reimbursed
by Client at cost plus 5%.  Air travel
will be by Economy class and reasonable efforts will be made to purchase
tickets at least one (and preferably two) weeks in advance of the start of the
trip.  Written authorization of Client
is required prior to purchasing tickets or initiating travel if the aggregate
cost for an individual or group attending a single meeting is in excess of [Subject to a request for confidential treatment;
Separately filed with the Commission].

 

 

17

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