EXHIBIT 10.2

 
 
 
AGREEMENT FOR MANUFACTURE
 
BETWEEN
 
MORE ENERGY LIMITED
 
AND
 
CELESTICA IRELAND LIMITED
 
 
 
Final Version dated 27th September 2005
 
 
 
 
 
 
 

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CONTENTS

     
1.
DEFINITIONS
3
2.
SCOPE OF AGREEMENT
4
3.
FORECAST AND ORDER PROCEDURE
5
4.
MATERIALS
6
5.
DELIVERY OF CONSIGNED MATERIALS TO CELESTICA
7
6.
DELIVERY AND RISK
8
7.
ACCEPTANCE OF CONSIGNED MATERIALS
9
8.
ORDER AND FORECAST, UPSIDE FLEXIBILITY, AND RESCHEDULING
9
9.
CANCELLATION
10
10.
PRICES
11
11.
PAYMENT
12
12.
CUSTOMER CREDIT LIMIT
12
13.
TITLE
13
14.
INTELLECTUAL PROPERTY
13
15.
QUALITY ASSURANCE
14
16.
CHANGE CONTROL
15
17.
COST SAVING SHARING
16
18.
EXCESS AND/OR OBSOLETE MATERIAL
16
19.
CELESTICA WARRANTY
18
20.
CUSTOMER WARRANTY
19
21.
INDEMNIFICATION
20
22.
CUSTOMER PROPERTY
20
23.
CONFIDENTIALITY
21
24.
FREEDOM OF ACTION
21
25.
EXCLUSIONS AND LIMITATION OF LIABILITY
21
26.
TERM AND TERMINATION
22
27.
GENERAL
23
SCHEDULE 1
27
SCHEDULE 2
28
SCHEDULE 3
29

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THIS AGREEMENT is made effective the 27th day of September, 2005 (the “Effective
Date”)

BETWEEN

CELESTICA IRELAND LIMITED, whose registered office is located at Parkmore
Business Park West, Ballybrit, Galway, Ireland ("Celestica”).

AND

MORE ENERGY LIMITED, with its principal place of business at 4 Yodfat, Global
Park, Lod, Israel (the “Customer”).
 
WHEREAS

This Agreement sets out the terms and conditions upon which Celestica will
manufacture and supply to the Customer certain Products and supply certain
Services as herein defined.
 
IT IS AGREED
 
1. DEFINITIONS 
 

The following words and expressions shall have the following meanings:

1.1  
“Affiliate” means, with respect to a party hereto, a corporation that directly
or indirectly controls, is controlled by or is under common control with that
party.

1.2  
“Consigned Materials” shall mean the Materials that are consigned by the
Customer to Celestica that support the manufacture of the Products by Celestica
as listed in Schedule 2.

1.3  
“Customer Information” shall mean the specification for the relevant Product and
all drawings, documentation, data, software, information and know-how, and any
tooling provided by the Customer to Celestica.

1.4  
“Days” means calendar days unless otherwise identified herein

1.5  
“Excess” Material shall have the meaning set forth in Article 19.1

1.6  
“Forecast” shall have the meaning set forth in Article 3.1(b)

1.7  
“Intellectual Property” shall mean all patents, applications for patents,
copyrights, mask works, trade secrets and any other intellectual property rights
recognised by any jurisdiction

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1.8  
“Material” shall mean any Consigned Materials and components and other Materials
comprising or comprised in Products.

1.9  
“Obsolete” Material shall have the meaning set forth in Article 19.4.

1.10  
“Order” shall mean purchase order for Products and/or Services placed by the
Customer subject to the terms and conditions of this Agreement.

1.11  
“Prices” shall mean the prices for Products and/or Services and/or non-recurring
expenditure (“NRE”) (including, without limitation, tooling and fixtures and
other agreed items) agreed between the parties from time to time.

1.12  
“Products” shall mean the products listed in Schedule 1 and described in the
Specifications.

1.13  
“RMA” shall mean a return material authorisation to be provided by Celestica to
the Customer.

1.14  
“Services” shall have the meaning set forth in Article 2.2.

1.15  
“Turnkey Materials” shall mean all materials required to manufacture a given
Product that exclude the Consigned Materials consigned by the Customer.

 

2.  
SCOPE OF AGREEMENT

 

2.1  
This Agreement will apply to all Orders for Products and Services placed by the
Customer and accepted by Celestica under this Agreement.

2.2  
From time to time, Customer or its Affiliates may wish to purchase services from
Celestica. Such “Services” may include, but shall not be limited to:
development, design, engineering, out-of-warranty repair, prototyping,
distribution or other services as Customer may request and Celestica may provide
from time to time and which may be described in more detail in various
statements of work or Orders. Unless otherwise agreed to in writing between the
parties, Celestica shall perform all Services in accordance with the terms and
conditions set forth in this Agreement and in accordance with Celestica’s
then-current fee schedule for such service, or if no fee exists for such
service, at a mutually agreed upon price. 

2.3  
From time to time the Customer or its Affiliates may wish to purchase Products
and/or Services directly from a Celestica Affiliate. In such event the Customer
or its Affiliate, as applicable, shall issue an Order directly to Celestica’s
Affiliate. The Order shall incorporate by reference the terms and conditions of
this Agreement and, with respect to that Order, this Agreement shall be
interpreted as if it had been entered into directly by

 
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the Celestica Affiliate and the Customer or Customer Affiliate, as applicable.
By issuing an Order, Customer’s Affiliates agree to be bound to the terms and
conditions of this Agreement. Customer will provide a copy of this Agreement to
its Affiliates who wish to place Orders.

 

2.4  
Celestica will manufacture and deliver Products and supply Services pursuant to
the terms of this Agreement, subject to the Customer first having provided
Celestica with the Consigned Materials, the specification for the Product,
together with any Customer Information and all other necessary drawings,
documentation, data, software, and other information of the Customer and any
consigned materials necessary for the manufacture of Products and the provision
of Services.

2.5  
The Customer will accept Products and Services delivered, at agreed upon Prices,
pursuant to the terms of this Agreement.

 

3.  
FORECAST AND ORDER PROCEDURE

 

3.1  
Each month, or on an more frequent basis as the parties may mutually agree, the
Customer will provide Celestica with updated Orders and Forecasts for the
Products so as to maintain a minimum of twelve (12) months of Order and Forecast
coverage at all times. This monthly update shall include:

 

(a)  
Order(s) for Product requirements, in weekly increments, for that month and the
following three (3) months, so as to maintain a minimum of three (3) months of
required Product Orders at all times. 

 

(b)  
A forecast (the “Forecast”) of its intended purchases of Products for all
remaining months in the Order and Forecast coverage period described above.
Customer will use its best efforts to ensure that the Forecast is accurate but
he Forecast will not constitute an Order.

3.2  
Celestica will acknowledge receipt of Orders as soon as reasonably practicable
and notify the Customer of acceptance or non-acceptance of Orders within five
working (5) days of receipt.

3.3  
Celestica will use its commercially reasonable efforts to accept unplanned
Orders or an increase in the quantity to be delivered relative to an Order,
subject to the Customer's agreement to pay any related premium costs and charges
incurred by Celestica.

3.4  
Orders will incorporate by reference, the terms and conditions of this
Agreement. This Agreement shall supersede the terms and conditions of such
Orders and exclude any pre-printed terms and conditions found on the Customer’s
Orders, which shall be deemed deleted. Orders will describe in more detail the
required Product and/or Service to be rendered by Celestica and will include:
the description and Price per unit of Product; the quantities ordered; Product
revision details and such other information as the parties may

 
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agree is required. Orders may be issued in writing, by mail or facsimile, or by
electronic means as agreed to by the parties.

 

 
3.5
It is understood that the product of Customer is a new product and the rate of
delivery to the market is not presently known and may be gradual. Accordingly,
the Parties will coordinate a gradual increase in the quantity capabilities of
Celestica (personnel and materials etc.) so as to manage the risk of the costs
of the program.

 

4.  
MATERIALS

 

4.1  
The Customer hereby authorises Celestica, and Celestica shall be entitled, to
order Turnkey Materials in accordance with Material leadtimes (for which
Customer will be responsible in accordance with Article 19 herein), as necessary
to support Orders and Forecasts. Such authorisation shall include without
limitation, additional Materials as are, in Celestica’s opinion, reasonably
required, taking into account any supplier minimum order requirements, packaging
sizes and economic order quantities.

4.2  
Without limiting Article 4.1above, where lead times for Materials are at any
time longer than the period covered by Orders set out in Article 3.1(a)above,
Celestica shall be authorized to order such Materials on the basis of the
Forecast in order to meet the Customer's delivery requirements requested
therein.

4.3  
Where the Customer so directs, Celestica will procure Turnkey Materials in
accordance with the Customer’s approved vendor list. To use other vendors of
Turnkey Materials, Celestica must obtain the Customer’s prior written consent,
which consent shall normally be provided within fourteen (14) Days and, in any
event, shall not be unreasonably withheld or delayed.

4.4  
In the event of any inconsistency between the terms and conditions of this
Agreement and Customer negotiated terms and conditions with suppliers for
Customer controlled components, then to the extent of any such inconsistencies
or in the event of any Materials quality issues, Celestica shall be relieved of
any liability to Customer with respect to Customer controlled components.

4.5  
For Customer controlled Materials, Customer will use its commercially reasonable
efforts to require its vendors to provide inbound hubs for the benefit of
Celestica and Customer. Celestica will only be required to purchase Materials
from such inbound hubs consistent with Customer’s immediate requirements for the
manufacture of Products in accordance with Orders placed by Customer and
accepted by Celestica.

4.6  
When requested by the Customer and upon receipt of a Customer Order, Celestica
will purchase lifetime buys of Turnkey Materials that exceed the Forecast
horizon. Upon receipt of the Turnkey Materials, Celestica will invoice the
Customer for such Turnkey Materials. Payment shall be due to Celestica in US
dollars, without offset or deduction, within thirty (30) Days from the date of
Celestica’s invoice to Customer for such Turnkey Materials. For the period of
time that Celestica stores such Materials for Customer, such

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Materials will be subject to warehousing charges at Celestica’s then-current
rates. Warehousing charges will be invoiced to Customer on a monthly basis.

 

4.7  
Where the Customer directs Celestica to buy Turnkey Materials from contracts
that are negotiated by the Customer, the Customer will have primary
responsibility for directing its suppliers to perform in accordance with these
contracts, including resolving any quality issues. The Customer shall make
reasonable commercial efforts to align the terms and conditions for Customer
controlled components with the terms and conditions of this Agreement. The
Customer agrees to disclose the relevant terms and conditions of such supplier
agreements to Celestica, including but not limited to terms related to payment,
forecast, materials liability, return rights, flexibility terms, and MOQ. The
Customer will be responsible for compensating Celestica for its reasonable costs
related to Material quality issues or as a result of misalignments between
Customer’s supplier agreements and this Agreement. Notwithstanding the
aforesaid, the parties shall agree a Quality Assurance Plan including inspection
and testing requirements in accordance with Article 16. Celestica shall maintain
quality assurance systems for the control of Material quality and shall promptly
notify Customer of any identified Material quality issues or deficiencies..

 

4.8  
From time to time, the Customer may request that Celestica sell Turnkey
Materials to Customer or its third party designee. Celestica will make
reasonable efforts to accommodate any such request, provided that any such sale
of Turnkey Materials does not interfere with Celestica’s ability to perform
Services and provide Product under this Agreement. Such Turnkey Materials shall
be sold to Customer at the price reflected in the current cost of the Products,
together with the applicable Material markup, SG&A and profit rates, or as
otherwise agreed.

 
 

5.  
DELIVERY OF CONSIGNED MATERIALS TO CELESTICA

 

5.1  
Except as agreed otherwise, all Consigned Materials consigned to Celestica are
delivered DDP (INCOTERMS 2000) Celestica’s premises. Arrangement for Carrier
transportation is the responsibility of the Customer.

5.2  
Risk of loss and damage will pass from the Customer to Celestica upon delivery
by the Customer pursuant to clause 5.1 above.

5.3  
The Customer will ship Consigned Materials in mutually agreed upon form and
packaging that supports Celestica’s manufacturing process and conforms to the
Consigned Material specifications as supplied by the Customer.

5.4  
Celestica shall store Consigned Materials in a separate, secure location to
prevent loss or damage.

5.5  
It is the responsibility of the Customer to ensure that enough Consigned
Materials are delivered on a timely basis to support Orders and Forecasts
including any additional

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quantities for mutually agreed upon process fallout per Quality Assurance
section 16. Celestica will have no liability for delayed delivery of Product due
to late or non-delivery of Consigned Materials.

 

5.6  
Celestica shall not use Consigned Materials for any purpose other than for
manufacturing Product, unless otherwise specified by the Customer in writing.

 

6.  
DELIVERY AND RISK

 

6.1  
Except as agreed otherwise, all Products sold to the Customer are delivered
ExWorks (INCOTERMS 2000) Celestica's premises of manufacture, after packaging
and certification by Celestica of conformance with the specifications and other
terms of this Agreement.

6.2  
The Customer will arrange transportation and specify carrier and transportation
instructions. If the Customer has not done so, Celestica shall arrange for
transportation on the Customer’s behalf and at the Customer’s cost as directed
in writing by Customer.

6.3  
Celestica will use its reasonable efforts to meet agreed delivery dates.
Celestica will bear the cost of any reasonable additional freight charges
necessarily incurred as a result of persistently late delivery, where such costs
have been agreed by Celestica in advance.

6.4  
Risk of loss and damage will pass from Celestica to the Customer upon delivery
by Celestica pursuant to Article 6.1above.

6.5  
All Products will be packed by Celestica in secure packaging considered
appropriate by Celestica or otherwise as may be agreed to by the parties.

6.6  
The Customer is responsible for obtaining:

 
(a)
any necessary export and import licenses beyond the delivery point in Article
6.1 relating to Products; and

 

 
(b)
any government or regulatory approvals relating to the marketing, sale or use of
Products and maintaining compliance with all applicable laws and regulations in
any jurisdiction to or from which Products are shipped or in or from which the
Products are marketed, distributed or sold.

 
Celestica will at Customer expense, use commercially reasonable efforts to
assist Customer in these activities.

6.7  
Celestica will have the risk of loss for all Materials as follows:

a.  
Risk of loss and damage to Consigned Materials will pass from Customer to
Celestica upon delivery by Customer pursuant to Article 5.1

 

b.  
Risk or loss and damage to Turnkey Materials will pass from Celestica to
Customer upon deliver in the form of finished product pursuant to Article 6.1or
otherwise, subject to the terms of this Agreement.

 
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7.  
ACCEPTANCE OF CONSIGNED MATERIALS

 

7.1  
Celestica may reject Consigned Materials which are established, a) to have been
materially damaged prior to delivery or b) not to have met, in all material
respects, the specifications provided by the Customer (“Rejected Consigned
Materials”).

 

7.2  
Celestica will notify the Customer in writing of Rejected Consigned Materials
within three (3) Days of original discovery and will return Rejected Consigned
Materials at the Customer’s risk and expense to the Customer within a further
thirty (30) Days.

7.3  
The Customer will then at its election either promptly replace with Consigned
Materials free from defect or reduce the forecast by the appropriate amount in
respect to Rejected Consigned Materials and notify Celestica of its action.

 

8.  
ACCEPTANCE OF PRODUCTS BY CUSTOMER

 

8.1  
Customer may reject Products which are established, a) to have been materially
damaged prior to delivery or b) not to have met, in all material respects, the
specifications provided by the Customer (“Rejected Products”).

8.2  
Customer will notify Celestica in writing of Rejected Products within ten (10)
Days of original receipt of shipment and will return Rejected Products at
Celestica’s risk and expense to Celestica within a further thirty (30) Days. The
Customer requires an RMA from Celestica prior to returning any Product.
Celestica’s issuance of an RMA will not be unreasonably withheld. In the case of
replacement or credit, title to the Rejected Product shall pass to Celestica on
delivery to Celestica and verification of Rejected Product.

8.3  
Celestica will then promptly repair or replace with Products free from defects
established in Article 8.1 and reship at Celestica’s expense the new Products or
credit as agreed.

8.4  
Upon acceptance by Customer of Product (including non-rejection as stated above)
the provisions of Article 20 shall apply. In the absence of earlier notification
of rejection, the Customer will be deemed to have accepted Products ten (10)
Days after delivery.

 

9.  
ORDER AND FORECAST, UPSIDE FLEXIBILITY, AND RESCHEDULING

 

9.1  
Upon Customer’s request, Celestica shall use its commercially reasonable efforts
to:

 
(a) accept unplanned Orders, or
 
(b) accelerate delivery dates of existing Orders, or
 
(c) accept increases in quantities on existing Orders;
 
subject to Customer agreeing to meet any increased costs or premium charges
incurred by Celestica as a result of such activity.

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9.2  
Subject to Article 10.4, Customer may request Order delay or reschedule, which
Celestica shall accept, provided Customer agrees to pay:

(a)  
No additional charge if delay or reschedule is outside the fixed 90 Day Order
period;

(b)  
The transformation and related costs of such Order(s) (or any part thereof) so
delayed or rescheduled that Celestica is unable to mitigate, where
"Transformation Cost" is defined as the full costs of Celestica attributable to
such delayed or rescheduled Product manufacture which are not otherwise covered
by Product being completed, including personnel, space, utilities, and the like,
minus Celestica’s Material cost for such Products, plus a reasonable margin.
Celestica will use its reasonable efforts to reallocate costs and thereby
mitigate the costs to Customer of such delay or rescheduling. On Customers
request, Celestica shall provide evidence of such costs.

9.3  
Further to article 9.2, Celestica shall use its commercially reasonable efforts
to mitigate the costs caused by any such delay or rescheduling and any Excess or
Obsolete Material created as a result of such delay or rescheduling will be
dealt with in accordance with Article 19. 

9.4  
In the event that Customer requests completed Product be stored at Celestica
prior to shipment to delivery pursuant to Article 6.1 Celestica shall invoice on
delivery of Product into the finished Product store and the Customer shall pay
pursuant to Article 12. The parties shall agree the quantity of Product to be
retained in the finished Product store at risk of loss and damage to Celestica.
Celestica may apply a reasonable warehousing charge, which shall be invoiced to
Customer on a monthly basis..

 

10.  
CANCELLATION

 

10.1  
Subject to Article 10.2, if Customer cancels an Order, (or any part thereof) or
if an Order is deemed to be cancelled pursuant to Article 10.5, then:

 

(a)
in the case of prototypes, pilot, pre-production, work-in-process (which
Supplier shall be entitled to complete and deliver to Customer) or finished
Products, Customershall pay to Supplier the full Price for such Order (or any
part thereof) so cancelled;

 

(b)
if the Order (or any part thereof) is cancelled within ninety (90) days of the
original scheduled delivery date specified in such Order, then, for all Products
that Celestica has not at such time commenced the manufacturing process,
Customer shall pay to Celestica the transformation cost of the Order(s) (or any
part thereof) so cancelled, where "transformation cost" is defined as the full
Product price that the Celestica would have received for such Products if it had
completed the manufacturing process on the date the Order(s) (or any part
thereof) was cancelled, minus Celestica’s Material cost for such Products;

 
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(c)
Customer shall pay for all costs associated with any Obsolete Inventory and/or
Excess Inventory that arises as a result of the cancellation of such Order (or
any part thereof), in accordance with Article 19 of this Agreement; and

 

(d)
Customer shall pay Celestica an amount equal to any investment incurred by
Celestica specifically in relation to that Order or this Agreement if the entire
Agreement is terminated with the prior agreement of Customer and which has not
been fully recovered by Celestica from Customer through amortization or other
means.

10.2  
If any Order (or part thereof) is cancelled due to a termination pursuant to
Article 27, Customer may direct Celestica to cease its manufacturing operations
in respect of Products affected by such termination. In the event of such
termination, Customer shall pay to Celestica all relevant amounts specified in
Article 10.1.

 

10.3  
Celestica will use its commercially reasonable efforts to attempt to mitigate
the costs described above on behalf of the Customer. All costs of Obsolete or
Excess Materials and related handling charges shall be addressed in accordance
with Article 19.

10.4  
In the event of Order cancellation, delay or reschedule that results in no
Product manufacture for one (1) month or more. Customer and Celestica shall
review and agree the minimum requirement of resources and fixed costs that
Celestica shall maintain at Customers cost until Product Orders are placed,
which shall be invoiced to Customer on a monthly basis.

10.5  
If the Customer refuses or fails to accept any delivery made by Celestica
pursuant to any Order or this Agreement, such Order (or the relevant part
thereof) may, at Celestica’s option, be deemed to have been cancelled by the
Customer.

 

11.  
PRICES

 

11.1  
Prices are subject to volume of units and the number of shifts and are set forth
in Schedule 3 to this Agreement. Prices will be subject to review by the Parties
on a quarterly basis (and at such other times as may be agreed) at a Price
review meeting to be arranged by the authorised representatives of the parties.
Unless mutually agreed in writing the Prices in Schedule 3 (as modified
hereunder by mutual agreement from time to time) will apply.

11.2  
Changes to Prices, and the manner and timing of their implementation, will be
agreed by the parties on a fair and reasonable basis at such review meeting. In
the event that Celestica holds any Product on behalf of the Customer, and
Product is re-priced, Customer shall pay to Celestica an inventory revaluation
charge equal to the difference between the previous Price and the new Price,
multiplied by the total quantity of such Product owned by Celestica as of the
effective date of the new Price.

11.3  
Prices are related to volume and in the event Customer does not purchase the
anticipated volume of Product, Celestica reserves the right to adjust Prices to
reflect the

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actual quantities of Product shipped to the Customer and invoice the Customer
for the difference between the Price paid and the adjusted Price.

 

12.  
PAYMENT

 

12.1  
All payments by Customer to Celestica under this Agreement shall be in the
currency quoted by Celestica in the relevant quotation, unless otherwise
restricted by the laws of a particular country in which the Products or Services
are being purchased. Payment is due, without set off or deduction, net thirty
(30) days from the date of invoice.

12.2  
Celestica will invoice on, or as soon as reasonably practicable after, the
delivery of Products pursuant to Article 6.1 and Article 9.4, or the rendering
of Services.

12.3  
Unless the Customer provides appropriate exemption certificates, the Customer
will be solely responsible for and will pay all taxes including value added
taxes, duties or other governmental or regulatory charges in any country
resulting from the performance of this Agreement, except for any income related
taxes for which Celestica is directly liable.

12.4  
If the Customer fails to make any payment by the due date Celestica may, in
addition to its other rights and remedies, charge interest on any overdue
amounts, together with any additional costs and charges incurred by Celestica in
collecting the overdue payment. If payment is not received within seven (7) Days
of the due date, Celestica will notify Customer of its default and if the delay
is due to a genuine error in Customer payment processing and payment is not
received within a further seven (7) Days, then Celestica shall charge a late
payment charge at a rate of one (1) percent per month after such fourteen (14)
Day period, up to a maximum of thirty (30) Days from original due date. A late
payment charge at a rate of one and a half (1.5) percent per month shall apply
thereafter. It is anticipated that such genuine error would constitute an
exceptional circumstance and in any other event Celestica may charge a late
payment charge at a rate of two (2) percent per month from the original due
date. Furthermore, Celestica may elect not to perform any further obligations
under this Agreement and/or any Order until payment is received.

 

13.  
CUSTOMER CREDIT LIMIT AND PARENT GUARANTY

 

13.1  
The Customer acknowledges that Celestica, in the performance of its obligations
under this Agreement, will incur financial obligations on behalf of the
Customer. The parties agree that Celestica will, before it incurs financial
obligations on behalf of the Customer, and from time to time, establish, and
advise the Customer in writing, the Customer’s credit limit with Celestica. The
credit limit will be established after consultation between Customer and
Celestica. Customer agrees to operate within its credit limit. In the event that
Customer’s financial liability exceeds the amount of this credit limit,
Celestica will give Customer notice of its default of this condition and, if

 
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not remedied within 7 Days, Celestica has the right to take appropriate action
to reduce its financial obligations.

 

13.2  
If the Customer entity entering into this Agreement is the parent corporation,
then Customer unconditionally and irrevocably guarantees all payment and
financial obligations, which arise directly or indirectly, from non-performance
of an Affiliate’s obligations to Celestica and/or its Affiliates. In the event
that a Customer Affiliate fails to perform any of its payment or other financial
obligations to Celestica and/or its Affiliates under this Agreement, Celestica
may make a claim against Customer under this guarantee. The liability of
Customer as guarantor hereunder shall not be affected or modified by (i) failure
of Celestica and/or its Affiliates to exercise any of their respective rights or
remedies under this Agreement, any agreement, instrument or writing with the
Customer Affiliate or at law, or (ii) any waiver by Celestica and/or its
Affiliates of any of their respective rights or remedies under this Agreement,
any agreement, instrument or writing with the Customer Affiliate. For greater
certainty, Celestica and/or its Affiliates shall not be required to take any
other steps against the Customer Affiliate prior to enforcing any of their
respective rights or remedies hereunder against Customer.

13.3  
If the Customer entity entering into this Agreement is not the parent
corporation, then, in consideration of Celestica’s extension of credit to the
Customer, Customer shall have its parent corporation enter into a mutually
acceptable agreement with Celestica, on or before the execution of this
Agreement, to unconditionally and irrevocable guarantee to Celestica the prompt
payment of all payment and financial obligations that are or may become due to
Celestica from the Customer Affiliate under this Agreement.

 

14.  
TITLE

 

14.1  
Title and interest to Consigned Materials shall be with the Customer at all
times. In addition, title and interest to other Materials paid for by Customer
and held by Celestica shall be with the Customer.

14.2  
Except as otherwise specified in Article 20.2, title and interest to Products
will pass to the Customer upon delivery pursuant to Article 6.1 or on delivery
of Product into the finished Product store pursuant to Article 9.4.

 

15.  
INTELLECTUAL PROPERTY

 

15.1  
Except as otherwise set forth herein, neither this Agreement nor the provision
of Services hereunder shall give either Celestica or the Customer any ownership,
interest in, or rights to the intellectual property of the other party. All
intellectual property that is owned or controlled by a party at the commencement
of the Services, or obtained independently during the performance of the
Services, (“Pre-existing IP”) shall remain under the ownership or control of
such party throughout the performance of the Services and thereafter. 

 
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15.2  
As used herein, the term “Innovations” shall mean any improvements, inventions,
developments or modifications conceived or developed by Celestica solely or
jointly with the Customer pursuant to an ECN in accordance with Article 17 or
otherwise during the performance of the Services. The Customer shall be assigned
ownership and sole intellectual property rights to any and all Innovations that
are derived from or which contain any of the Customer Information, and/or the
Customer Pre-existing IP therein (the "Customer Innovations”), Celestica shall
retain all ownership and Intellectual Property rights to, including all other
Innovations (the “Celestica Innovations”), whether or not jointly conceived,
which:

 
(a)
derive in whole or in part from Celestica’s Pre-existing IP, proprietary
information, materials and/or intellectual property; and/or

 
(b)
relate to the business of electronic design automation, the provision of printed
circuit board or semiconductor design, generic manufacturing or design know-how,
generic design processes, or generic design consulting services. For clarity
sake, the term “generic” is meant to exclude innovations with specific
application to fuel cell products or related technologies, which innovations, if
any, will be the sole property of Customer..

15.3  
To perfect a party’s (“IP Owner”) ownership of its Pre-existing IP or
Innovations in accordance with Clauses 15.1 and 15.2 above, the other party
agrees, at the IP Owner’s expense, to assign to the IP Owner all rights the
other party may have in the Pre-existing IP or Innovations and, if requested, to
assist and co-operate with the IP Owner in all reasonable respects, execute all
documents, and take all further acts reasonably necessary for the IP Owner to
acquire, transfer, maintain and enforce its right in such Pre-existing IP or
Innovations. Each party hereby waives, and shall secure the waiver of its
employees, agents, and subcontractors relating to, any moral rights in such
Pre-existing IP or Innovations in favor of the IP Owner, its successors and
assigns to the fullest extent permitted by law.

15.4  
Each party agrees not to directly or indirectly reverse engineer any tangibles
resulting from the Pre-existing IP or Innovations of the other party. Each party
agrees not to alter, remove or destroy any proprietary markings or
confidentiality legends or notices placed upon or contained within the
Pre-existing IP or Innovations of the other party. Nothing in this Agreement
gives either party the right to use the other party’s name, trade mark (s) or
refer to or disclose the content hereof, whether directly or indirectly, in
connection with any marketing or other activities, without the other party’s
prior written consent.

 

16.  
QUALITY ASSURANCE

 

16.1  
Celestica will maintain quality assurance systems for the control of material
quality, processing, assembly, testing, packaging and shipping in accordance
with its usual policies and practices. The workmanship standard to be used by
Celestica in building

 
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PCB sub-assembly Products is IPC-A-610 Rev. C Class 2, as published by the
Institute for Interconnecting and Packaging Electronic Circuits. Celestica will
carry-out the work hereunder pursuant to a mutually agreed Quality Assurance
Plan. Any change to the aforementioned standard or Plan shall require the mutual
agreement of the Parties.

 

16.2  
Celestica will perform its normal test procedures relating to Products and
Services. If Celestica performs tests using test equipment, procedures or
software provided by the Customer, Celestica will have no liability for defects
in Products where failure to isolate the defect is attributable to such
equipment, procedures or software.

16.3  
Either party may during normal business hours and following reasonable notice
and subject to the other party’s normal security and confidentiality
requirements, review the other party’s facilities and quality control procedures
as reasonably necessary for the first party to satisfy itself of the other
party's compliance with its obligations under this Agreement.

16.4  
The parties will endeavour to meet quarterly to discuss and resolve any issues
which may have arisen including those relating to quality, performance,
engineering changes, obsolescence or excess.

16.5  
For Consigned Materials, it is recognised by the Customer that through the
regular course of manufacturing, Celestica will experience a certain amount of
fallout. The Parties will agree on an accepted level of fallout of the
Consignment Materials, and the Customer will not hold Celestica liable for this
level of fallout. Beyond this level, Celestica will be responsible for the cost
of replacing such Consigned Materials. The parties will review the previous
quarters percentage fallout at the quarterly business review and the Customer
will thus provide additional Consigned Materials to ensure that Orders can be
fulfilled. . If fallout is due to defective Consigned Materials, the Customer
will be advised and the Customer will direct Celestica to either return such
defective Consigned Materials for failure analysis or scrap.

 

17.  
CHANGE CONTROL

 

17.1  
Either party may at any time propose changes to the relevant specification or
the Products by a written Engineering Change Notice (“ECN”) to the other party.

17.2  
The recipient of an ECN will use all reasonable efforts to provide a detailed
response within fourteen (14) Days of receipt.

17.3  
Celestica will advise the Customer of the likely impact of an ECN (including but
not limited to delivery scheduling and Prices) on the provisions of any relevant
Orders.

17.4  
Neither party will unreasonably withhold or delay agreement to an ECN and the
parties will endeavor to agree and implement at the earliest opportunity ECN’s
relating to personal and product safety.

 
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17.5  
Until an ECN and any associated impact have been agreed in writing, the parties
will continue to perform their obligations without taking account of that ECN.

17.6  
Any Obsolete and/or Excess Materials resulting from an ECN will be dealt with in
accordance with Article 19 below.

17.7  
All costs of assessing and implementing ECN’s (including without limitation:
premium costs of Materials; Material handling charges; process and tooling
charges; administrative charges; engineering charges; and evaluation and testing
costs) will be the responsibility of the Customer, except for ECN’s initiated by
Celestica solely to improve its manufacturing processes. 

 

18.  
COST SAVING SHARING 

 

18.1  
Any cost savings which are achieved by Celestica as a result of changes proposed
by Celestica will be dealt with in the following manner and the calculation of
such cost savings sharing will commence in the quarter following the quarter in
which Celestica’s implementation costs were fully recovered: (a) Celestica will
retain 75% of the cost savings to the end of the first full quarter after
Celestica fully recovers any costs of implementation; (b) the savings will be
shared by Celestica and the Customer on a 50/50 basis in the subsequent quarter:
and (c) thereafter, 100% of the savings will be to the benefit of the Customer.
The Parties will agree targets within a formal cost reduction plan to be
administered between them.

 

19.  
EXCESS AND/OR OBSOLETE MATERIAL

 

19.1  
If at any time, the aggregate quantity of any item of Turnkey Material that
Celestica has on hand, which has been ordered, manufactured or acquired in
accordance with Article 3 and Article 4, is greater than the sum of: (i) the
quantity of such item of Turnkey Material consumed by Celestica in the
manufacture of Products for the Customer under this Agreement in the preceding
thirty (30) Days and (ii) the quantity of such Material Forecasted to be
consumed by Celestica in the manufacture of Products for Customer under this
Agreement in the subsequent fifteen (15) Days, then such excess quantity of
Turnkey Material shall be deemed “Excess”.

 

19.2  
On or about the fifteenth (15th) day of each month, Celestica shall provide
Customer with a notice, setting out the amount and value of any Excess Turnkey
Material on hand at the end of the previous month. Within sixty (60) Days of the
date on which Customer receives such notice from Celestica (the “Notice Receipt
Date”), Customer shall contemporaneously issue to Celestica (i) an inventory
purchase order for any remaining Excess Turnkey Material, pursuant to Article
19.5 below, and (ii) a purchase order for an inventory carrying charge (the
“Inventory Carrying Purchase Order”) in the amount of one and a half (1.5)
percent per month of the average value of such Excess Material carried by
Celestica from the Notice Receipt Date to the date that the

 
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inventory purchase order and the Inventory Carrying Purchase Order for such
Excess Turnkey Material is issued by Customer to Celestica. The calculation of
such average shall be based on month-ending inventory levels unless otherwise
agreed in writing.

 

19.3  
Customer shall keep Celestica’s procurement organization apprised of any Turnkey
Material purchased by Customer from Celestica under this Article 19, which is
suitable for use in the manufacture of Products and Celestica shall purchase
such Material from Customer, on an as-needed basis, prior to purchasing such
Turnkey Material from Material vendors. The purchase price of such Material
shall be at the cost reflected in the then current Product pricing or as
otherwise agreed in writing.

19.4  
In the event of:

 
(a) a complete or partial termination, rescheduling or cancellation of an Order,
or
 
(b) a reduction in a Forecast, or
 
(c) the termination of all or any part of this Agreement, or
 
(d) any other event, including a change in specifications or an engineering
change,
 
which results in any Turnkey Material which Celestica has purchased or issued a
purchase order to the Material vendor for in accordance with Article 3 and
Article 4, no longer being required by Celestica to manufacture Products (or
being otherwise unsuitable for use in the manufacture of Products due to the
passage of time) within the subsequent six (6) months, based on the most recent
Orders and Forecast, such Turnkey Material shall be considered “Obsolete” and
Customer shall be notified of the same subsequent to Celestica’s mitigation
efforts as specified in Article 19.6 below. Customer shall, within seven (7)
business days of receiving such notice, issue an inventory Order to Celestica
for such Obsolete Turnkey Material, pursuant to Article 19.5 below.

19.5  
Customer will purchase the Excess Turnkey Material and/or the Obsolete Turnkey
Material, as the case may be, pursuant to an inventory purchase order at the
following prices: (i) in the case of Excess Turnkey Material, at the price
reflected in the current cost of the Products, together with the applicable
Turnkey Material markup, (ii) in the case of Obsolete Turnkey Material, at the
price paid by Celestica for such Obsolete Turnkey Material, together with the
applicable Turnkey Material markup. Any Excess or Obsolete Turnkey Material
purchased by Customer from Celestica pursuant to an inventory purchase order
shall be deemed Customer Owned Inventory. The inventory purchase order shall
include the costs of mitigation incurred by Celestica pursuant to Article 19.6
below, including under-recoveries resulting from the sale of Turnkey Material at
prices less than the price originally paid by Celestica for such Turnkey
Material, as well as costs relating to re-stocking or return charges. Any
Customer Owned Inventory that Customer requests Celestica to store will be
subject to warehousing charges at Celestica’s then-current rates. Warehousing
charges will be invoiced to Customer on a monthly basis.

 
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19.6  
When any Turnkey Material is for any reason at any time rendered Excess or
Obsolete, Celestica will use its reasonable efforts to:

 
(a) cancel outstanding orders for such Turnkey Materials; and
 
(b) return or sell such Turnkey Materials back to the original supplier or to a
third party on such terms as Celestica may determine at its discretion; and
 
(c) use excess/non-cancellable Turnkey Materials for the manufacture of other
Products.

Such mitigation efforts shall continue for a period of up to fourteen (14) Days.

19.7  
Notwithstanding the payment term specified in Article 12.1, all invoices
relating to Excess or Obsolete Turnkey Material, as specified in this Article
19, shall be due to Celestica in the currency quoted by Celestica in the
relevant quotation, without set off or deduction, within seven (7) Days of the
date of such invoice.

19.8  
Notwithstanding the persons designated in Article 28.6, all notices, inventory
purchase orders and any other communication required to be made or delivered by
either party to the other party pursuant to this Article 19 shall be sent to
representatives agreed to by the parties.

 

20.  
CELESTICA WARRANTY

 

20.1  
Celestica warrants that it will without charge, repair, replace or credit, as it
may elect, any Products which are proved to be defective as a result of a
failure in Celestica's workmanship provided that:

 

 
(a)
the Customer notifies Celestica in writing within thirty (30) Days after
discovery of the defect; and

 

 
(b)
such defective Product has been returned prepaid to Celestica’s designated
repair location within one year after original delivery by Celestica (which
period shall not be extended by the repair or replacement of Product), except
where the defect is discovered in the last month of the warranty, where Customer
notifies Celestica in accordance with Article 20.1(a) above and returns the
defective Product no later than thirty Days after the expiration of the warranty
period.

The Customer requires a return material authorization (RMA) from Celestica prior
to returning any Products. All returned Product shall include documentation
describing the nature of the defect, how it was discovered and under what
conditions it occurred. Celestica’s issuance of an RMA will not be unreasonably
withheld.

20.2  
The Customer will pay for the return of Products to Celestica’s designated
premises. Celestica will pay for the redelivery to the Customer's premises as
agreed of all repaired

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or replaced Products, where the returned Products were found by Celestica to be
defective under Article 20.1above. Title to replaced Product will pass to
Celestica on delivery to Celestica; and title to replacement Product will pass
to the Customer on delivery to the Customer.

 

20.3  
The above warranties will not apply to:

 

 
(a)
Products which have been misused, modified, damaged, placed in an unsuitable
physical or operating environment or maintained improperly or caused to fail by
any product or service not supplied by Celestica or to any Products which have
been subjected to any repair not authorised in writing in advance by Celestica;

 

 
(b)
any defect caused by the Customer or a third party or by an error or omission or
design or other fault in any Customer Information or in any other drawings,
documentation, data, software, information, know-how or Materials provided or
specified by the Customer;

 

 
(c)
prototypes and pre-production or pilot versions of Products which will be
supplied “as is” without warranty of any kind; or

 

 
(d)
Products for which Celestica has not performed the standard inspection and test
procedure at the request of the Customer.

 

20.4  
THIS ARTICLE 20 SETS OUT CELESTICA’S SOLE OBLIGATION AND LIABILITY, AND THE
CUSTOMER’S EXCLUSIVE REMEDIES, FOR CLAIMS BASED ON DEFECTS IN OR FAILURE OF ANY
PRODUCT OR SERVICE OR THE SUBJECT MATTER OF ANY SERVICE AND REPLACES ALL OTHER
WARRANTIES, REPRESENTATIONS AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO IMPLIED WARRANTIES, REPRESENTATIONS OR CONDITIONS OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

21.  
CUSTOMER WARRANTY

 

21.1  
The Customer warrants that the Customer Information, Consigned Materials and any
other items or information supplied by the Customer are accurate and contain all
items and information of the Customer necessary for Celestica to manufacture and
deliver the Products and Services.

21.2  
Celestica will notify the Customer of any manufacturing problems which it
encounters and believes are related to the Consigned Materials, Product design
or any Customer Information. The parties will jointly determine whether such
manufacturing problems are attributable to the Consigned Materials, Product
design or any Customer Information. Where such problems are so attributable, the
Customer will be responsible for all costs incurred by Celestica to correct such
problems. Celestica will not implement any changes to the Consigned Materials,
Product design or any Customer Information without the Customer’s prior
approval. Where any such changes result in

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the delay of any scheduled delivery date for Product, Celestica will have no
liability for such delay and Customer may not cancel any orders for Products
affected thereby.

 

21.3  
The Customer warrants that all Tooling and Information is owned by them or is
licensed to them and its license to Celestica to use this Tooling and
Information is in good standing and includes all rights to sub-license.

 

22.  
INDEMNIFICATION

 

22.1  
Customer agrees to indemnify, defend and hold harmless Celestica from and
against all third party claims, costs, damages, fines, losses and expenses
(including reasonable attorney’s fees) to the extent that such claims, costs,
damages, fines, losses and expenses result from: (i) death, personal injury or
property damage arising from Customer’s negligent acts or omissions or willful
misconduct; or, (ii) an intellectual property infringement claim arising from
any specifications, software, information supplied or any instructions given to
Celestica by or on behalf of the Customer provided that Celestica gives Customer
prompt notice in writing of the claim, provides reasonable assistance and
co-operation to Customer in defense of the claim and permits Customer to control
the defense of the claim. Celestica may employ counsel, at its own expense, to
assist in the defense of the claim. Celestica shall have no authority to settle
any claim on behalf of the Customer.

22.2  
Celestica agrees to indemnify, defend and hold harmless Customer from and
against all third party claims, costs, damages, fines, losses and expenses
(including reasonable attorney’s fees) to the extent that such claims, costs,
damages, fines, losses and expenses result from: (i) death, personal injury or
property damage arising from Celestica’s negligent acts or omissions or willful
misconduct; or, (ii) an intellectual property infringement claim arising from
Celestica proprietary manufacturing processes used for the Customer provided
that Customer gives Celestica prompt notice in writing of the claim, provides
reasonable assistance and co-operation to Celestica in defense of the claim and
permits Celestica to control the defense of the claim. Customer may employ
counsel, at its own expense, to assist in the defense of the claim. Customer
shall have no authority to settle any claim on behalf of Celestica.

 

23.  
CUSTOMER PROPERTY

 

23.1  
All Customer Information, tooling and Consigned Materials may be used by
Celestica as required by Celestica for the purposes of performing its
obligations under this Agreement and any Orders.

23.2  
All Customer Information, tooling and Consigned Materials will remain the
Customer's property and will be treated by Celestica with substantially the same
care as it treats its own property of a similar nature.

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23.3  
Except for the costs of routine maintenance, the costs of maintenance,
calibration and repair of any Customer tooling shall at all times be the
responsibility of the Customer.

23.4  
All Customer property (including tooling, Materials, and finished Product owned
by Customer stored at Celestica prior to delivery) shall be held by Celestica at
Celestica’s risk for loss or damage.

 

24.  
CONFIDENTIALITY

 

24.1  
The parties will comply with the provisions of the confidentiality agreement
referenced as 14th January 2005.

24.2  
Nothing in this Agreement gives either party a right to use the other party’s
name, trade mark(s), trade name(s) or to refer to, or disclose, the existence of
this Agreement or any Orders or any terms and conditions of this Agreement or
any Orders, whether directly or indirectly in connection with any marketing or
other activities without the other party’s prior written consent. Either party
may, however, be permitted to respond generally to inquiries regarding its
business provided that it will not disclose specific terms of the Agreement,
except as may be required under applicable laws and regulations.

 

25.  
FREEDOM OF ACTION

 

25.1  
Except as expressly provided pursuant to Article 24 above, this Agreement shall
not prevent Celestica or its Affiliates from marketing, acquiring, or developing
materials, products or services which are similar or competitive to those of the
Customer. Celestica may pursue activities independently with any third party,
even if similar to the activities under this Agreement.

 

26.  
EXCLUSIONS AND LIMITATION OF LIABILITY 

 

26.1  
To the maximum extent permitted by law, under no circumstances will either party
have any liability, whether in contract or for negligence or otherwise and
whether related to any single event or series of connected events, and except
for any obligation to pay amounts which are properly due and payable hereunder,
for any of the following:

 

 
(a)
any liability in excess of:

 

 
i)
in the case of damage to or loss of tangible property, the value of such
property; and

 

 
ii)
in any event, regarding any other liability, the total of the Prices (if any)
paid by the Customer for the product(s) which is the subject of the claim or
$500,000.00 (whichever is the lesser);

 
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(b)
any liability for any incidental, indirect, exemplary, punitive, special or
consequential damages or any other damages, including without limitation, loss
of business, loss of records or data, loss of use, loss of profits, revenue or
anticipated savings or other economic loss whether or not a party was informed
or was aware of the possibility of such loss; or

 

 
(c)
any third party claims, other than claims arising under Article 22, against the
other party for any loss, damage, costs or expenses.

26.2  
Neither party may bring an action under this Agreement more than two (2) years
after the cause of action arose or the party becoming aware of the existence
thereof, whichever is later.

26.3  
The provisions of Article 26.1(a)(ii) does not apply to the liability of a Party
hereunder arising under Article 22 or Article 24 above to the extent that it
relates to either Parties Pre-Existing IP and Innovations.

 

27.  
TERM AND TERMINATION

 

27.1  
This Agreement:

 

 
(a)
is effective from the Effective Date and continues for a period of three (3)
years from the Effective Date unless and until terminated in accordance with
this Article 27; and

 

 
(b)
will automatically renew for additional one (1) year terms after the expiration
of the initial term unless either party receives from the other, at least six
(6) months prior to the end of the initial term or any renewal term, written
notice to terminate this Agreement at the end of the then current term.

27.2  
Customer may terminate this Agreement by giving Celestica six (6) months prior
written notice at any time. In the event of termination pursuant to this Article
27.2:

 

 
(a)  
termination of this Agreement will not prejudice accrued rights and liabilities
(including payment of Prices for Product delivered) of either party; and

 

 
(b)  
on the termination or other discharge of this Agreement Celestica will, in so
far as reasonably practicable following the Customer’s request, deliver up to
the Customer at the Customer's expense and risk all Customer Information (for
which, if applicable, Celestica has been paid in full) on an “as is” basis;

(c)  
the parties will mutually agree a transition plan and associated costs in the
event the Customer’s written instructions issued with the notice of termination
require variation from the provisions of this Article 27 with regard to (i)
completion of any work in process; (ii) packaging and shipping of any completed
Products and/or Consigned materials or partially completed products;

 
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(d)  
Celestica will at Customers cost follow Customer’s reasonable instructions with
regard to packaging and shipping of all capital equipment, including tooling,
test equipment and the like, owned by Customer.

27.3  
Either party may terminate any Order and/or this Agreement: 

 

 
(a)
if the other party commits a material breach of any of the terms of this
Agreement and fails to remedy the breach within sixty (60) Days of written
notice requiring it to do so; or

 

 
(b)
immediately, if the other party becomes insolvent or is declared bankrupt, or if
a receiver and manager, liquidator, trustee in bankruptcy or other officer with
similar powers is appointed over all or a substantial part of the assets of that
party, or if that party files a proposal or a notice of intention to make a
proposal under the Bankruptcy and Insolvency Act or any similar law, or any
equivalent event occurs under any relevant jurisdiction;

and in any such case on termination under 27.3(a) or (b) above the terminating
party shall have no further obligations to the other party except to make
payment:
 

 
(c)
of Prices for Product delivered prior to the date of termination; and

 

 
(d)
for any Orders cancelled, in accordance with Article 10.2,

less any amount owing to the terminating party.

27.4  
The terms of Article 10 "Cancellation" will apply to any Orders cancelled as a
result of termination pursuant to this Article 27and the terms of Article 19
"Excess and/ or Obsolete Material" will apply to any Material rendered Excess or
Obsolete by such cancellation.

27.5  
Celestica and Customer shall review the completion of all Orders placed and
accepted prior to the termination of this Agreement in accordance with
Customer’s instruction. Furthermore, unless otherwise agreed in writing between
the parties, the terms of this Agreement will remain in effect during and after
the initial term and will continue to govern any Orders issued by the Customer.

 

28.  
GENERAL

 

28.1  
Resale, import and export - The Customer will comply with all applicable laws
and regulations and will obtain all necessary licenses and consents for the
resale, import or export of Products and Consigned Materials under the laws and
regulations of any relevant jurisdiction. Celestica will use commercially
reasonable efforts to assist Customer at Customers cost where appropriate under
this paragraph.

28.2  
Location Celestica may request Customer authorization to relocate the
manufacturing site to another location at Celestica's cost and expense. Customer
shall review the

 
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associated impact on Customer requirements and shall accept such request,
subject to no negative impact on the Customer.

 

28.3  
Effective terms and precedence - 

 

 
(a)
Together with Orders, the terms of this Agreement constitute the entire
agreement between the parties in respect of the subject matter thereof and
supersede and exclude all other representations, promises and proposals, whether
oral or written.

 

 
(b)
Any standard terms and conditions set out in any Customer Order form will be
without effect.

 

 
(c)
Any rights or obligations under this Agreement which by their nature continue
after termination will remain in effect until they are completed.

 

 
(d)
If there is any conflict or inconsistency between the terms of any Order or
other documents and the terms of this Agreement then the terms of this Agreement
will prevail over the Order or any other such document.

28.4  
Severability - If any provision or any part thereof contained in any Order or
this Agreement is, for any reason, held to be invalid or unenforceable in any
respect under the laws of any jurisdiction where enforcement is sought, such
invalidity or unenforceability will not affect any other provision of such Order
or this Agreement and such Order and this Agreement will be construed as if such
invalid or unenforceable provision or part thereof had not been contained
therein.

28.5  
Variations - No purported variation or amendment of this Agreement or any Order
will be valid unless made or confirmed in writing by a duly authorised
representative of each party.

28.6  
Notices - All notices must be in writing and sent by prepaid registered mail, by
facsimile or by electronic mail or delivered personally to the parties at their
respective addresses set out below or such other address as may be notified from
time to time by the addressee to the other party. A notice shall be deemed to
have been given on the date of receipt if sent by prepaid registered mail, on
the date of transmission in the case of facsimile or electronic communication or
on the date of delivery if it is delivered by hand.

Notices delivered to Customer shall be delivered to:

More Energy Limited
2 Yodfat Street
Global Park
PO Box 1112
Lod 71291
Israel

Attention: Israel Fisher
fax + 972 (8) 9200024

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Notices delivered to Celestica shall be delivered to:

Celestica Limited
Clock Tower
Manor Lane
Holmes Chapel
Cheshire
CW4 8AB
Attention: Contracts Department
Fax: +44 (0) 1477 536 202

With a copy to:

Celestica International Inc.
1150 Eglinton Avenue, East
Toronto, Ontario
M3C 1H7
Attention: Corporate Counsel
fax: +1 416 448 2817

28.7  
Waiver - The waiver of any term, condition or provision of this Agreement must
be in writing and signed by an authorized representative of the waiving party,
Any such waiver will not be construed as a waiver of any other term, condition
or provision except as provided in writing, nor a waiver of any subsequent
breach of the same term, condition or provision.

28.8  
Force majeure - Neither party will be liable for any delay in performing or for
failing to perform obligations (other than payment obligations) resulting from
acts of God; inclement weather; fire; explosions; floods; strikes; work
stoppages; slow-downs or other industrial disputes; accidents; riots or civil
disturbances; acts of government; inability to obtain any necessary license or
consent; delays by suppliers or Material shortages or from any cause whatsoever
beyond its reasonable control.

28.9  
Assignment - 

 

 
(a)
Neither party may assign this Agreement or any Order or any part thereof without
the written consent of the other party, such consent not to be unreasonably
withheld.

 

 
(b)
The expressions "Celestica" and the "Customer" include their respective
successors and permitted assigns where the context admits.

28.10  
Relationship of the parties - The relationship of Celestica and Customer as
established under this Agreement and any Order(s) will be and at all times
remain one of independent contractors, and neither party will at any time nor in
any way represent itself as being a dealer, agent or other representative of the
other party or as

 
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having authority to assume or create obligations or otherwise act in any manner
on behalf of the other party.

 

28.11  
Headings - The headings in this Agreement are inserted for convenience only and
do not constitute a part of any agreement nor are they to be referred to in its
interpretation.

28.12  
Governing law - This Agreement and all transactions under it will be governed by
the laws of the State of New York, USA exclusive of any provisions of the United
Nations Convention on the International Sale of Goods and without regard to
principles of conflict of laws. The parties submit to the non-exclusive
jurisdiction of the courts of New York, USA. The parties hereto expressly waive
any right they may have to a jury trial and agree that any proceedings under
this Agreement shall be tried by a judge without a jury.

 
Agreed to by the duly authorized representatives of the parties as of the date
first set forth above:

MORE ENERGY LIMITED:

Signed by: /s/ Gennadi Finkelshtein  
Signed by: /s/ Israel Fisher  
Name: Gennadi Finkelshtein 
Name: Israel Fisher  
Title: General Manager 
Title: Senior Vice President Finance  
Date: 28th Sept. 05 
Date: 28th Sept. 05  

CELESTICA IRELAND LIMITED:

Signed by: /s/ Kevin Walsh 
Name: Kevin Walsh 
Title: V.P. AMS 
Date: 28th Sept 05 

26 of 29

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SCHEDULE 1
 
PRODUCTS AND SPECIFICATION

27 of 29

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SCHEDULE 2
 
CONSIGNED MATERIALS AND SPECIFICATIONS

28 of 29

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SCHEDULE 3
 
PRICES
 
MORE ENERGY - FUEL CELL
 
28th September 2005
 
ASSUMPTIONS
 
Prices are guideline prices only and are not considered a quote
 

1.
Currency

 
Prices are stated in US Dollars for comparison. Celestica reserve the right to
quote in Euro. Average August exchange rates have been used in the above pricing
 
1 Euro is equal to 1.24 USDollars
 
1 US Dollar is equal to 0.8065 Euros
 

2.
Cost Basis

 
Costs are estimated based on information available and reviewed with More Energy
on 23 August 2005
 

3.
Space

 
Space Cost is based on current drawings of proposed lines
 

4.
Direct Labour/Machine usage

 
Direct labour is based on a 24 x 7 work pattern of lines over 4 shifts.
 
Numbers of direct employees are based on current drawings of proposed lines.
 

5.
Facility Running Costs

 
Based on allocation of square footage and current drawings.
 

6.
Materials

 
Materials are estimated costs based on information available on 28 September
2005. These costs will change based on product design and consigned versus
turnkey split. Celestica and customer to agree on which materials are consigned
versus turnkey.
 
 
 

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7.
Margins

 
Margins percentages over the various cost headings are as follows:
 
Consigned Material 0%
Turnkey Material 6.5%
Value Add 15%
Margin percentage is defined as margin divided by revenue.
 

8.
Freight Out

 
Freight Out has been excluded from the cost model
 

9.
Equipment

 
All customer dedicated equipment is assumed to be consigned by More Energy
 

10.
Manufacturing Scope

 
Scope of manufacturing includes the following:
 
Fuel component manufacture/formulation
Fuel Cell assemby and packaging
 
 
 

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LOGO [celestica-logo_13929.jpg]
FUEL CELL MODEL, YEARLY COSTS
 

 
DOLLARS
                             
 
 
 
Qty/Mth Millions
# of Shifts
 
Qty/Mth Millions
# of Shifts
 
Qty/Mth Millions
# of Shifts
 
Qty/Mth Millions
# of Shifts
   
 
   
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LEAD
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1 Lines
 
 
1 Lines
 
 
1 Lines
 
 
1 Lines
 
   
 
   
# of
Emps
Cost $
 
# of
Emps
Cost $
 
# of
Emps
Cost $
 
# of
Emps
Cost $
   
Cumulative Costs
 
PER
YEAR
Purch.
Line
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Purch.
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Purch.
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Purch.
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MATERIAL
   
 
 
 
 
 
 
 
 
 
 
 
   
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Total Material
   
 
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Labour (Direct)
   
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Indirect Cost
   
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

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TOTAL LABOUR
   
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Operating Costs
   
 
 
 
 
 
 
 
 
 
 
 
   
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Total Operatiing costs
   
 
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TOTAL COST OF MANUFACTURING SERVICE
 
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MARK UP ON MANUFACTURING SERVICE
 
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MARK UP ON MATERIAL
 
 
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DEPRECIATION COST
   
 
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TOTAL MARGIN
   
 
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TOTAL PRICE
   
 
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Cost per Unit
 
 
 
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__________
* [Subject to a request for confidential treatment; separately filed with the
Commission]
 
 
 

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Component
 
Qty.
 
Who buys?
 
Sourced from
 
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each
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Component
 
Qty.
 
Who buys?
 
Sourced from
 
Quote status
 
Current
price [€]
each
Total Price
 
Comments

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Component
 
Qty.
 
Who buys?
 
Sourced from
 
Quote status
 
Current
price [€]
each
Total Price
 
Comments

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__________
* [Subject to a request for confidential treatment; separately filed with the
Commission]
 
 
 

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GUARANTY
 
THIS GUARANTY is made and entered into to be effective as of 27th September
2005, by Medis Technologies Ltd. ("Guarantor"), in favor of Celestica Ireland
Limited and its parent and affiliated companies (collectively, "Celestica").
 
In consideration of Celestica granting credit to More Energy Limited, and their
successors and assigns (each of which is hereinafter referred to as a
“Customer”), and for other good and valuable consideration, the receipt and
adequacy of which are hereby specifically acknowledged by Guarantor, the parties
hereto agree as follows:
 
1.    Guaranty. Guarantor hereby unconditionally and irrevocably guarantees to
Celestica the prompt payment, when due, of all of Celestica 's charges for the
account of a Customer, of whatever nature, for or in connection with goods
and/or services sold and delivered on or after the effective date of this
Guaranty arising under the Agreement for Manufacture between More Energy Ltd.,
an affiliate of Guarantor, and Celestica dated September 2005 (the
"Obligations"), until this Guaranty is terminated in accordance with its terms.
Guarantor acknowledges that this is a continuing guaranty, which shall remain in
force until terminated by Guarantor by written notice to Celestica or until it
automatically terminates upon the termination of the aforesaid Agreement of
Manufacture, provided that any such termination shall not effect this guaranty
with respect to Obligations incurred by a Customer on or before the effective
date of such Termination. This Guaranty shall extend to each and every extension
or renewal of any Obligation. Nothing contained herein will provide Celestica
with any more rights against the Guarantor than it has against the Customer.
 
2.    Waivers. Guarantor has entered into this Guaranty based solely upon its
independent investigation of a Customer's financial condition and Guarantor
assumes full responsibility for obtaining any further information with respect
to a Customer or the conduct of its business. Guarantor waives all rights and
defenses arising out of an election of remedies by Celestica, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for an Obligation, may destroy the Guarantor’s rights of subrogation and
reimbursement against the Customer by operation of applicable law. Guarantor
authorizes Celestica, without notice or demand and without affecting Guarantor's
liability hereunder or on the Obligations, from time to time to: (i) renew,
modify or extend the time for performance of the Obligations, (ii) take and hold
security for the payment of the Obligations and exchange, enforce, waive and
release such security, and (iii) release or substitute a Customer or any
endorsers or guarantors of the Obligations or any part thereof, or any other
parties thereto. For clarity sake, it is agreed that the purpose of this
Guarantee is to cause Guarantor to honor the Obligations as if the aforesaid
Agreement of Manufacture were signed directly by Guarantor and accordingly the
only defenses available to Guarantor hereunder are those that are available to a
Customer under the aforesaid Agreement of Manufacture.
 
3.    Bankruptcy Not Discharge. Notwithstanding anything to the contrary herein
contained, this Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of any or all of the
Obligations is rescinded or must otherwise be restored or returned by Celestica
upon the insolvency, bankruptcy or reorganization of a Customer or Guarantor, or
if Celestica elects to return such payment or any part thereof in its sole and
absolute discretion, all as though such payment had not been made though due.
Notwithstanding any modification, discharge or extension of the Obligations or
any amendment, modification, stay or cure of Celestica’s rights which may occur
in any bankruptcy or reorganization case or proceeding concerning a Customer,
whether permanent or temporary, and whether or not assented to by Celestica,
Guarantor hereby agrees that it shall be obligated hereunder to pay the
Obligations and discharge its other obligations in accordance with
 

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the terms of this Guaranty in effect on the date hereof. Guarantor understands
and acknowledges that by virtue of this Guaranty, it has specifically assumed
any and all risks of a bankruptcy or reorganization case or proceeding with
respect to a Customer. As an example and not in any way of limitation, a
subsequent modification of the Obligations in any reorganization case concerning
a Customer shall not affect the obligation of Guarantor to pay the Obligations
in accordance with their terms, as such may have been modified with the consent
of Celestica prior to the commencement of any bankruptcy case.
 
4.    Guarantor's Understandings With Respect to Waivers. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences.
 
5.    Miscellaneous. If any of the provisions of this Guaranty shall be held
invalid or unenforceable, this Guaranty shall be construed as if not containing
those provisions and the rights and obligations of the parties hereto shall be
construed and enforced accordingly. This Guaranty shall be construed in
accordance with and governed by the laws of New York, USA. The parties submit to
the non-exclusive jurisdiction of the courts of New York, USA. Headings in this
Guaranty are for convenience only and are not be construed as a part of this
Guaranty or in any way amplifying or limiting the provisions hereof. Where the
context so requires, the singular shall include the plural and the plural shall
include the singular. To be effective, any notice by Guarantor to Celestica
hereunder must be in writing, sent by certified mail, postage prepaid, by
facsimile or by electronic mail or delivered personally to the following address
or to such other address as Celestica may designate by written notice to
Guarantor from time to time, and such notice shall be deemed effective on the
date of receipt if sent by prepaid registered mail, on the date of transmission
in the case of facsimile or electronic communication or on the date of delivery
if delivered by hand:

Celestica Inc.
1150 Eglinton Avenue East
Toronto, Ontario
Canada
M3C 1H7

Attention: Corporate Counsel    fax:+1 416 448 2817
 

 
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as the date first
written above.
 
Medis Technologies Limited
 
Signature:  /s/ Robert K.Lifton 

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Print Name: Robert K.Lifton 

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Title:           Chairman and CEO 

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