<PAGE>

EXHIBIT 10.12





                              GUARANTEE & INDEMNITY

                                     BETWEEN

                           XCEL POWER SYSTEMS LIMITED
                           PASCALL ELECTRONICS LIMITED
                      PASCALL ELECTRONIC (HOLDINGS) LIMITED
                         BELIX WOUND COMPONENTS LIMITED

                                       AND

                      LLOYDS TSB COMMERCIAL FINANCE LIMITED



<PAGE>


                             GUARANTEE AND INDEMNITY
                             -----------------------


To       LLOYDS TSB Commercial Finance Limited
         Boston House
         The Little Green
         Richmond
         Surrey TW9 1QE

1.       We, the Guarantors and Indemnifiers, whose names appear in the schedule
         hereto have agreed to give you as contained in the succeeding clauses
         hereof, as many separate and independent guarantees and indemnities as
         there are parties hereto (other than you) whereby the liabilities to
         you of each and every one of us are guaranteed by the others of us and
         whereby each one of us indemnifies you against any losses (as defined
         herein) arising from transactions between you and any other of us.

2.       Accordingly in this deed except where the context otherwise requires:

         (1)      words implying the singular shall include the plural and words
                  implying any of the three genders shall include either of the
                  other two;

         (2)      the expression "Principal" shall mean and apply to any one of
                  us for whose liabilities any such guarantee is given and in
                  respect of whose transactions with you any such indemnity is
                  given;

         (3)      the following expressions shall have the meanings assigned to
                  them below:

                  "Agreement"
                  any agreement between the Principal and you for the factoring,
                  discounting and/or financing of book debts and/or receivables,

                  "Indulgence"
                  any indulgence, agreement not to sue or release of any charge
                  lien or other security or any part thereof,

                  "Losses"
                  losses, costs, damages, claims, interest and expenses and

         (4)      any other expression used in the Agreement shall have the
                  meaning attributed to it therein.

3.       We hereby guarantee:

         (i)      the due performance of all the obligations of the Principal
                  under the Agreement and any other agreement and


<PAGE>

         (ii)     upon your demand in writing the due payment of all amounts
                  payable or which may at any time hereafter become payable to
                  you by the Principal whether arising under the Agreement or
                  otherwise.

4.       Without prejudice to the provisions of paragraph 3 hereof, we hereby
         agree to indemnify you and hold you harmless against all losses you may
         suffer or incur by reason of any failure of the Principal to comply
         with any term of the Agreement or of any other agreement between the
         Principal and you.

5.       The guarantee given herein shall be a continuing guarantee, shall apply
         to the ultimate amount payable by the Principal and shall not be
         discharged by any intermediate payment or satisfaction by the
         Principal.

6.       Our liability under this guarantee and indemnity shall not be affected
         by:

         (i)      any time or indulgence granted by you to the Principal or any
                  other person,

         (ii)     any compromise made by you with the Principal or any other
                  person,

         (iii)    any variation in the Agreement or in any other agreement
                  between the Principal and you (whether or not our liability to
                  you may be increased thereby) or by any defect therein or in
                  its execution, or

         (iv)     any change in the constitution of the Principal.

         and we shall be liable hereunder in every respect as principal debtors.

7.       For the purpose of determining our liability under this guarantee and
         indemnity, which shall be additional to and not in substitution for any
         other security taken or to be taken by you in respect of the
         Principal's obligations to you, we shall be bound by any
         acknowledgement or admission by the Principal and by any judgment in
         your favour against the Principal. For the purpose of determining the
         amount of any losses we shall accept and be bound by a certificate
         signed by your company secretary in arriving at the amount payable by
         the Principal to you you shall be entitled to take into account all
         liabilities (whether actual or contingent) and to make a reasonable
         estimate of any contingent liability.

8.       Any notice or demand on any of us shall be validly given if handed to
         any one of its officials or if delivered to or sent by post to its
         address stated herein or its registered office or its address last
         known to you and if sent by post shall be deemed to be received within
         seventy-two hours of posting.

9.       We shall be liable to pay you interest calculated from day to day and
         compounded monthly at a rate equivalent to the discount charge for
         which provision is made in the Agreement on all sums demanded by you
         hereunder from the date of your demand to the date when payment is
         received by you both before and after any judgment.


                                      -2-

<PAGE>

10.      Each one of us assigns to you, as security for the due performance of
         our obligations hereunder any right of proof, in consequence of any
         winding up of the Principal, in respect of any indebtedness of the
         Principal to that one of us; and each one of us irrevocably appoints
         you and your directors and secretary for the time being jointly and
         each one of you and them severally to be his attorney to execute in his
         name such documents and to do such other things as you may consider
         requisite to effect collection of any dividend or to vote at any
         meeting in respect of such right of proof.

11.      Our liability hereunder shall be joint and several and you may release,
         grant indulgence to or compromise with any one of us without affecting
         the obligations of the other or others. The liability of any one of us
         hereunder shall not be affected by:

         (i)      any defect in the execution of this deed by any other of us,

         (ii)     any defect in any other guarantee or indemnity or other
                  security held by you in respect of the Principal's obligations
                  to you or in the execution thereof or

         (iii)    any notice of termination hereof by any other of us.

         You may at your discretion (but shall not be obliged to) treat any
notice by any one of us as notice by all of us.

12.      Any monies received by you by virtue of or in connection with this
         guarantee and indemnity may be placed by you to the credit of a
         suspense account with a view to your preserving your right to prove for
         the whole of your claim against the Principal in the event of its
         winding up.

13.      This guarantee and indemnity shall remain in full force and effect
         until the termination of the Agreement and the discharge in full of all
         the Principal's obligations thereunder and after such full discharge
         until the expiry of not less than three months notice of termination
         delivered by any one of us to your registered office but such
         termination shall not affect our liability as regards any liability of
         the Principal existing or known to be contingent before the expiry of
         the period of the said notice with effect from the date of the receipt
         of' it by you.

14.      This guarantee and indemnity shall be construed and take effect
         according to English law and we accept the non-exclusive jurisdiction
         of the English Courts. If any provision hereof shall he held invalid or
         unenforceable no other provisions hereof shall be affected and all such
         other provisions shall remain in full force and effect.


                                      -3-

<PAGE>

                                  THE SCHEDULE

Guarantors and Indemnifiers:

(1)      Xcel Power Systems Limited                    (name)
         Brunswick Road, Cobbs Wood, Ashford, Kent     (address)
         TN23 1EB
         England & Wales                               (country or registration)
         00575679                                      (number)

(2)      Pascall Electronics Limited                   (name)
         Brunswick Road, Cobbs Wood, Ashford, Kent     (address)
         TN23 1EH
         England & Wales                               (country of registration)
         01316674                                      (number)

(3)      Pascall Electronic (Holdings) Limited         (name)
         Brunswick Road, Cobbs Wood, Ashford, Kent     (address)
         TN23 1EH
         England & Wales                               (country of registration)
         01756274                                      (number)

(4)      Belix Wound Components Limited                (name)
         Brunswick Road, Cobbs Wood, Ashford, Kent     (address)
         TN23 1EH
         England & Wales                               (country of registration)
         01537636                                      (number)

This document has been executed as a deed by or on behalf of each of us to
indicate our binding agreement to its terms.

SIGNED and DELIVERED as a deed on            )
21st    day of   June 2005            by you )
XCEL POWER SYSTEMS LIMITED

acting by                                    )
                                             )
(a Director )                                         and Signature of Director

                                             )
(a Director / its Company Secretary          )        Signature of Director/
                                             )        Company Secretary


                                      -4-

<PAGE>

SIGNED and DELIVERED as a deed on            )
         day of                       by you )
PASCALL ELECTRONICS LIMITED

acting by
                                             )
(a Director) and                                      Signature of Director
                                             )
(a Director / its Company Secretary          )        Signature of Director/
                                             )        Company Secretary


SIGNED and DELIVERED as a deed on            )
21st    day of   June 2005            by you )
PASCALL ELECTRONIC (HOLDINGS) LIMITED

acting by
                                             )
(a Director) and                                      Signature of Director

                                             )
(a Director / its Company Secretary          )        Signature of Director/
                                             )        Company Secretary


SIGNED and DELIVERED us it deed on           )
21st    day of   June 2005            by you )
BELIX WOUND COMPONENTS LIMITED

acting by
                                             )
(a Director) and                                      Signature of Director

                                             )
(a Director /its Company Secretary           )        Signature of Director/
                                             )        Company Secretary


                                      -5-