SUBCONTRACT B335l88

                                     between

                   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

                     LAWRENCE LIVERMORE NATIONAL LABORATORY

                                       and

                                ZYGO CORPORATION



                                  INTRODUCTION
                                  ------------

This is a hybrid subcontract, with fixed price and cost plus fixed fee sections.
The parties to this Subcontract are The Regents of the University of California,
a California corporation, hereinafter called "University," and Zygo Corporation,
hereinafter called "Subcontractor."

The Regents of the University of California have entered into Prime Contract No.
W-7405-ENG-48 with the United States Government, hereinafter called "Government"
represented by the Department of Energy, hereinafter called "DOE," for the
management and operation of the Lawrence Livermore National Laboratory and the
performance of certain research and development work. This Subcontract is
entered into as a subcontract in furtherance of the work provided for under the
Prime Contract.

                                    AGREEMENT
                                    ---------

The parties agree to perform their respective obligations in accordance with the
terms, conditions, and provisions of the attached SCHEDULE OF ARTICLES and any
documents referenced or incorporated therein. This Signature Page and the
SCHEDULE OF ARTICLES collectively constitute the entire Subcontract and shall
supersede all prior proposals, negotiations, representations, or agreements,
whether written or oral.

         ZYGO CORPORATION                          THE REGENTS OF
                                            THE UNIVERSITY OF CALIFORNIA

BY: /s/ GARY K. WILLIS                        BY: /s/ JOHN S. HUNT
    ----------------------------          -------------------------------------
    Gary K. Willis                            John S. Hunt

TITLE: President and CEO                  TITLE: Laboratory Business Manager
       -------------------------          -------------------------------------

DATE: 5/9/97                              DATE: 5-8-97
      --------------------------          -------------------------------------
                                          University Procurement Representative:
                                          Margaret C. Cooke, (510) 423-2178

<PAGE>

                              SCHEDULE OF ARTICLES

                                       FOR

                               SUBCONTRACT B335188

ARTICLE 1.-- SCOPE OF WORK
--------------------------

A.   The Subcontractor shall conduct certain work generally described as
     Amplifier Finishing Lead Facilitization and Initial Production of Flat
     Optics. The work is more specifically described in the Statement of Work as
     Facilitization (F).

B.   The University may, at its unilateral option, by written notification to
     the Subcontractor require the continued performance of the work described
     in the Statement of Work as Pilot Production (P0), hereafter known as
     Option 1". This option must be exercised no later than 60 days prior to the
     completion of the work defined in paragraph A above.

C.   The University may, by written notification to the Subcontractor require
     the continued performance of the work described in the Statement of Work as
     Initial Production (P1), hereafter known as "Option 2". Written
     notification of the University's desire to exercise this option and price
     it accordingly must be given no later than 120 days prior to the completion
     of the work defined in paragraph B above.

D.   The University may, by unilateral modification to the Subcontract, purchase
     a 24-inch interferometer for the price shown in Article 3 below. This
     interferometer is to be essentially the same as the two to be provided by
     the Subcontractor at no additional cost to the University. This option is
     hereafter known as Option 3". The decision to purchase this additional unit
     will be based, in part, on the input and recommendation of the
     Subcontractor and the results of efforts to provide this capability through
     other means. This option may be exercised at any time during any exercised
     option (F, P0 or P1).

E.   The Subcontractor shall furnish all personnel, supervision, materials,
     supplies, equipment (including two 24-inch interferometers), tools,
     facilities, transportation, testing, and other incidental items and
     services necessary for performance of the work, except for Government
     Property specified herein to be furnished by the University. The
     Subcontractor shall deliver the materials, products, supplies, and reports
     specified, and all residuals.

F.   The work shall be performed by the Subcontractor at the Subcontractor's
     facility located at Middlefield, CT and at other locations approved by the
     University.

G.   Acceptance of the work under this Subcontract shall be based on the
     Subcontractor's performance and completion of the work in consonance with
     high professional standards and compliance with the delivery and reporting
     requirements specified herein.

H.   This Subcontract is a DX-E1 Rated Order, certified for national defense use
     under the DEFENSE PRIORITIES AND ALLOCATIONS SYSTEM. The Subcontractor
     shall comply with the requirements of the Defense Priorities and
     Allocations System regulation (15 CFR Part 700).

ARTICLE 2 -- PERIOD OF PERFORMANCE
----------------------------------

A.   The work authorized and described in ARTICLE 1 - SCOPE OF WORK, Paragraph A
     shall be completed by October 31, 1998 unless completely performed prior
     thereto or sooner terminated in accordance with the clause of the GENERAL
     PROVISIONS entitled TERMINATION FOR


                                       -1-


<PAGE>

     CONVENIENCE OF THE GOVERNMENT (FIXED PRICE) for fixed price work, or
     Termination (COST REIMBURSEMENT) for all cost reimbursement work.

B.   The University may extend the period of performance by written notice to
     the Subcontractor, unilaterally exercising any or all of the following
     options:

     1. Option No. 1 (P0):              Inclusive period of performance of
                                          18 months.

     2. Option No. 2 (P1):              Inclusive period of performance of
                                          6 months.

     3. Option No. 3 (Interferometer):  To be completed during the inclusive
                                          period of performance defined at the
                                          time this option is exercised.

     The total period of performance of this Subcontract, inclusive of all
     optional periods, shall not exceed 41 months.

ARTICLE 3 -- FIXED PRICE AND LIMITATION OF OBLIGATION
-----------------------------------------------------

(For fixed price work only)

A.   Fixed Price -- Authorized Work
     ------------------------------

     The Subcontractor shall perform this Subcontract for the total fixed price
     of NINE MILLION, EIGHT HUNDRED SEVENTY-ONE THOUSAND, EIGHT HUNDRED TEN and
     NO/l00 DOLLARS ($9,871,810.00).

     The fixed price stated above does not include, and the University shall not
     be charged for, any State Sales & Use Tax, as the University holds
     California Seller's State Resale Permit No. SR-CHA 21-135323.

B.   Fixed Price -- Option 2 (if exercised)
     -----------------------

     The fixed price for the work defined as Option 2 in Article 1 above shall
     be negotiated and defined if and when this option is exercised.

C.   Fixed Price -- Option 3 (if exercised)
     -----------------------

     The Subcontractor shall perform the work defined as Option 3 in Article 1
     for the total fixed price of THREE HUNDRED Fifty THOUSAND AND NO/1OO
     DOLLARS ($350,000.00).

D.   Pricing of Adjustments: When costs are a factor in any determination of a
     Subcontract price adjustment pursuant to the "Changes" clause or any other
     provision of this Subcontract, such costs shall be in accordance with the
     contract cost principles and procedures in Part 31 of the Federal
     Acquisition Regulation (48 CFR Part 31), as supplemented or modified by
     DEAR Part 931(48 CFR Part 931) in effect on the effective date of this
     Subcontract.

E.   Limitation Of Obligation -- Available Funds
     -------------------------------------------

     1.   Funds appropriated by the U. S. Congress and made available to the
          University by the Government's obligation of funds to the prime
          contract are the sole source for payment of all work to be done and
          all claims of any type that may be made pursuant to the Subcontract.
          The project will be funded in increments as annual appropriations are
          made by Congress to the Department of Energy for obligation to the
          project by the University. For FY 1997, $5,542,504.00 has been
          appropriated and is presently available for payment ("Available
          Funds"). These funds are expected to cover the period through
          September 30, 1997. For FY 1998, $4,329,306.00 are anticipated to be
          appropriated to cover the balance


                                       -2-


<PAGE>

          of the work from October 1, 1997 through October 31, 1998. While it is
          anticipated that subsequent year appropriations will be made, there is
          no assurance or obligation on the part of the University that this
          will occur. The University has no obligation under this Subcontract to
          make any payments in excess of Available Funds. Should such
          appropriations be made, the University will notify the Subcontractor
          in writing and reserves the unilateral right to modify the amount of
          Available Funds specified in this Subcontract. The University shall
          have no liability whatsoever to the Subcontractor arising out of or in
          any way connected with the Subcontract work or claims arising
          therefrom, save and except such liability as may be paid from funds
          appropriated by the U.S. Congress.

     2.   The Subcontractor is obligated to continue performance of the work
          until such time as the Available Funds are insufficient to pay for the
          work and any claims related thereto. The subcontractor shall give
          notice 30 days in advance of the date upon which the costs of the work
          (defined as actuals plus commitments) constitute 75% of the Available
          Funds. Such notice will be based on review of progress payments made
          to date, monthly status reports, periodic site visits/inspections,
          on-site reviews, etc.

     3.   Upon receipt of such notice, the University within 30 days may elect
          to stop the work pursuant to the General Provision entitled "STOP WORK
          ORDER". At or before the end of that period, the University may elect
          to rescind the stop work order or terminate the Subcontract pursuant
          to the General Provision entitled "TERMINATION FOR CONVENIENCE". This
          Article does not restrict the University's rights to modify the
          Subcontract pursuant to the "CHANGES" Clause.

     4.   Should the Subcontract be amended to allocate additional funds for
          continued performance of the work under this Subcontract, the
          provisions of the preceding paragraphs above shall apply in like
          manner to such additional allotted funds and subsequent dates
          pertaining thereto.

     5.   After notice of termination, the University may at any time prior to
          the effective date of termination, allot additional funds for this
          Subcontract and, with the consent of the Subcontractor, rescind said
          termination.

     6.   The provisions of this Clause with respect to termination shall in no
          way be deemed to limit the rights of the University under the Clause
          hereof entitled "DEFAULT." The provisions of this Clause are limited
          to the allotment of funds for performance of the work of this
          Subcontract.

ARTICLE 4 -- ESTIMATED COST AND FIXED FEE (Option No. 1)
-----------------------------------------

(For cost reimbursement work only, if the option is exercised through formal
modification to the subcontract.)

A.   Estimate of Cost and Fixed Fee
     ------------------------------

     1.   The estimated cost for the Subcontractor's performance of this
          Subcontract, exclusive of the Subcontractor's fixed fee, is TWO
          MILLION, FOUR HUNDRED THIRTY-ONE THOUSAND, THIRTY AND NO/100 DOLLARS
          ($2,431,030.00).

     2.   The Subcontractor's fixed fee for performance of this Subcontract
          shall be TWO HUNDRED FORTY-THREE THOUSAND, SIXTY AND NO/100 DOLLARS
          ($243,060.00).

     3.   The aggregate of the estimated cost and fixed fee is TWO MILLION SIX
          HUNDRED SEVENTY-FOUR THOUSAND, NINETY AND NO/100 DOLLARS
          ($2,674,090.00).


                                       -3-


<PAGE>

B.   Limitation of Costs
     -------------------

     1.   The aggregate of the estimated cost and fixed fee specified in
          Paragraph A.3, above, is allocated to this Subcontract for work under
          this option.

     2.   Pursuant to the clause of the GENERAL PROVISIONS for Cost Plus Fixed
          Fee Subcontracts entitled LIMITATION OF COST, the estimated cost
          specified in Paragraph A. 1, above, shall be the limit of the
          University's cost liability under this Subcontract, and shall not be
          exceeded by the Subcontractor.

     3.   The Subcontractor shall notify the University's Subcontract
          Administrator in writing at least five (5) working days prior to
          stopping the work to avoid exceeding the estimated cost specified in
          Paragraph A. 1, above.

C.   Revised Estimate of Cost -- The estimated cost for this Subcontract may be
     increased or decreased by a written modification to this Subcontract issued
     by the University's Subcontract Administrator. Modifications shall not be
     considered as authorization to exceed the estimated cost unless they
     contain a statement increasing the estimated cost.

D.   Cost Information -- The Subcontractor shall maintain, at all times while
     the work is in progress, current cost information adequate to reflect the
     cost of performance of this Subcontract and shall prepare and furnish to
     the University such written estimates of cost and information in support
     thereof as the University may request.

ARTICLE 5 -- PRICE AND PAYMENT PROVISIONS   (For fixed price work only.)
-----------------------------------------

A.   The University will make progress payments as the work proceeds. Progress
     payments shall be based on estimates of work accomplished which meets the
     standards of quality established in the Subcontract and approved by the
     University. Progress payments will be made monthly. The Subcontractor shall
     furnish a breakdown of the progress payment showing the amount included
     therein for each principal category of the work (labor, equipment and
     facilities) which shall substantiate the payment amount requested, in such
     detail as requested by the University.

B.   When the University approves a request for a progress payment, the
     University will retain five (5) percent of the payment amount. However, if
     satisfactory progress has not been made, the University may retain up to
     ten (10) percent of the amount of any payment until satisfactory progress
     is achieved. When satisfactory progress has been re-established, the
     University may release the excess retention for payment.

C.   When the work is substantially complete, the University may retain from
     previously withheld amounts or future progress payments that amount the
     University considers adequate for protection of the University and may
     release to the Subcontractor all the remaining withheld funds. The
     University will pay the total fixed price, including any retention, after:

     1.   Completion and acceptance of all work in accordance to the following
          Facility Acceptance Principles:

          a.   On-site reviews to be held no less than quarterly. These sessions
               will review progress to date and projected progress for the next
               quarter. Laboratory representatives will observe the physical
               plant and all equipment assembled as of that point.

          b.   Review of the Subcontractor's equipment check-out results. The
               Laboratory representatives may review the actual equipment, any
               testing data, etc.


                                       -4-


<PAGE>

          c.   A final on-site review to be held no later than one month after
               Facility completion. This review will include a walk-through,
               demonstration of major equipment as requested by the Laboratory
               representatives, and inspection of the entire facility as deemed
               appropriate.

     2.   Presentation of a properly executed voucher; and

     3.   Presentation of an executed Assignment and Release, releasing all
          claims against the University and Government arising by virtue of this
          Subcontract other than claims, in stated amounts, that the
          Subcontractor has specifically excepted from the operation of the
          release. Another Assignment and Release may be required of the 
          assignee if the Subcontractor's claim to amounts payable under this 
          Subcontract has been assigned.

ARTICLE 6 -- REIMBURSEMENT OF COSTS   (For cost reimbursement work only.)
-----------------------------------   

A.   Allowability
     ------------

     1.   Costs incurred by the Subcontractor for performance of this
          Subcontract shall be allowable to the extent they are reasonable,
          allocable, and determined to be allowable in accordance with the
          provisions of this Subcontract and the cost principles and procedures
          of Subpart 31.2 of the Federal Acquisition Regulations (48 CFR Part
          31.2), as modified by Subpart 931.2 the DOE Acquisition Regulations
          (DEAR) (48 CFR 931.2).

     2.   Nothing contained in this article shall authorize the estimated cost
          amount stipulated in ARTICLE 4 -- ESTIMATED COST AND FIXED FEE to be
          exceeded.

     3.   Any audit conducted hereunder shall be in accordance with the
          provisions of this Subcontract and the cost principles and procedures
          specified in A.1, above. The University will endeavor to arrange for
          any audit conducted hereunder to be performed by the cognizant
          government audit agency, through the DOE, though reserves the right to
          request that a University Cost/Price Analyst perform that audit if
          agreeable to the Subcontractor.

B.   Provisional Indirect Costs Rates
     --------------------------------

     1.   Pending final audit and determination of indirect costs, the
          Subcontractor shall be paid in accordance with the following
          provisional indirect cost rates, which rates may be revised from time
          to time, but not more frequently than every six (6) months, by a
          unilateral modification to this Subcontract, as recommended or
          approved by the cognizant government audit agency and accepted by the
          University:

                    G&A   15.62%    Duration of P0 (Option No. 1)


     2.   When the actual indirect rates and costs have been determined pursuant
          to the provisions of this Subcontract and the cost principles and
          procedures specified in paragraph A.1 of this article, the difference
          between the actual indirect costs and the provisional payments shall
          be paid; provided, however, that any such payment shall not cause the
          estimated cost amount stipulated in ARTICLE 4 -- ESTIMATED COST AND
          FIXED FEE to be exceeded.

C.   Waiver Of Facilities Capital Cost Of Money
     ------------------------------------------

     The Subcontractor is aware that facilities capital cost of money is an
     allowable cost but waives the right to claim it under this Subcontract.


                                       -5-

<PAGE>

ARTICLE 7 -- INVOICES AND PAYMENT PROCESSING
--------------------------------------------

A.   Invoices for Fixed Price Work
     -----------------------------

     All invoices shall be submitted to the LLNL Procurement & Materiel's
     Subcontract Administration Support Section ("SASS") at the following
     address:

          University of California
          Lawrence Livermore National Laboratory
          Attention: SASS Group, L-650
          P.O. Box 5012
          Livermore, CA 94551

B.   Payment Terms for Fixed Price Work
     ----------------------------------

     Payment shall be made within 30 days after receipt of the Subcontractor's
     invoice, upon the University's acceptance of any portion of the work
     delivered or rendered for which a price is separately stated or an invoice
     is allowed. Payments made thereafter shall not he subject to any interest
     or late charges. (See also Articles 5 and 10.)

C.   Invoices for Cost Reimbursement Work
     ------------------------------------

     The invoicing and payment of costs incurred shall be in accordance with the
     clause of the GENERAL PROVISIONS for Cost Plus Fixed Fee subcontracts
     entitled ALLOWABLE COST AND PAYMENT. Payment of the fixed fee shall he made
     in monthly installments based upon the percentage of completion of the
     work, as determined or approved by the University's Subcontract
     Administrator, and shall be subject to a 15% fee retention until a reserve
     is set aside in an amount that the University considers necessary to
     protect the University's interest. The reserve shall not exceed 15% of the
     total fixed fee or $100,000.00, whichever is less.

D.   Payment Terms for Cost Reimbursement Work

     All invoices shall substantially comply with the requirements of the
     attached VOUCHER FORM & INSTRUCTONS. All invoices except the completion
     invoice shall be processed for payment within thirty (30) days of receipt;
     provided, however, that payments made thereafter shall not he subject to
     any interest or late charges.

E.   All invoices shall be submitted to the LLNL Procurement & Materiel's
     Subcontract Administration Support Section ("SASS") at the following
     address:

          University of California
          Lawrence Livermore National Laboratory
          Attention:  SASS Group, L-650
          P.O. Box 5012
          Livermore, CA 94551

F.   All invoices requesting reimbursement for any property acquired by the
     Subcontractor shall either include a completed copy of the attached
     PROPERTY IDENTIFICATION LIST for the following classes of property or a
     certification that such property does not include any of the reportable
     classes of property:

     CONTROLLED PROPERTY:   Any property purchased for $5,000.00 or more.

     ATTRACTIVE PROPERTY:   My attractive property, as defined in the attached
                              Property Identification List


                                       -6-

<PAGE>

ARTICLE 8 -- COORDINATION AND ADMINISTRATION
--------------------------------------------

A.   THE University's Subcontract Administrator for this Subcontract is Margaret
     C. Cooke or her designee. All matters relating to the non-technical
     interpretation; administration, and performance of this Subcontract shall
     be reserved to the University's Subcontract Administrator. The
     Subcontractor shall direct all notices and requests for approval to the
     University's Subcontract Administrator, and any notices or approvals from
     the University to the Subcontractor shall be issued by the University's
     Subcontract Administrator.

B.   The University's Technical Representative under this Subcontract is Dave
     Aikens or his designee, who shall represent the University in matters
     relating to the technical performance of the Scope of Work described
     herein. The University's Technical Representative shall interpret the
     technical requirements of the Scope of Work and determine the emphasis and
     direction of the Subcontractor in the conduct of the work.

ARTICLE 9 -- TECHNICAL DIRECTION AND CHANGES
--------------------------------------------

A.   Performance of the work under this Subcontract shall be subject to the
     technical direction of the University's Technical Representative. The term
     "technical direction" is defined to include, without limitation:

     1.   Directions to the Subcontractor which redirect the Subcontract effort,
          shift work emphasis between work areas or tasks, require pursuit of
          certain lines of inquiry, fill in details or otherwise serve to
          accomplish the Subcontract Statement of Work;

     2.   Provision of written information to the Subcontractor which assists in
          the interpretation of drawings, specifications, or technical portions
          of the work description; and

     3.   Review and, where required by the Subcontract, approval of technical
          reports, drawings, specifications, and information to be delivered by
          the Subcontractor to the University under the Subcontract.

B.   All technical direction must be within the scope of work stated in the
     Subcontract and shall be issued in writing by the University's Technical
     Representative.

C.   The Subcontractor shall proceed promptly with the performance of technical
     direction of the nature prescribed by this section issued by the
     University's Technical Representative.

D.   The University's Technical Representative is not authorized to issue, and
     the Subcontractor shall not comply with, any technical direction which
     would:

     1.   Constitute a change within the general scope of work, affecting the
          description of the work to be performed, (including applicable
          drawings, designs, and specifications), the time of performance, or
          the place of performance.

     2.   Constitute an assignment of work outside the general scope of the work
          covered by this Subcontract;

     3.   Increase the price for performance of the work or the time required
          for performance of the work;

     4.   Change any expressed term or condition of the Subcontract; or

     5.   Unreasonably interfere with the Subcontractor's ability to perform and
          complete the work, as required under the Subcontract.


                                       -7-


<PAGE>

     Any such technical direction must first be authorized by a written change
     order to this Subcontract issued by the University's Subcontract
     Administrator, as provided in the clause of the GENERAL PROVISIONS entitled
     CHANGES-FIXED PRICE for all fixed price work, or the clause entitled
     CHANGES-COST REIMBURSEMENT for all cost reimbursable work.

E.   If any instruction or direction by the University's Technical
     Representative falls within one of the types described in paragraph D,
     above, the Subcontractor shall not proceed, and shall promptly notify the
     University's Subcontract Administrator in writing, and shall request the
     University's Subcontract Administrator to modify the Subcontract
     accordingly.

     Upon receipt of the notification from the Subcontractor, the University's
     Subcontract Administrator shall promptly:

     1.   Advise the Subcontractor in writing that the technical direction is
          within the scope of the Subcontract effort and does not constitute a
          change under the clause of the GENERAL PROVISIONS entitled
          CHANGES-FIXED PRlCE for all fixed price work, or the clause entitled
          CHANGES-COST REIMBURSEMENT for all cost reimbursable work; or

     2.   Issue a written change order.

ARTICLE 10 -- REPORTS
---------------------

A.   Type of Reports

     The Subcontractor shall prepare and submit the following reports to the
     University:

     1.   Monthly Progress Reports -- (Type A) -- Monthly technical and
          financial progress reports shall be submitted by the fifth working day
          after the close of the Subcontractor's accounting month.

          The first monthly report shall establish time-phased work schedules
          and budgetary baselines against which progress can be measured. It
          should also include an updated discussion of the subcontractor's
          approach to executing this subcontract, specifically in terms of the
          facilitization plan as negotiated.

          Subsequent monthly progress reports shall contain a description of
          technical progress to date by task and technical status charted
          against the baseline schedule, and the work planned for the succeeding
          period. Monthly financial status reports shall include all actual
          costs incurred plus outstanding commitments to the end of the month,
          and projected costs for the next reporting period. Variances between
          the baselines and actual experience shall be briefly addressed to
          explain the cause of the variance and identify corrective action as
          appropriate. The financial status report shall support any invoicing
          submitted for the month.

     2.   Statement of Work Required Reporting (Type B) -- These reports shall
          be submitted in accordance with the Statement of Work. The form and
          content of these reports shall be acceptable to the University's
          Technical Representative. If so requested, a draft copy of the reports
          shall be provided to the University's Technical Representative for
          review prior to final submittal.

B.   Distribution of Reports
     -----------------------

     Reports shall be separately addressed and transmitted to:


                                       -8-


<PAGE>

          University of California
          Lawrence Livermore National Laboratory
          Attention: (Intended Recipient; see below)
          P.O. Box 808
          7000 East Avenue
          Livermore, CA 94551

               Type Report       No. of Copies         Recipient
               -----------       -------------         ---------
               A & B                   2               Dave Aikens, L-487
               A & B                   1               Margaret Cooke L-443

     The Subcontractor shall not distribute reports of work under this
     Subcontract to any individual or organization other than those indicated
     above or an authorized representative of the U. S. Department of Energy
     without prior written approval of the University's Subcontract
     Administrator.

C.   Interim Reports

     It is understood that there will be other information exchanged between the
     parties from time to time. These data may be exchanged directly between the
     parties concerned; formal reporting and distribution is not required in
     these cases.

ARTICLE 11 -- PROPERTY
----------------------

A.   The Subcontractor shall acquire, and the University shall furnish to the
     Subcontractor, the materials, equipment, supplies, and/or tangible personal
     property items identified below, if any, for use under this Subcontract:

          Subcontractor Acquired Property:
          --------------------------------
               See attached Government Property Listing

          University Furnished Government Property:
          -----------------------------------------
                    See attached Government Property Listing

B.   All property furnished by the University under this Subcontract shall be
     identified, controlled, and dispositioned in accordance with the clause
     incorporated in the SUPPLEMENT TO GENERAL PROVISIONS entitled GOVERNMENT
     FURNISHED PROPERTY -- FIXED PRICE for all property under fixed price work,
     and in accordance with the clause entitled GOVERNMENT PROPERTY (COST
     REIMBURSEMENT) for all CPFF work. Disposition directions and authorization
     shall be provided by the University's Subcontract Administrator or a
     University property representative.

C.   Title to all property acquired by the Subcontractor under this Subcontract
     shall vest in the Government upon the vendor's delivery of such property to
     the Subcontractor. The Subcontractor shall assume the risk and
     responsibility for its loss or damage, except: (1) for reasonable wear and
     tear; (2) to the extent it is consumed in performing this Subcontract; or
     (3) as otherwise provided in this Subcontract.

D.   All property acquired by the Subcontractor or furnished by the University
     under this Subcontract shall be used only for performing this Subcontract
     and shall not be utilized after the completion, expiration or termination
     of this Subcontract, for any reason, unless otherwise provided in this
     Subcontract or approved by the University's Subcontract Administrator or a
     University property representative.


                                       -9-


<PAGE>

E.   The work described herein is based upon the University furnishing optical
     materials to the Subcontractor. The Subcontractor shall not be liable for
     any loss or damage to this optical material while it is in process, except
     if the loss or damage is the result of negligence or willful acts on the
     part of the Subcontractor. The Subcontractor shall not be obligated to
     insure optical material furnished to the Subcontractor by the University.

F.   Non-subcontract Use of Government Owned Equipment:

     1.   Not withstanding the limitation on subcontractor use of Government
          property in the GENERAL PROVISION entitled GOVERNMENT FURNISHED
          PROPERTY, the subcontractor may use the Government owned equipment
          listed above without charge in the performance of, in order of
          preference:

          a.   Subcontracts under Department of Energy Contract
               No. W-7405-ENG-48;

          b.   Prime contracts with the Government that specifically authorize
               such use without charge;

          c.   Subcontracts of any tier under Government prime contracts other
               than W-7405-ENG-48 if the Contracting Officer having cognizance
               of the prime contract (i) approves a subcontract specifically
               authorizing such use or (ii) otherwise authorizes such use in
               writing; and

          d.   Other work to the extent that such use does not interfere with
               work under a, b, and c above.

     2.   The Subcontractor agrees not to include in the price or prices of any
          such contracts or subcontracts the cost of said listed property, or
          any allowance or charge to cover depreciation or amortization. The
          Subcontractor further agrees to allocate the cost of maintenance,
          upkeep, repairs and consumables to the appropriate customers as
          defined in paragraph 1 above, or to the appropriate indirect cost
          pool. In the case of the three ring polishers (RPs) (Reference
          Subcontract No. B334926), the Subcontractor agrees to absorb the cost
          of normally scheduled maintenance, repairs and upkeep during the
          facilitization and initial production phases. If the RPs are used on
          non-subcontract work, these costs may be allocated to the appropriate
          customer, provided the allocation does not include the University. In
          the case of RP consumables, the Subcontractor agrees to provide those
          utilized in the continuous operation of the RPs, while those used in
          the actual processing of optics are to be properly allocated to the
          price of the optics themselves.

     3.   Nothing in this subcontract shall abrogate any right of the University
          to withdraw Government Owned Equipment from the subcontractor upon
          reasonable notice, subject to provision for equitable adjustment that
          may exist in an active University subcontract affected by such
          withdrawal. The University is not responsible for the effect of such
          withdrawal on any work being performed by the subcontractor under any
          other contract or subcontract.

ARTICLE 12 -- APPROVAL OF TECHNICAL DATA
----------------------------------------

If this Subcontract requires the Subcontractor to furnish any drawings,
specifications, diagrams, layouts, schematics, descriptive literature,
illustrations, schedules, performance or test data, or other technical data for
approval by the University prior to Subcontractor performance, the approval of
the data by the University shall not relieve the Subcontractor from
responsibility for any errors or omissions in such data, or from responsibility
for complying with the requirements of this Subcontract, except as specified
below. Any work done prior to such approval shall be at the Subcontractor's
risk.


                                      -10-

<PAGE>


If the data includes any variations from the Subcontract requirements, the
Subcontractor shall describe such variations in writing at the time of
submission of the data. If the University approves any such variation(s), a
change order to the Subcontract shall be issued by the University and, if
appropriate, a bilateral modification to the Subcontract shall be negotiated.

ARTICLE 13 -- ASSIGNMENT OF PERSONNEL

The personnel specified below are considered to be essential to the work being
performed hereunder. Prior to diverting any of the specified individuals to
other programs, the Subcontractor shall notify the University's Subcontract
Administrator reasonably in advance and shall submit justification (including
proposed substitutions) in sufficient detail to permit evaluation of the impact
on the performance of this Subcontract. No diversion shall be made by the
Subcontractor without the written consent of the University's Subcontract
Administrator, provided, however, that the University's Subcontract
Administrator may ratify in writing such diversion and that such ratification
shall constitute the consent of the University's Subcontract Administrator. The
list of key personnel may be modified from time to time during the course of
this Subcontract to either add or delete personnel, as appropriate.

          NAME                        TITLE
          ----                        ------
          Rich Boland                 Manufacturing Engineer
          Kevin Grobsky               Optics Engineer (Part-time to NIF)
          Jim Hopkins                 Mechanical Engineer
          Fleming Tinker              Optics Engineer (Part-time to NIF)
          Al Slomba                   NIF Program Manager

          Key Consultants:

          Doug Hoon
          Sol Laufer           
          Paul Forman

The Subcontractor shall not employ on the work any unfit person or anyone not
skilled in the work assigned to him or her and shall devote only qualified
personnel to work under this Subcontract. Should the University deem anyone
employed on the work incompetent or unfit for his or her duties and so inform
the Subcontractor, the Subcontractor shall remove such person from work under
this Subcontract and he or she shall not again, without written permission of
the University, be assigned to work under this Subcontract.

ARTICLE 14 -- QUALITY OF SUPPLIES

Any supplies furnished by the Subcontractor in performance of the work shall, as
a minimum: (1) be new, (2) be as warranted (including used equipment that has
been refurbished), and (3) not contain any counterfeit or suspect materials,
parts, or components. Types of counterfeit or suspect materials, parts and
components include, but are not limited to: electrical components, piping,
fittings, flanges, and fasteners. The University will not accept any work
involving the furnishing of any supplies found by the University to not conform
to these minimum requirements, notwithstanding any inspection or acceptance of
delivery by the University, unless such condition is specifically approved in
writing by the University's Subcontract Administrator.


                                     - 11 -



<PAGE>


ARTICLE IS -- WARRANTY

A.   The Subcontractor agrees that the materials, supplies and services
     furnished under this Subcontract shall be covered by the most favorable
     commercial warranties the Subcontractor gives to any customer for the same
     or substantially similar materials, supplies or services. Such warranties
     shall include performance, workmanship, labor, materials, Subcontractor's
     design or engineering contributions, and the Subcontractor shall furnish
     copies of same to the University, upon request. Notwithstanding any other
     provisions of this Subcontract, the Subcontractor also warrants that the
     materials, supplies or services furnished shall be of the most suitable
     grade and exactly as specified in this Subcontract. The rights and remedies
     provided by such warranties shall be in addition to and shall not limit any
     rights afforded to the University by any other provision of this
     Subcontract.

B.   If a defect is discovered in any item of materials, supplies or services
     covered in this Subcontract, the Subcontractor shall correct at its expense
     such defects as are reported within one (1) year of final acceptance. Upon
     expiration of the applicable warranty period, all such liability shall
     terminate except for fraud, or such gross mistakes as amount to fraud,
     latent defects, or specific failure to comply with the terms of this
     Subcontract.

ARTICLE 16 -- RELEASE OF INFORMATION

Information regarding this Subcontract or the undertaking or any data developed
hereunder shall not be released, and the name of the University, the Lawrence
Livermore National Laboratory, or the Government shall not be used, in any
publications, news releases, advertising, speeches, technical papers,
photographs and other releases of information, without prior written approval
from the University's Subcontract Administrator.

ARTICLE 17 -- ORDER OF PRECEDENCE

Any inconsistencies in the documents comprising this Subcontract shall be
resolved by giving precedence in the following order: (a) the Subcontract
Signature Page; (b) this SCHEDULE OF ARTICLES; (c) the GENERAL PROVISIONS; (d)
the SUPPLEMENT TO GENERAL PROVISIONS, if any (e) any referenced specification or
statement of work; and (f) and other documents, exhibits, and attachments.

ARTICLE 18 -- ASSIGNMENTS

A.   This Subcontract may be assigned by the University to the U.S. Government
     or a successor-in-interest.

B.   Except as to the assignment of payments due hereunder, the Subcontractor
     shall have no right, power or authority to sell, mortgage, transfer or
     assign this Subcontract, any portion hereof, any interest herein or any
     claim hereunder, nor allow or permit any other party or parties to have any
     interest in or use any part of the rights or obligations granted hereunder
     for any purpose whatsoever without the prior written consent of the
     University.

ARTICLE 19 -- DISPUTES

A.   Except as otherwise provided in this Subcontract, any non-routine claim
     under this Subcontract not resolved in the ordinary course of business
     shall be referred in writing to the University's Procurement Representative
     and the executive management of the Subcontractor with the authority to
     settle the dispute. The representatives of the parties, or their designees,
     shall then attempt in good faith to resolve the dispute by negotiations.
     All negotiations shall be confidential and shall be treated as compromise
     and settlement negotiations, for the purposes of application of rules of
     evidence.


                                      -12-



<PAGE>


B.   If the parties still have not been able to resolve the dispute, they may
     thereafter pursue any remedy they may have, at law or in equity, in any
     court of competent jurisdiction. Pending resolution of the dispute, the
     Subcontractor shall proceed diligently with the performance of this
     Subcontract, in accordance with its terms.

ARTICLE 20 -- NOTICES -- LITIGATION AND CLAIM: INABILITY TO PERFORM

A.   The Subcontractor shall immediately notify the University's Subcontract
     Administrator in writing of (1) any action, including any proceeding before
     an administrative agency, filed against the Subcontractor arising out of
     the performance of this Subcontract, and (2) any claim against the
     Subcontractor, the cost or expense of which is allowable under the terms of
     this Subcontract.

B.   If, at any time during the performance of this Subcontract, the
     Subcontractor becomes aware of any circumstances whatsoever which may
     jeopardize its performance of all or any portion of this Subcontract, it
     shall immediately notify the University's Subcontract Administrator in
     writing of such circumstances, and the Subcontractor shall take whatever
     action is necessary to enable the Subcontractor to fulfill its performance
     obligations under this Subcontract.

ARTICLE 21 -- GENERAL PROVISIONS

A.   The clauses listed in the attached GENERAL PROVISIONS shall be applicable
     to this Subcontract, based on the value of the Subcontract, the fixed price
     versus CPFF nature of the work in question, the status of the
     Subcontractor, and the nature and location of the work, as indicated in the
     GENERAL PROVISIONS.

B.   This Subcontract is for the conduct of research, development, or
     demonstration work or design work involving non-standard types of
     construction. Accordingly, the Authorization and Consent, Alternate I,
     Patent Rights, and Additional Data Requirements clauses listed in the
     GENERAL PROVISIONS for such work shall apply. The applicable Patent Rights
     clause of the GENERAL PROVISIONS shall be the clause entitled PATENT
     RIGHTS-RETENTION BY THE CONTRACTOR.

ARTICLE 22 -- INCORPORATED DOCUMENTS

The following documents are hereby incorporated as a part of this Schedule of
Articles of the Subcontract, and are attached hereto.

     o    STATEMENT OF WORK

     o    GOVERNMENT PROPERTY LISTING

     o    GENERAL PROVISIONS FOR FIXED PRICE SUPPLIES & SERVICES (List 600A;
          Rev. 1/15/97) - This GP set applies only to the fixed price portions
          of this subcontract.

     o    GENERAL PROVISIONS FOR COST PLUS FIXED FEE SUBCONTRACTS (List 400;
          Rev. 8/19/96) - This GP set applies only to the cost reimbursement
          portions of this subcontract.

     o    SUPPLEMENT TO GENERAL PROVISIONS, SUBCONTRACT NO. B335188

     o    VOUCHER FORM AND INSTRUCTIONS

     o    PROPERTY IDENTIFICATION LIST


                                (END OF SCHEDULE)


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