<PAGE>

                                                                    Exhibit 10.3

                             CONTRACT NO. KESHET 002

                                     BETWEEN

                               SOLTAM SYSTEMS LTD.

                                       AND

                              VALENTEC SYSTEMS INC.

                                       FOR

                       PRODUCTION, ASSEMBLY AND SUPPLY OF
                     RECOILING MORTAR SYSTEMS (RMS6 SYSTEM).
                    120MM SELF-PROPELLED MORTAR SYSTEMS (TBD)
                                       AND
                        120MM TOWED MORTAR SYSTEMS (TBD)

                                                                               1

<PAGE>

                             CONTRACT No. KESHET 002

TABLE OF CONTENTS

<TABLE>
<S>                                                                                                 <C>
PREAMBLE                                                                                             3
ARTICLE 1 - DEFINITIONS                                                                              3
ARTICLE 2 - PREAMBLE, HEADINGS, ANNEXES AND CONTRACT SCOPE                                           3
ARTICLE 3 - SALE                                                                                     3
ARTICLE 4 - CONTRACT EFFECTIVE DATE (CED)                                                            3
ARTICLE 5 - SELLER'S REPRESENTATIONS AND OBLIGATIONS                                                 3
ARTICLE 6 - DELIVERABLES AND SCHEDULE                                                                3
ARTICLE 7 - PRICE                                                                                    3
ARTICLE 8 - PAYMENT                                                                                  3
ARTICLE 9 - PRICE AND PAYMENT SCHEDULE                                                               3
ARTICLE 10 - NOTIFICATION AND SHIPPING ADVICE                                                        3
ARTICLE 11 - TITLE                                                                                   3
ARTICLE 12 - RISK OF LOSS                                                                            3
ARTICLE 13 - FREIGHT AND PACKING                                                                     3
ARTICLE 14 - WARRANTY                                                                                3
ARTICLE 16 - BUYER FURNISHED EQUIPMENT ("BFE") AND INFORMATION ("BFI")                               3
ARTICLE 17 - BUYER PERSONNEL                                                                         3
ARTICLE 18 - QUALITY CONTROL, DELIVERY AND ACCEPTANCE                                                3
ARTICLE 19 - TERMINATION FOR DEFAULT                                                                 3
ARTICLE 20 - TERMINATION FOR CONVENIENCE                                                             3
ARTICLE 21 - SUBCONTRACTORS                                                                          3
ARTICLE 22 - APPLICABLE LAW AND ARBITRATION                                                          3
ARTICLE 23 - NEW MATERIALS                                                                           3
ARTICLE 24 - PROPRIETARY RIGHTS IN THE SYSTEM                                                        3
ARTICLE 25 - PROPRIETARY DATA AND CONFIDENTIALITY                                                    3
ARTICLE 26 - INTELLECTUAL PROPERTY REPRESENTATION AND INDEMNIFICATIONS                               3
ARTICLE 27 - FORCE MAJEURE                                                                           3
ARTICLE 28 - TAXES                                                                                   3
ARTICLE 29 - PERSONNEL DELEGATION                                                                    3
ARTICLE 30 - VISAS                                                                                   3
ARTICLE 31 - HEADINGS                                                                                3
ARTICLE 32 - ENTIRE CONTRACT                                                                         3
ARTICLE 33 - WAIVER                                                                                  3
ARTICLE 34 - RELIABILITY                                                                             3
ARTICLE 35 - MODIFICATION -- CHANGES                                                                 3
ARTICLE 36 - DISCLAIMER OF AGENCY                                                                    3
ARTICLE 37 - DECLARATIONS                                                                            3
ARTICLE 38 - LANGUAGE OF DOCUMENTS                                                                   3
ARTICLE 39 - COMPUTATION OF TIME                                                                     3
ARTICLE 40 - ASSIGNMENT                                                                              3
ARTICLE 41 - NOTICES                                                                                 3
ARTICLE 42 - U.S. GOVERNMENT REQUIRED CERTIFICATION AND AGREEMENT                                    3
ARTICLE 43 - IMOD REQUIRED CERTIFICATION                                                             3
ARTICLE 44 - SECURITY                                                                                3
ARTICLE 45 -- STOP WORK ORDERS                                                                       3
ANNEX I - STATEMENT OF WORK (SOW)                                                                   29
ANNEX II - SYSTEM SPECIFICATION                                                                     30
ANNEX III - IRREVOCABLE STANDBYLETTER OF CREDIT                                                     31
ANNEX IV - CONTRACTORS DSCA CERTIFICATION (DRAFT)                                                    3
ANNEX V -  FMF GUIDELINES                                                                            3
ANNEX VI - CERTIFICATE OF MILESTONE ACHIEVEMENT                                                      3
ANNEX VII - EXCLUSIVE LICENSE AGREEMENT BETWEEN SOLTAM AND VSI                                       3
ANNEX VIII - BUYER FURNISHED EQUIPMENT (BFE)                                                         3
</TABLE>

                                                                    Page 2 OF 41

<PAGE>

                             CONTRACT No. KESHET 002

<TABLE>
<S>                                                                            <C>
ANNEX IX - WORK BREAKDOWN STRUCTURE                                             3
ANNEX X - RMS PRODUCTION PLAN                                                   3
ANNEX XI - ACCEPTANCE AND SHIPMENT CHECK LIST                                   3
ANNEX XII - TRANSFER OF TITLES AND BILL OF SALES                                3
ANNEX XIII - DRAWING LIST                                                       3
ANNEX XIV - SPARE PARTS LIST                                                   42
</TABLE>

                                                                    Page 3 OF 41

<PAGE>

                             CONTRACT No. KESHET 002

PREAMBLE

This Contract signed the__th day of__________, 2004 is between Soltam Systems
Ltd., a private Israeli company having an address at P.O. Box 13 Yokneam, Israel
20692 (the "Buyer" or SOLTAM) and Valentec Systems Inc. , a private United
States Company having offices at 2618 York Avenue, Minden, L.A.71055 (the
"Seller" or VSI).

      WITNESSETH THAT:

      1. WHEREAS, Soltam has been awarded by the Israeli Ministry of Defense
(hereinafter referred to as "IMOD") as the prime contractor of the Israeli
Defense Forces (hereinafter referred to as "IDF") 120 mm Mortar System Program
(hereinafter referred to as "the Program"), which will be financed primarily
through United States Foreign Military Financing ("FMF").

      2. WHEREAS, SOLTAM granted VSI Exclusive License with respect to the
manufacture and sale of SOLTAM's products and SOLTAM's Know-How in the United
States to the Government of United States of America, the Government of ISRAEL,
and the Foreign Governments directly or under U.S. Government FMF and FMS
programs.

      3. WHEREAS, the parties have agreed that VSI will act as the 120mm RMS6
producer, the 120mm Mortar Carrier Integrator, the 120mm Towed Mortar producer
and 120mm Ammunition Carrier IDF Configuration Integrator.

      NOW, THEREFORE, in consideration of the terms, conditions and covenants
contained herein, the parties agree as follows:

ARTICLE 1 - Definitions

Whenever used in this Contract, the following terms shall have the meaning
assigned to them as hereunder:

1.1   SYSTEM - 120mm Self-Propelled Mortar System described in Annex II to be
      supplied under this Contract.

1.2   CONTRACT - this contract between the Parties.

1.3   DSCA - The U.S. Defense Security Cooperation Agency.

1.4   FMF - Foreign Military Financing provided by the U.S. Government to fund
      direct commercial contracts between American contractors and the
      Government of Israel.

1.5   GOI - The Government of Israel.

1.6   IDF - The Israeli Defense Forces or any person or entity duly authorized
      to represent it.

1.7   BUYER FURNISHED EQUIPMENT/DATA (BFE) - Equipment provided to Seller by the
      Buyer within the framework of this Contract, as specified in Annex IX and

                                                                    Page 4 of 41

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                             CONTRACT No. KESHET 002

      data provided to Seller by the Buyer according to the License Agreement,
      free of charge, for the purposes of performing this Contract.

1.8   IMOD - The Israeli Ministry of Defense.

1.9   THE ORDER - IMOD Order No. 15914773-01 issued by IMOD to the Buyer, for
      the supply of the Systems.

1.10  LICENSE AGREEMENT - The License Agreement between Buyer and Seller for the
      manufacture of the Components, assembly and supply of the System attached
      hereto as Annex "VIII".

1.11  PROGRAM - IMOD program for the purchase of the Systems, which is the
      subject of Order.

1.12  PROGRAM MANAGER - A member of Buyer's personnel designated by Buyer as the
      manager of the Program on its behalf.

1.13  SOW - The statement of work as submitted by Buyer to Seller (attached
      hereto as Annex "I") and as may be updated or modified from time to time
      pursuant to ARTICLE 35, including any other documents referred to therein.

1.14  SUBCONTRACTORS - Contractors and suppliers of Seller and their respective
      employees who shall render goods or services to Seller, for the
      performance of this Contract.

1.15  SPECIFICATIONS - The technical specifications as agreed upon by the Buyer
      and the Seller (attached hereto as part of Annex "II") and as may be
      updated or modified from time to time pursuant to ARTICLE 35, including
      any other document referred to therein.

1.16  TECHNICAL DATA PACKAGE - (TDP) - Means the Buyer approved and released
      specification and drawings that allow Seller to purchase materials build
      and test the system.

1.17  WORK - The work to be performed by Seller according to the SOW.

1.18  BUYER - Soltam Systems, Ltd.

1.19  END USER - Israeli Ministry of Defense

1.20  EXPORT LICENSE - The export license(s), known as DSP-5, is defined as the
      license required to export the defense systems to Israel.

1.21  SELLER - Valentec Systems, Inc.

ARTICLE 2 - PREAMBLE, HEADINGS, ANNEXES AND CONTRACT SCOPE

2.1   The preamble to this Contract and the Annexes attached hereto, or the
      Annexes and documents incorporated by reference herein shall all form
      integral parts of this Contract for all intents and purposes.

2.2   The headings of the Articles in this Contract are provided for convenience
      only, and shall not affect the interpretation of this Contract.

2.3   The following Annexes (the "Annexes") are attached hereto, and form
      integral parts hereof:

                                                                    Page 5 of 41
<PAGE>

                            CONTRACT NO. KESHET 002

Annex 1    -   Statement of Work (SOW)
Annex II   -   System Specification
Annex III  -   Irrevocable Standby Letter of Credit
Annex IV   -   Contractors DSCA Certification (DRAFT)
Annex V    -   FMF Guidelines
Annex VI   -   Certificate of Milestone Achievement
               (or Certificate of Completion)
Annex VII  -   Exclusive License Agreement Between Soltam and VS1
Annex VIII -   Buyer Furnished Equipment (BFE)
Annex IX   -   Work Breakdown Structure
Annex X    -   RMS Production Plan
Annex XI   -   Acceptance and Shipment Check List
Annex XII  -   Transfer of Title and Bill of Sale
Annex XIII -   Drawing List
Annex XIV  -   Spare Parts List

ARTICLE 3 - SALE

3.1   VALENTEC SYSTEMS INC. agrees to sell and SOLTAM agrees to buy a quantity
      of:

      1.    Eighty-two (82) each RMS System and supporting System

      2.    Spare Parts as defined in Annex XIV.

ARTICLE 4 - CONTRACT EFFECTIVE DATE (CED)

4.1   The date of the last to occur of the following shall be the effective date
      of this Contract:

      A.    Execution of the Contract by the parties hereto;

      B.    Receipt by VALENTEC SYSTEMS INC. of the advance payment as set out
            in Articles 5 and 10;

      C.    VALENTEC SYSTEMS INC. receipt of Defense Security Cooperation
            Agency, (hereinafter referred to as "DSCA") approval of IMOD'S
            funding request for this Contract. VALENTEC SYSTEMS INC. shall
            promptly notify SOLTAM in writing of the IMOD's receipt of the
            required DSCA approval after it receives notice of such approval
            from the IMOD.

ARTICLE 5 - SELLER'S REPRESENTATIONS AND OBLIGATIONS

5.1   Seller hereby represents and warrants that it possesses and its
      Subcontractors possess the necessary ability, fitness, know-how,
      professional expertise, resources and, in general, the capability and
      ability required to manufacture and supply the Components and the System,
      in the quantities requested and required, and to perform all of its
      obligations pursuant to this Contract.

5.2   The Seller shall manufacture and supply the Systems in accordance with
      Soltam released Technical Data Package in accordance with Annex X, and the
      terms and provisions of this Contract and shall use qualified personnel
      and suitable materials and tools in the performance of its obligations
      hereunder.

5.3   The Seller shall not sell, either directly or indirectly, or offer to sell
      the System or any part thereof, to any third party, without receiving
      prior written consent from the Buyer.

                                                                    Page 6 of 41

<PAGE>

                             CONTRACT NO. KESHET 002

ARTICLE 6 - DELIVERABLES AND SCHEDULE

6.1   The Seller shall deliver the Systems, hardware, software, data and
      services in accordance with the Delivery Schedule and the other terms and
      conditions of this Contract. The foregoing shall not limit Seller's
      obligation to deliver hardware, software, data and services in addition to
      those set forth in the Delivery Schedule or to modify any items listed in
      the Delivery Schedule, if required for the Systems to meet the
      Specifications or other Contract requirements. In the event Seller is
      required to modify any item listed in the Delivery Schedule, Seller shall
      modify any corresponding spares for such item so as to be completely
      interchangeable with such modified item, at no additional cost to Buyer.

ARTICLE 7 - PRICE

7.1   It is agreed by and between the parties hereto that the total firm, fixed
      price of this Contract (or "Total Price") shall be U.S. Dollars $
      16,745,271.00 (Sixteen million seven hundred forty-five thousand two
      hundred seventy-one and zero cents, U.S. Dollars.)

7.2   Payment for defense items delivered hereunder shall be EX-WORKS VALENTEC
      SYSTEMS INC. Minden, Louisiana, U.S.A. The pricing of the eighty two (82)
      RMS6 and supporting Spare Parts shall be on a firm-fixed price basis
      payable as set forth in the Article 9.

7.3.  Prices are based on the drawing list in Annex XIII.

7.4   Above price does not include the following (WBS) items. Prices for these
      (WBS) items will be submitted when adequate data is available from Soltam
      Systems Inc.

      1.2.1 - Integration into the vehicles

      2.2.4 - Packaging of the Spare Parts and Mortar Carrier

      4.2.3.1.3 - Transporting the Mortar Carriers from Anniston to Minden, LA
      and from Minden, LA to the port of export

      5.2.3.2 - IDF Kit, changes and improvement Manufacturing and Integration

      6.2.3.3 - Changes and Improvements

      7.3.0 - Towed trailers

      10.1.2.2.2 & 1.2.3.2; 1.2.2.3 & 1.2.3.3, 2.4 - Freight to Soltam and
      Packaging

      11. Special Tooling for Mortar and MortarCarriers

ARTICLE 8 - PAYMENT

8.1   The Contract Price shall be paid by IMOD, in accordance with this
      Contract, which shall make payment to the Seller in U.S. Dollars according
      to the corresponding Milestones set forth in Article 9, the Price and
      Payment Schedule.

8.2   Upon completion of all activities required for completion of a milestone,
      the Seller shall deliver a signed Certificate of Milestone Achievement in
      the form set forth in Appendix VII, further accompanied by all the
      documents specified in Article 9 to the Buyer's Program Manager. The
      Buyer's Program Manager shall review and approve the Milestone material
      within seven (7) days. The Buyer will deliver the signed Certificate to
      IMOD and the Seller within fifteen (15) days after their receipt by the
      Buyer. The Buyer will telefax/email a copy of the countersigned
      certificates to the Seller at the time the Certificate is sent to the
      IMOD. The Seller shall submit to the Buyer a copy of each invoice and the
      associated Milestone material. The Seller shall submit to the IMOD six (6)
      copies of each invoice, each copy accompanied by a copy of the Certificate
      of Milestone Achievement. IMOD shall make payment to Seller within thirty
      (30) days of receipt of Seller's invoice accompanied by a Certificate of

                                                                    Page 7 of 41
<PAGE>

                             CONTRACT NO. KESHET 002

      Milestone Achievement signed by the Seller and the Buyer and the
      appropriate documents as specified in Article 6. If the Seller is not paid
      by net 45, then interest, at the U.S. Prime Rate, will accrue on the
      invoice amount. Prime rate is defined as the interest rate at which the
      U.S. Federal Reserve Bank lends to its best customers.

8.3   When sending an invoice relating to this Contract, the Seller shall
      indicate the applicable reference number from the Price and Payment
      Schedule. Failure to do so will prevent the processing and payment of the
      invoice. In the event a Milestone payment applies to more than one (1)
      reference number, the Seller shall submit a separate invoice for each
      reference number, which covers a portion of such payment. In addition,
      Seller's invoices must as a minimum contain the relevant information
      required by the FMF Guidelines, which are attached hereto as Appendix VI
      and Seller's Certification to the DSCA, including the following
      certification: "(Full Name of Seller) acknowledges that U.S. Government
      funds are being used by the Government of Israel to finance this Contract
      and certifies that the invoice(s) submitted with respect thereto are free
      from any material false statement or misrepresentation and do not omit any
      material facts."

8.4   Payment shall be made by wire transfer as follows:

                      Payee: VALENTEC SYSTEMS INC.
                      Mail to: VALENTEC SYSTEMS INC.
                               2618 YORK AVENUE
                               MINDEN, LOUISIANA, 71005 U.S.A.

                      Payable to: BANK NAME: BANK ONE
                                  ROUTING NUMBER: 065400137
                                  ACCOUNT NUMBER: 1591964588
                                  ACCOUNT NAME: VALENTEC SYSTEMS, INC.

8.5   The Milestones and corresponding payments and letter of credit amounts
      shall be as set forth in the Price and Payment Schedule.

8.6   IMOD's obligation to make the payments pursuant to Milestones shown in the
      Price and Payment Schedule is conditioned upon receipt by the Buyer of the
      Appendix III Irrevocable Standby Letter of Credit.

8.7   All Milestones must be performed in full. Notwithstanding the Seller's
      successful completion of its obligations under a particular Milestone,
      neither the Buyer nor IMOD will have any payment obligation for such
      Milestone unless the Milestone has been successfully completed. All tasks
      within a Milestone must be successfully completed in order for the
      Milestone to be considered as having been successfully completed.

8.8   However, minor non-conformities (those that do not affect the system's
      form, fit and function), such as minor chips in the system's paint or a
      misplaced decal on the exterior of a system, will not be the basis for
      refusing to accept a subsequent Lot/Milestone, so long as VALENTEC SYSTEMS
      INC. gives assurances of a timely correction of the minor non-conformity
      and IMOD reasonably believes VALENTEC SYSTEMS INC. has made reasonable
      progress in effecting the promised corrections by the scheduled delivery
      date of the subsequent lot/Milestone. Where Soltam/IMOD has rejected a
      RMS6 System because of minor non-conformities, VALENTEC SYSTEMS INC. may
      substitute a replacement RMS6 System, in kind, for the rejected RMS6
      System, and VALENTEC SYSTEMS INC. may then later deliver the rejected RMS6
      once corrected.

8.9   The Seller shall not deliver items prior to the dates set forth in the
      Delivery Schedule without first obtaining the prior written permission of
      the Buyer. Failure to obtain such

                                                                    Page 8 of 41
<PAGE>

                             CONTRACT NO. KESHET 002

      permission shall give the Buyer and IMOD the right to delay processing and
      payment of the applicable invoice until the date set forth in the Price
      and Payment Schedule (with no interest accruing thereon). This Article is
      in no way intended as authorization for late delivery. Failure to meet the
      schedule as set forth in this Contract shall entitle the Buyer to all of
      its rights and remedies under this Contract, at law and in equity.

8.10  The Seller hereby confirms that the IMOD assumes no responsibility towards
      this contract. The Seller agrees that under no circumstances shall IMOD be
      made a party to any dispute between the Buyer and the Seller, regardless
      of the nature of such dispute.

ARTICLE 9 - PRICE AND PAYMENT SCHEDULE

9.1   The contract provides for the direct payment of the Contract Price by the
      IMOD Mission to the United States to VALENTEC SYSTEMS INC., in accordance
      with DSCA FMF Guidelines.

9.2   Payment by direct wire transfer will be made NET 45 days to VALENTEC
      SYSTEMS INC. in United States Dollars to VALENTEC SYSTEMS INC., Account
      No. 1591964588, Routing No. 065400137 at Bank One.

9.3   The IMOD shall pay to Valentec Systems Inc. in accordance with the
      following Milestone Payment Schedule:

      9.3.1 Upon placement of contract by Soltam Systems to Valentec Systems
            Inc. an advance payment, not exceeding 15% of the contract value,
            shall be made by IMOD to Valentec Systems Inc. This advance payment
            shall be made against the Irrevocable Stand by Letter of Credit, as
            outlined in Annex III, from an IMOD approved bank in USA. Valentec
            System will submit the Irrevocable Standby Letters of Credit in
            accordance with the need of the advance payment which may be in
            multiple installments.

      9.3.2 This irrevocable standby letter of credit (the "Letter of Credit"),
            equal to the amount of the advance payment, will be provided by VSI
            to SOLTAM within thirty (30) days after the Contract Effective Date.
            This Letter of Credit will be increased accordingly by the amount of
            the Article advanced payments. The value of the Letter of Credit
            will be reduced at the time of RMS6 delivery in proportion to the
            value of the item being invoiced.

      9.3.3 This Letter of Credit will expire at the time of completion of the
            final contract hardware deliveries. The Letter of Credit shall be
            payable to the United States Government in accordance with Article
            37 in the event SOLTAM is entitled to draw on the Letter of Credit
            in accordance with its terms.

      9.3.4 In the event that the scheduled date for completion of the final
            contract hardware deliveries is revised, VSI shall cause the
            expiration date of the Letter of Credit to be extended to a date one
            hundred twenty (120) days following the latest of such revised
            completion date. VSI shall cause the amount of the Letter of Credit
            to be increased as appropriate on account of any changes made
            pursuant to Article 28 hereof, Modification Changes.

                                                                    Page 9 of 41
<PAGE>

                                     CONTRACT NO. KESHET 002

      9.3.5 Payment Milestones

<TABLE>
<CAPTION>
                                           SCHEDULE
MILESTONE           MILESTONE              CED PLUS    PRODUCTION    SPARE      MILESTONE        PRICE
 NUMBER#           DESCRIPTION              MONTHS        QTY         QTY      ACHIEVEMENT       (US $)
---------          -----------             --------    ----------    -----     -----------       -----
<S>         <C>                            <C>         <C>           <C>      <C>              <C>
    1       Machined Cradle Sets           CED + 7         41          4      Ship In Place     1,057,476

    2       Saddle Assembly                CED + 8         20          1      Ship In Place       361,160

    3       Main Bearings                  CED + 8         20          2      Ship In Place       269,938

    4       Assembly of the Mortar
            (without the EFW MFCS Kit)     CED + 9         12          0      Ship In Place       488,907

    5       Saddle Assembly                CED + 10        15          1      Ship In Place       275,169

    6       Machined Cradle Sets           CED + 10        41          4      Ship In Place     1,057,476

    7       Assembly of the  Mortar
            (without the EFW MFCS Kit)     CED + 10        12          0      Ship In Place        488,907

    8       Main Bearings                  CED + 11        62          8      Ship In Place       858,858

    9       Assembly of the Mortar
            (without the EFW MFCS Kit)     CED + 11        12          0      Ship In Place       488,907

   10       Saddle Assembly                CED + 12        15          1      Ship In Place       275,169

   11       Barrel Forgings                CED + 12        82         20         Delivery         782,251

   12       Assembly of the Mortar
            (without the EFW MFCS Kit)     CED + 12        12          0      Ship In Place       488,907

   13       Spare Parts                    CED + 13        na         **         Delivery       1,045,371

   14       Assembly of the Mortar
            (without the EFW MFCS Kit)     CED + 13        12          0      Ship In Place       488,907

   15       Saddle Assembly                CED + 14        16          0      Ship In Place       275,069

   16       Completed Mortar
            Assemblies with EFW Kit        CED + 14        12          0         Delivery       1,005,556

   17       Assembly of the
            Mortar (without the
            EFW MFCS Kit)                  CED + 14        12          0      Ship In Place       488,907

   18       Completed Mortar
            Assemblies with EFW Kit        CED + 15        12          0         Delivery       1,005,556

   19       Assembly of the
            Mortar (without the
            EFW MFCS Kit)                  CED + 15        10          0      Ship In Place       407,422

   20       Saddle Assembly                CED + 16        16          0      Ship In Place       275,189

   21       Completed Mortar
            Assemblies with EFW Kit        CED + 16        12          0         Delivery       1,005,556

   22       Completed Mortar
            Assemblies with EFW Kit        CED + 17        12          0         Delivery       1,005,556

   23       Completed Mortar
            Assemblies with EFW Kit        CED + 18        12          0         Delivery       1,005,556

   24       Completed Mortar
            Assemblies with EFW Kit        CED + 19        12          0         Delivery       1,005,556

   25       Completed Mortar
            Assemblies with EFW Kit        CED + 20        10          0         Delivery         837,965

                                                                                  TOTAL        16,745,271
</TABLE>

      ** Note: The US Dollars shown in the "PRICE" column above is the value of
      the Production Quantity items only. The Spare Quantity shown is for
      reference only. The value of the total Spare Quantities is shown in
      Milestone Number 13.

      CED (Contract Effective Date) - The payment milestone schedule shown above
      is based on the Buyer furnishing the Seller the Keshet Master Production
      Plan for RMS per Annex X. Any delay in furnishing the approved TDP may
      result in a delay to the schedule. Seller's costs associated with the
      delay, or any expedite charges authorized by Buyer shall be treated as
      "change" under Article 35 - Modification-Changes of this contract.

ARTICLE 10 - NOTIFICATION AND SHIPPING ADVICE

10.1  Shipping advice shall be telefaxed to SOLTAM, fifteen (15) days prior to
      the first scheduled shipment from VALENTEC SYSTEMS INC., Minden, LA.,
      containing such information as the contract number and a brief description
      of the commodities to be shipped.

                                                                   Page 10 of 41
<PAGE>

                             CONTRACT NO. KESHET 002

ARTICLE 11-TITLE

11.1  Title to the assembled RMS6 System shall remain with the IMOD. Title to
      all Spare Parts shall pass from VALENTEC SYSTEMS INC. to SOLTAM upon
      delivery, EX WORKS (INCOTERMS 2000).

ARTICLE 12 - RISK OF LOSS

12.1  The RMS6 System shall be delivered to SOLTAM EX WORKS, VALENTEC SYSTEMS
      INC., 2618 York Avenue, Minden, L.A 71055. Risk of loss or RMS6 Systems
      damage to or deterioration of the System from whatever cause arising shall
      be borne by VALENTEC SYSTEMS INC. prior to delivery.

ARTICLE 13 - FREIGHT AND PACKING

13.1  IMOD shall pay for all freight charges to point of destination and shall
      have the right to designate the means of transportation and routing. A
      U.S. Carrier must be used. VALENTEC SYSTEMS INC. shall arrange for inland
      transportation on behalf of IMOD to port of exportation, if requested.

13.2  Spare parts shall be packed in accordance with best commercial practices
      for overseas shipment. The cost of such packing is not included in the
      total price of this Contract.

ARTICLE 14 - WARRANTY

14.1  Seller warrants that the Systems and all Software, hardware, data and
      documentation delivered hereunder shall be free from manufacturing errors
      and errors, deficiencies and defects in materials and workmanship, and
      shall conform to the Specifications and other provisions of this Contract.
      This warranty is limited (i) to the prompt correction of errors,
      deficiencies and defects in the System and its sub-systems/components,
      data and documentation, and (ii) to the prompt repair, replacement or
      modification, at Seller's option, of defective goods or parts, and any
      parts damaged by reason thereof, returned to Seller at Seller's plant,
      provided that written notice of the defect shall have been given to Seller
      within one hundred twenty (120) days of final delivery of the System in
      accordance with Article 10 hereof; and provided further, that any
      warranties made by subcontractors that extend beyond the term of this
      warranty shall inure to the benefit of the Buyer. Transportation charges
      to Seller's plant in connection with items returned to Seller shall be at
      Buyer's expense. Return transportation charges for repaired, modified or
      replacement items shall be paid by Seller if Seller is responsible for
      repair, modification or replacement under the terms of this warranty and
      such items shall be shipped by a mode of transportation to reach Buyer's
      plant no later than 45 days after shipment from Seller's plant. Repaired,
      modified or replacement items shall be warranted for the unexpired portion
      of this warranty applicable to the original item plus the period from
      notice to Seller of the defect until return of the item (including
      software) on-site.

14.2  Any other provisions of this contract to the contrary notwithstanding,
      this warranty, except as to title, is in lieu of all other warranties,
      express or implied, including merchantability or fitness for any
      particular purpose, whether arising by law, custom, conduct or usage of
      trade, and the rights and remedies provided herein are exclusive and in
      lieu of any other right or remedies.

ARTICLE I5 - LEFT BLANK INTENTIONALLY

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                                    CONTRACT NO. KESHET 002

ARTICLE 16 - BUYER FURNISHED EQUIPMENT ("BFE") AND INFORMATION ("BFI")

16.1  Buyer shall furnish to Seller for use only in connection with this
      Contract the information and materials set forth in Annex X at the time
      and locations stated therein. Titles to said materials and information
      shall at all times remain in Buyer. Seller shall keep and maintain said
      materials in accordance with the same practices it uses with respect to
      its own materials of like quality, and shall maintain control records with
      respect to Buyer furnished materials and information, which materials,
      information and records shall be subject to Buyer's inspection upon
      Buyer's request. Seller shall be responsible for any loss or damage to
      Buyer furnished materials from the time of delivery to Seller until their
      return to Buyer. Seller agrees to return said materials in the same
      conditions as delivered by Buyer, reasonable wear and tear excepted. Upon
      completion of this Contract or at such time as specified elsewhere in this
      Contract, Seller shall pack and prepare for shipment and deliver EX Works
      Minden, LA all Buyer furnished materials not consumed in the performance
      of this Contract or not previously delivered to Buyer, all in accordance
      with directions given by Buyer. The Seller will maintain insurance
      covering its liabilities and risks under this ARTICLE as provided in
      ARTICLE 13. If any BFE requires repair, the Seller will notify the Buyer,
      who will perform the repair or authorize the Seller to perform the repair.

ARTICLE 17 - BUYER PERSONNEL

17.1  Buyer's personnel shall be entitled to conduct in-process monitoring and
      inspection of Contract performance (including all in-process testing) at
      Seller's facilities where the Work is being performed (hereinafter
      referred to as the "Seller's Plant") and at the facilities of Seller's
      major subcontractors (as defined in the SOW). This shall include access to
      Seller's quality assurance program. Also, the Seller will use its
      reasonable best efforts to enable the Buyer's personnel to conduct
      in-process monitoring and inspection of Subcontractors' performance at
      Subcontractor's plants. Subject to ARTICLE 17.3, the Seller shall provide
      the Buyer with access to drawings, designs, diagrams and specifications
      for the System and all portions thereof. The Seller shall enter into
      appropriate agreements with its Subcontractors and vendors to provide for
      the foregoing.

17.2  The Buyer shall give the Seller at least thirty (30) days prior written
      notice of the visit date to the Seller's Plant and its Subcontractors.

17.3  The Seller's obligations set forth in Articles 17.1 and 17.2 above are
      conditioned on the Seller obtaining all necessary approvals from the U.S.
      Government including the U.S, Department of State, and the Buyer complying
      with the applicable U.S. Government laws and security regulations and
      seller's Plant rules and escort requirements.

17.4  The Buyer's personnel mentioned in this Contract may include
      representatives of the IMOD and IDF who will have the same rights as the
      Buyer's personnel.

17.5  Without derogating from the aforesaid, the Program Manager has the right
      to visit at the Seller's Plant from time on a non-interference basis
      during the term of this Contract and is authorized to execute Acceptance
      Forms, Certificates of Milestones Achievement and Certificates of
      Approvals or issuing comments in respect to technical documents requiring
      the Buyer's approval. The Program Manager shall have no authority to make
      Contract changes or to grant approvals which require Contract changes,
      such approvals to be made on the Buyer's behalf only in writing signed by
      the authorized signatories of the Buyer, as stipulated in ARTICLE 18.2.

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                             CONTRACT NO. KESHET 002

17.6  The Seller agrees to provide the Program Manager, with normal furnished
      office space; reasonable access to office equipment, including, but not
      limited to, photocopying equipment; supplies, secretarial services; local
      and long distance domestic telephone services, at Seller's expense while
      staying at Seller's facilities.

ARTICLE 18-QUALITY CONTROL, DELIVERY AND ACCEPTANCE

18.1  Seller shall perform interim production, quality control, and final tests
      in accordance with the Statement of Work, schedule and procedures and to
      the standards specified in this Contract. All deliverable items hereunder
      shall be delivered in accordance with the Delivery Schedule, which sets
      forth deliverable items by name, quantity and delivery date relative to
      the effective date of the Contract.

18.2  All acceptance tests shall be conducted pursuant to acceptance test plans
      and acceptance test procedures ("ATP") as set forth in the SOW. The
      Buyer's and IMOD's representatives may witness all tests set forth in the
      SOW. The Seller shall give the Buyer at least sixty (60) days prior
      written notice of the commencement date of each lot of the acceptance
      tests, the Buyer shall respond and notify the Seller within forty-five
      (45) days of receipt of the said notice, if the Buyer and/or IMOD
      representatives intend to attend the relevant test. Upon a determination
      that the acceptance test results comply with the applicable ATP and pass
      the criteria specified therein, the Buyer and the Seller shall sign
      Certificates of Completion with respect to such acceptance tests. If the
      Buyer elects not to attend the acceptance tests, or if Buyer attends the
      acceptance tests but does not act upon Seller's request for signature
      within fourteen (14) days of receipt of said request. Seller shall be
      authorized to sign the Certificate of Completion so long as the acceptance
      test results comply with the applicable ATPs and pass the criteria
      specified therein. The form for the Certificate of Completion shall be as
      set out in Annex VI attached hereto.

18.3  The delivery of the Systems shall be Ex-Works (INCOTERMS 2000), Seller's
      facilities at 2618 York Avenue, Minden, Louisiana, USA 71055. The Buyer
      (or IMOD) shall furnish the Seller with shipping instructions within a
      reasonable time following execution by Buyer of the Certification of
      Completion for each lot of Systems. Such shipping instructions will set
      forth the date(s) by which ocean freight containers are to be loaded by
      Seller. Seller shall provide ninety (90) days temporary storage at its
      facilities at no cost to Buyer, pending loading of the containers. Systems
      not shipped within ninety (90) days may incur storage costs. Buyer agrees
      to pay the storage costs, if any are imposed by the U.S. Army or their
      designated representatives.

18.4  Neither the provisions of this Article 18, nor actions taken pursuant
      hereto, nor any approvals or comments by Buyer with respect to Seller's
      work shall affect or diminish the full and absolute responsibility of
      Seller to comply with the requirements of this Contract.

18.5  Without derogating from any right or remedy available to Buyer under any
      law or Contract, it is hereby specifically clarified that any delay or
      expected delay in the delivery dates as set forth in the timetable of the
      SOW shall be notified in writing by Seller to Buyer immediately upon
      Seller's becoming aware of such delay. Seller shall specify in its notice
      the reasons for the delay and the expected date of delivery.

18.6  Each System or lot of Systems delivered by Seller to Buyer shall be
      accompanied by a certificate confirming the following:

      (a)  That each of the Systems were built and examined in strict accordance
           with the final and approved technical documentation (Specifications
           and the production file);

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                                     CONTRACT NO. KESHET 002

       (b)   That each of the Systems were examined and successfully passed the
             qualification acceptance tests as specified in the Specifications,
             the SOW and the mutually approved specifications; and

       (c)   That all of the Systems as a whole were examined and successfully
             passed the mutually agreed upon Acceptance Tests.

ARTICLE 19 - TERMINATION FOR DEFAULT

19.1   It is agreed by and between the parties hereto that in the event VALENTEC
       SYSTEMS INC. fails to make delivery of any items within ninety (90) days
       after notice of default or any extension thereof the Performance
       Guarantee shall vest with SOLTAM, unless the price of the item defaulted
       is less than the value of the Letter of Credit, at which case, the price
       of the item(s) shall be paid to SOLTAM in lieu of the full value of the
       Letter of Credit.

19.2   However, if there is a dispute between SOLTAM and VALENTEC SYSTEMS INC.
       concerning the alleged default of the Contract such dispute shall be
       settled under the Arbitration Article 22. Under a dispute situation, the
       Performance Guarantee, or a less amount as mentioned above, would not
       vest in SOLTAM unless the Arbitration Board decided the dispute in favor
       of SOLTAM.

19.3   Except for defaults of subcontractors at any tier, the Seller shall not
       be liable for any excess costs if the failure to perform the contract
       arises from causes beyond the control and without the fault or negligence
       of the Seller. Examples of such causes include (1) acts of God or of the
       public enemy, (2) fires, (3) floods, (4) epidemics, (5) quarantine
       restrictions, (6) strikes, (7) freight embargoes, and (8) unusually
       severe weather. In each instance the failure to perform must be beyond
       the control and without the fault or negligence of the Seller.

19.4   If the failure to perform is caused by the default of a subcontractor at
       any tier, and if the cause of the default is beyond the control of both
       the Seller and subcontractor, and without the fault or negligence of
       either, the Seller shall not be liable for any excess costs for failure
       to perform, unless the subcontracted supplies or services were obtainable
       from other sources in sufficient time for the Seller to meet the required
       delivery schedule.

19.5   The Buyer shall pay contract price for completed supplies delivered and
       accepted. The Seller and Buyer shall agree on the amount of payment for
       manufacturing materials delivered and accepted and for the protection and
       preservation of the property. Failure to agree will be a "dispute" under
       Article 22-Applicable Law and Arbitration clause of this contract.

19.6   If, after termination, it is determined that the Seller was not in
       default, or that the default was excusable, the rights and obligations of
       the parties shall be the same as if the termination had been issued for
       the convenience of the Buyer.

19.7.1 It is agreed by and between the parties that the remedies available to
       VALENTEC SYSTEMS INC. and SOLTAM as set forth above are the sole and
       exclusive remedies, recourse and liability to each of the parties under
       this Article of this Contract. Under no circumstances shall SOLTAM or
       VALENTEC SYSTEMS INC. be liable under this Article or any other provision
       of this Contract to a cumulative liability greater than that set forth in
       this Article.

                                                                   Page 14 of 41
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                             CONTRACT NO. KESHET 002

ARTICLE 20 - TERMINATION FOR CONVENIENCE

20.1  Buyer shall have the right, at its convenience and discretion, to
      terminate this Contract, in whole or from time to time in part, by
      delivery to Seller of a notice of termination for convenience, specifying
      the extent to which the performance of the Program under this Contract is
      terminated, and the date upon which such termination shall become
      effective, which termination shall be subject to the terms set forth in
      Paragraph 52.249-2 of the September 1996 edition of the Federal
      Acquisition Regulation of the United States Government, with Buyer being
      substituted for the "Contracting Officer" and the "Government" and Seller
      being substituted for "Contractor", except that any disputes in connection
      herewith shall be resolved in accordance with ARTICLE 22 hereunder. Costs
      included in Seller termination claim may be verified by DCAA.

ARTICLE 21 - SUBCONTRACTORS

21.1  Seller shall notify Buyer the identity of its Subcontractors who may take
      part in the performance of Seller's obligations and undertakings pursuant
      to this Contract and in addition, the types of work in which they shall be
      engaged.

21.2  Seller shall cause, that all the required provisions of this Contract,
      shall be included in each agreement between Seller and any of its
      Subcontractors, mutatis mutandis, and shall ensure that each of its
      Subcontractors shall adhere to the provisions of this Contract. Provided
      that the aforesaid will apply only to the Subcontractors whose contract
      price is above US$ 500,000 (five hundred thousand U.S. Dollars).

21.3  Notwithstanding the above provisions, nothing in this Contract creates
      contractual relations between Buyer and the Subcontractors or shall impose
      on Buyer any financial obligation towards the Subcontractors and/or
      diminishes Seller's responsibilities and liabilities, undertakings and
      obligations to perform this Contract as it is written, and according to
      its provisions.

ARTICLE 22 - APPLICABLE LAW AND ARBITRATION

22.1  Applicable Law and Enforcement

      It is agreed by and between the parties hereto that this Contract shall be
      construed and interpreted in accordance with the laws of New York
      (excluding conflict of laws principles). Any arbitration award shall be
      based on and accompanied by findings of fact and conclusions of law, and
      shall be conclusive. Any award shall be confirmable by any U.S. District
      Court having jurisdiction over the parties and action.

22.2  Arbitration Required

      All disputes and/or claims between the parties hereto based upon any
      alleged breach of any of the obligations created hereunder shall be
      finally settled by an arbitrator appointed pursuant to the then rules and
      regulations of the American Arbitration Association.

22.3  Language of Arbitration

      The arbitration proceeding shall be conducted in accordance with the rules
      of the American Arbitration Association then in force and shall be in the
      English language. The arbitration shall take place in New York, New York,
      U.S.A.

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                            CONTRACT NO. KESHET 002

22.4  Confidentiality

      The parties agree that any arbitration proceedings hereunder shall be
      conducted on a confidential basis, and subject to the security provisions
      of this Contract.

22.5  Costs

      Each party shall be responsible for its respective costs incurred in
      arbitration, except that costs and fees imposed by the arbitrator for his
      fees and expenses shall be borne equally by the parties.

22.6  Scope of Awards

      The award of the arbitrator may be, alternatively or cumulatively, for
      monetary damages, an order requiring performance of non-mandatory
      obligations (including specific performance or an obligation to cease and
      desist) or any other appropriate order or remedy; however, under no
      circumstances shall the arbitrator be authorized to award, nor shall the
      arbitrator award, consequential damages, punitive damages or multiple
      damages. The arbitrator may issue interim awards and order any provisional
      measures that should be taken to preserve the respective right of either
      party.

ARTICLE 23 - NEW MATERIALS

23.1  Seller warrants that the supplies and components to be provided by Seller
      under this Contract are new, not used or reconditioned (except to the
      extent that such supplies and components must be used or modified in the
      performance hereof), and that at the time of System delivery, none of such
      supplies and components shall be of such age or so deteriorated as impair
      their usefulness or safety.

ARTICLE 24 - PROPRIETARY RIGHTS IN THE SYSTEM

24.1  Buyer owns and will continue to own the proprietary rights in the System.
      Seller will be entitled to manufacture, assemble, test and deliver the
      System under this Contract pursuant to the license, which will be granted,
      to it under the License Agreement (Annex VII) and according to its terms.

ARTICLE 26 - PROPRIETARY DATA AND CONFIDENTIALITY

25.1  All specifications, technical data and information furnished to Seller by
      Buyer in writing prior to the date of this Contract and all
      specifications, technical data; and information to be furnished to Seller
      by Buyer in the course of this Contract which are clearly and
      conspicuously marked Proprietary Data will not be disclosed by Seller to
      third parties other than the U.S. Government (and with respect to such
      disclosure to the U.S. Government only if required to do so by law or
      regulation).

25.2  Each of the Parties shall keep confidential, shall not to disclose, or
      allow to be disclosed and shall not expose or allow to be exposed, all or
      any part of any information which it will be, or may be exposed to, or
      will obtain or will have access to, directly or indirectly, regarding the
      other Party's respective intellectual property, work techniques,
      technologies, any financial or commercial information, cost information,
      customer and/or client lists, suppliers, subcontractors, prices on any
      other information regarding the other Party's business or affairs
      (hereinafter the "Confidential Information") and not to make use of the
      Confidential Information in any manner, for any purpose other than for
      the purpose of performing its respective undertakings and obligations as
      provided herein, and not to transfer any of the

                                                                   Page 16 of 41
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                            CONTRACT NO. KESHET 002

      Confidential Information to any third party. IMOD will not be regarded as
      a third party with respect to the limitations under this ARTICLE.

25.3  The provisions in ARTICLEs 25.1 and 25.2 hereinabove shall not apply to
      Proprietary Data aforementioned or Confidential Information that the
      receiving Party can provide by documentary evidence that such Confidential
      Information:

      25.3.1 Has already been known to the receiving Party not in connection
      with this Contract before being disclosed to it by the disclosing Party;

      25.3.2 Has become generally known to the public through no breach of the
      receiving party's undertakings herein by such Party or on its behalf.

      25.3.3 Has been rightfully received by the receiving Party from a third
      person who did not breach any restriction of disclosure or obligation of
      confidentiality;

      25.3.4 Has been independently developed for the receiving Party, by its
      employees (who, at no time, have been exposed to the Confidential
      Information) without use, directly or indirectly of the Confidential
      Information received from the other Party or on its behalf. '

25.4  Notwithstanding anything to the contrary contained herein, in the event
      that either Seller or Buyer shall be required to provide their
      Subcontractors with any of the other Party's Confidential Information, in
      order to fulfill its undertakings and obligations in connection to the
      performance of this Contract, it shall:

      25.4.1 Ensure that its Subcontractors sign a Confidentiality Undertaking
      similar to its undertaking, pursuant to this Contract, mutatis mutandis;
      and

      25.4.2 Receive back from its Subcontractors, any and all such Confidential
      Information, promptly upon such Subcontractors concluding performing their
      respective undertakings related to the Confidential Information.

      25.5 Each of the Parties undertakes to ensure that all of their respective
      employees, consultants, officers, directors, shareholders, subsidiaries
      and anyone else affiliated or related in any way to either of the Parties,
      shall abide with the above undertaking. Each Party acknowledges its
      liability for any breach of the above undertaking made by one or more of
      the persons or entities referred to above.

25.6  The provisions of this ARTICLE 25 shall survive any termination or
      expiration of this Contract.

ARTICLE 26- INTELLECTUAL PROPERTY REPRESENTATION AND INDEMNIFICATION

26.1  Seller represents that to the best of its knowledge, the items, data,
      information, drawings or any other material delivered by Seller hereunder
      are free from infringement from any patents or claim of other third party
      proprietary rights, and that Seller has not granted to any third party an
      exclusive license to manufacture or sell the same in Israel, and knows of
      no such grant.

26.2  Seller shall, without limitation, at its sole cost and expense, indemnify
      and hold Buyer harmless from, and defend any claims, suits or proceedings
      arising out of, any infringement or claimed infringement of:

            (a) Any letters patent; or

            (b) Any other proprietary rights.

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                             CONTRACT NO. KESHET 002

26.3  Seller shall pay any judgments entered, or any settlements made with
      Seller's prior written approval, with respect to the suits or proceedings
      referred to in ARTICLE 26.2 above. Such defense and payments under this
      ARTICLE 26 are conditioned on the following:

      A.    Buyer shall promptly notify Seller in writing of any notice of such
            claim;

      B.    Seller or its nominee shall have control of the defense of any
            action on such claim and all negotiations for its settlement or
            compromise; provided, however, that if the Buyer is a named
            defendant Buyer shall have the right to approve counsel and to
            cooperate in such defense; and

      C.    Buyer shall give Seller assistance reasonably required in connection
            with such defense or negotiations.

26.4  ARTICLEs 26.2 and 26.3 shall have no application if:

      A.    The infringement or claimed infringement results from compliance
            with specific written instructions by Buyer directing a change in
            the supplies to be delivered or in the materials or equipment to be
            used; or

      B.    The infringement results from the addition to, or change in, the
            supplies or services furnished, which addition or change was made
            subsequent to delivery or performance by Seller.

26.5  Should the use of any item in the System be enjoined, or in Seller's
      opinion be likely to become enjoined, or in the event Seller desires to
      minimize its liabilities hereunder, Seller will, at its option, either
      substitute a fully equivalent, non-infringing product, modify such item so
      that it no longer infringes but remains functionally equivalent or obtain
      for Buyer, at the expense of Seller or its nominee, the right to continue
      use of the item.

ARTICLE 27 - FORCE MAJEURE

27.1  A delay in the performance hereunder by a party shall only be excused when
      said delay in performance is caused by an event beyond the reasonable
      control of that party and which could not have reasonably been anticipated
      and was without the party's default or neglect, including but not limited
      to acts of God, war, strikes, explosions, hijacking, accidents, Government
      acts including limitations on travel and export limitations, VALENTEC
      SYSTEMS INC. self-imposed restrictions on travel based on US State
      Department travel advisories, act of the public enemy, and failure or
      inability of subcontractors to perform due to any such causes as above
      unless the parties otherwise agree that subcontract commodities to be
      furnished under the contract are procurable in the open market. The
      foregoing provision shall not, however, release a party claiming force
      majeure from using its best efforts to avoid or diligently remove such
      circumstances. When a party is excused from performance of any of the
      above-mentioned circumstances, that party shall resume performance with
      utmost dispatch as soon as such circumstances are removed. A party
      claiming such an excusable delay, in order for it to be recognized, shall
      promptly give written notice verified by the appropriate Chamber of
      Commerce.

ARTICLE 28 - TAXES

28.1  The Contract Price includes all United States federal, state or local
      taxes, levies and duties imposed on the Seller, its Subcontractors or
      employees. The Contract price does not include any amounts for Israeli
      value added tax, custom duty, stamps or any other taxes, charges or fees
      that may be levied in Israel on the System to be

                                                                   Page 18 of 41
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                               CONTRACT NO. KESHET 002

      supplied by the VALENTEC SYSTEMS INC. Notwithstanding the aforesaid,
      Israeli income tax, if due, on VALENTEC SYSTEMS INC.'s employees working
      in Israel pursuant to this Contract or on VALENTEC SYSTEMS INC.'S
      Subcontractors' employees working in Israel will not be borne by VALENTEC
      SYSTEMS INC. and will be reimbursed by IMOD or SOLTAM.

28.2  Any export tax, fee or other charges of any nature now existing or which
      may hereafter be imposed by the U.S. Government shall be paid by VALENTEC
      SYSTEMS INC.

ARTICLE 29 - PERSONNEL DELEGATION

29.1  It is understood and agreed that all technical specialists whose services
      are furnished to assist SOLTAM as contemplate herein shall operate under
      the direction of VALENTEC SYSTEMS INC., but VALENTEC SYSTEMS INC. shall
      assure that such persons are fully responsive to SOLTAM requirements. It
      is understood and agreed that employees of one party, while visiting the
      plant of the other, shall not be considered to be employees of the other,
      and that their salaries, traveling expenses, and living costs, as well as
      an liability for workmen's compensation, accident and health insurance or
      other benefits, shall be borne by their own employer which shall assume
      all responsibility with respect thereto. VALENTEC SYSTEMS INC. shall not
      be liable for any injuries or death or for any loss or damage to property
      arising out of or caused by their performance of this Contract or use of
      the equipment furnished hereunder unless due to willful misconduct or
      negligence of VALENTEC SYSTEMS INC., Such employees shall abide by all of
      the plant rules and regulations of the plant that they are visiting or at
      which they are resident. Each party shall make its own best efforts to
      obtain compliance therewith.

ARTICLE 30 - VISAS

30.1  If required, SOLTAM shall assist VALENTEC SYSTEMS INC. in obtaining Visa
      for VALENTEC SYSTEMS INC. personnel sent to Israel under this Contract.

30.2.1 If required, VALENTEC SYSTEMS, INC. shall assist SOLTAM in obtaining Visa
      for SOLTAM personnel sent to the U.S. under this Contract.

ARTICLE 31 - HEADINGS

31.1  The articles and paragraphs headings contained herein are for convenience
      and reference only, and are not a part of this Contract, nor shall they in
      any way effect the interpretation thereof.

ARTICLE 32 - ENTIRE CONTRACT

32.1  This Contract contains and constitutes the entire understanding and
      agreement between the parties hereto respecting the subject matter hereof
      and supersedes and cancels all previous negotiations, agreements,
      commitments and writing in connection therewith.

ARTICLE 33 - WAIVER

33.1  Any waiver by either party of a breach or default shall not constitute a
      waiver of any other breach or default subsequently occurring.

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                             CONTRACT NO. KESHET 002

ARTICLE 34 - RELIABILITY

34.1  The parties agree that if any portion of this Contract shall be held to be
      illegal and/or unenforceable, the parties will provide notice of such fact
      to each other and will active at the solution by mutual agreement. The
      remaining portions of this Contract shall continue to be binding and
      enforceable provided that the affectivity of the remaining portion of this
      Contract would not defeat the overall intent of the parties, or give one
      party any substantial financial benefit to the detriment of the other
      party.

ARTICLE 35 - MODIFICATION- CHANGES

35.1  Buyer may at any time, by written order make changes within the general
      scope of this contract in any one or more of the following:

            (1)   Drawings, designs, or specifications

            (2)   Content of Seller scope of work

            (3)   Buyer Furnished Equipment

35.2  If any such change causes an increase or decrease in the cost of, or the
      time required for, performance of any part of the work under this
      contract, the Buyer shall make an equitable adjustment in the contract
      price, the delivery schedule, or both, and shall modify the contract.
      Seller shall assert its right to an adjustment under this clause within 30
      days from the date of receipt of the written order. Seller shall provide
      Buyer with a proposal for equitable adjustment no later than 90 days after
      asserting its right. Buyer and Seller recognize that reductions in
      Seller's scope of work may impact Seller's indirect cost rates, including
      but not limited to Overhead, Fringe and G&A. In those situations, Buyer
      and Seller agree that Seller's claim shall be adjusted to reflect the
      changes in rates as allowed in the latest edition of the Federal
      Acquisition Regulation of the United States Government, with Buyer being
      substituted for the "Contracting Officer" and the "Government" and Seller
      being substituted for "Contractor". DCAA shall be the audit authority for
      any claim. If Seller's proposal includes the cost of material made
      obsolete or excess by the change, the Buyer shall have the right to
      prescribe the manner of the disposition of the material. Failure of Buyer
      and Seller to agree to any adjustment shall be a considered a "dispute"
      under Article - 22-Applicable Law and Arbitration of this contract.

35.3  No change altering price, payment terms or Program Schedule shall be
      effective unless accompanied by an amendment signed by the authorized
      representatives of SOLTAM and VALENTEC SYSTEMS INC. VALENTEC SYSTEMS INC.
      shall not proceed with the change request pending the Contract amendment.
      If VALENTEC SYSTEMS INC. does proceed with the change despite not having
      received a signed amendment to this Contract, all costs associated with
      such change shall be deemed to be covered by the firm fixed price of this
      Contract and will not be reimbursed by SOLTAM or IMOD.

35.4  Any amendment to this Contract is subject to the prior written consent of
      VALENTEC SYSTEMS INC., IMOD and DSCA.

35.5  VALENTEC SYSTEMS INC. shall use reasonable efforts to reduce delays agreed
      upon by the Parties in the timetable, as a result of the performance of
      any Changes.

35.6  No change altering any technical or other contractual requirement shall be
      effective unless accompanied by an amendment signed by the authorized
      representatives of SOLTAM and VALENTEC SYSTEMS INC. VALENTEC SYSTEMS INC.
      shall not proceed with any such change request pending the Contract
      amendment.

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                             CONTRACT NO. KESHET 002

ARTICLE 36 - DISCLAIMER OF AGENCY

36.1  The parties to this Contract are independent legal entities. There is no
      relationship existing of principal and agent. Therefore, neither party
      shall have authority to accept on behalf of the other any order,
      agreement, or contract, or to create any claim, guarantee, debt,
      obligation, expense or liability of any kind on behalf of the other
      party.

ARTICLE 37 - DECLARATIONS

37.1  It is agreed by and between the parties that they shall render one to the
      other whatever assistance is deemed appropriate in obtaining any
      Governmental approvals for this Contract, if required.

ARTICLE 38 - LANGUAGE OF DOCUMENTS

38.1  All documents such as shipping documents, shipping advice, markings,
      drawings, instruction manuals, guarantees, letters, telegrams, telefaxes,
      etc., in connection with the contract shall be in English, unless
      otherwise authorized by VALENTEC SYSTEMS INC.

ARTICLE 39 - COMPUTATION OF TIME

39.1  Time, if stated in number of days, will include Saturday, Sunday and
      Holidays.

ARTICLE 40 - ASSIGNMENT

40.1  Except as otherwise expressly provided herein, neither party shall assign
      or in any manner transfer its rights and/or obligations or any part
      thereof under this Contract without express prior written consent of the
      other party, which consent shall not be unreasonably withheld.

40.2  Subject to any required governmental licensing approvals or restriction,
      either party may, without the other party's consent, assign its rights
      and/or obligations hereunder to (i) its parent company, if any; (ii) any
      complete successor in interest in the event of change in corporate name,
      merger, acquisition or consolidation of its parent or itself, or (iii) a
      wholly owned subsidiary of its parent or itself.

ARTICLE 41 - NOTICES

41.1  Any and all notices hereunder shall be sent by registered airmail or cable
      as follows:

                TO SOLTAM:
                SOLTAM Systems Ltd.
                P.O.B. 13
                Yokneam 20692
                Israel

                Attention: Mr. Binyammin Zeagdone
                           Program Manager

                Telephone:   972-4-9896566
                Telefax:     972-4-9896232
                E-Mail:      bennie_z@sollam.com

                                                                   Page 21 of 41
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                             CONTRACT NO. KESHET 002

      TO VALENTEC SYSTEMS INC.:

      Notices on all contractual matters for the Program shall be addressed to:

      VALENTEC SYSTEMS INC.,
      2618 York Avenue
      Minden,LA 71055
      Attention: Ronald M. Mackey
                 Contracts & Purchasing Manager

      Telephone: (318) 459-5143
      Telefax: (318)459-5129
      E-Mail: rmackey@valentec.net

      A copy of all notices on all technical matters for the Program shall
      be addressed to:

      P.T. Asher
      Program Manager

      Telephone: (318) 459-5218
      Telefax: (318)459-5129
      E-Mail: ptasher@valentec.net

      All airmail notices shall be effective and deemed given one week after
      posted, and all email / fax notices seventy-two (72) hours after delivery
      to the email / fax address, unless the party can confirm receipt
      otherwise.

ARTICLE 42 - U.S. GOVERNMENT REQUIRED CERTIFICATION AND AGREEMENT

42.1  Contractor's Certification - In order for SOLTAM/IMOD to obtain approval
      of the U.S. Defense Security Cooperation Agency ("DSCA") (formerly Defense
      Security Assistance Agency) to use Foreign Military Financing ("FMF")
      credit funds for this procurement, VALENTEC SYSTEMS INC. agrees to
      complete, execute in duplicate and furnish SOLTAM for transmittal to the
      DSCA the form entitled "Contractors Certification and Agreement with
      Defense Security Cooperation Agency", hereinafter referred to as
      "Contractors Certification", in the form attached hereto as Appendix V (or
      such modified form as may be required by DSCA). VALENTEC SYSTEMS INC.
      agrees that any breach of any of its obligations under said Contractors
      Certification shall constitute a breach of VALENTEC SYSTEMS INC.'s
      obligation to SOLTAM/IMOD under this Contract.

42.2  FMF Guidelines - VALENTEC SYSTEMS INC. acknowledges receipt of the
      Guidelines for Foreign Military Financing of Direct Commercial Contracts -
      Israel, dated August 2001 (the "FMF Guidelines"), a copy of which is
      annexed hereto as Appendix VI. VALENTEC SYSTEMS INC. agrees to observe the
      FMF Guidelines. VALENTEC SYSTEMS INC. will not make any changes to the
      U.S. content / non - US content identified in its Certification without
      the prior written authorization of SOLTAM/IMOD.

42.3  Payments to the U.S. Government - In accordance with Paragraph 18 of the
      FMF Guidelines and Paragraph 19 of the Contractors Certification, VALENTEC
      SYSTEMS INC. and SOLTAM agree that all payments to the U.S. Government
      must be made payable to the United States Treasury and remitted (1)
      directly by check to the DSCA

                                                                   Page 22 of 41
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                            CONTRACT NO. KESHET 002

      or (2) by wire transfer to the U. S. Treasury's account. Checks shall be
      made payable to "United States Treasury" and mailed to:

      Defense Finance and Accounting Service (DFAS-DE/IADD)
      6760 E. Irvington Place
      Denver, CO 80279-5000

      The check shall be accompanied by a letter of explanation identifying
      Israel as the purchasing country. Wire transfer payments shall be
      transferred as follows:

            United States Treasury
            New York, New York
            021-030-004
            DFAS-DE/IADD
            Agency Code 3801
      Refund from VALENTEC SYSTEMS INC., for purchases made by the Government of
      Israel under GOI Contract/Purchase Order No.

      VALENTEC SYSTEMS INC. shall furnish to SOLTAM concurrently with any
      transmittal to the U.S. Government, copies of any check, wire transfer,
      letter of explanation or other relevant correspondence, which is sent to
      U.S. Government.

42.4  DCMA and DCAA Administrative Services - As a condition of FMF funding of
      the Contract, VALENTEC SYSTEMS INC. agrees that Defense Contract Audit
      Agency (DCAA) contract audit services will be performed to ensure that
      VALENTEC SYSTEMS INC. is in compliance with the Defense Security
      Cooperation Agency (DSCA) contractor's certification. DCAA will perform
      contract audit services in accordance with the contractor's certification.
      To ensure contractor compliance, DCAA contract audit services will be
      provided over the life of the Contract and will be coordinated with the
      Defense Contract Management Agency.

ARTICLE 43 - IMOD REQUIRED CERTIFICATION

43.1  VALENTEC SYSTEMS INC. agrees that by signing this Contract it is
      certifying that throughout the conduct of the solicitation leading to this
      Contract no officer, director employee, representative or agent of
      VALENTEC SYSTEMS INC. offered, promised or discussed with SOLTAM/IMOD
      personnel involved in this Contract 1) the future employment of (or
      business opportunity with) any SOLTAM/IMOD personnel, 2) the transfer of
      any money, gratuity or other thing of value to any SOLTAM/IMOD personnel,
      and/or 3) the transfer by any SOLTAM/IMOD personnel to VALENTEC SYSTEMS
      INC. of any proprietary or source selection information regarding this or
      any other procurement. For purposes of the preceding sentence (and only
      for purposes of such preceding sentence), SOLTAM/IMOD shall be defined so
      as to include officers in the Israeli Defense Forces or employees of
      SOLTAM. The prohibited conduct described above shall continue to be
      prohibited following the award of this Contract. VALENTEC SYSTEMS INC.
      further certifies that except as disclosed to SOLTAM/IMOD prior to
      VALENTEC SYSTEMS INC.'s signature of this Contract, VALENTEC SYSTEMS INC.
      does not currently employ any individual or retain any agents who at any
      time within the past two years were 1) employed by the Government of
      Israel Ministry of Defense (including, but not limited to, its Mission to
      the U.S.) or 2 officers on active duty in the Israel Defense Forces. Any
      breach by VALENTEC SYSTEMS INC. of the certifications set forth above
      shall constitute a breach of VALENTEC SYSTEMS INC.'s obligations to
      SOLTAM/IMOD under this contract. Such breach shall entitle SOLTAM/IMOD to
      terminate this Contract without any SOLTAM/IMOD liability to VALENTEC
      SYSTEMS INC. (including the right to return items already delivered for a
      refund of amounts already paid).

                                                                   Page 23 of 41
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                             CONTRACT NO. KESHET 002

ARTICLE 44 -- SECURITY

44.1  The Program covered by this Contract is [unclassified].

44.2  Except as required by U.S. and Israeli law, neither VALENTEC SYSTEMS INC.
      nor its Subcontractors shall release any publicity as to SOLTAM's identity
      or other information concerning this Contract (including publication in
      internal or trade newsletters) without the prior written consent of
      SOLTAM.

44.3  The furnishing of any classified information and materials to VALENTEC
      SYSTEMS INC. by SOLTAM in connection with this Contract requires the prior
      written consent of IMOD. IMOD's consent may be conditioned upon execution
      of an agreement between VALENTEC SYSTEMS INC. and SOLTAM on procedures
      governing the treatment of such information and materials.

44.4  SOLTAM agrees not to disclose or present the Program (or any part thereof)
      to any third party excluding the U.S. Government and VALENTEC SYSTEMS
      INC.'S Subcontractors on a need to know basis, without the prior written
      consent of VALENTEC SYSTEMS INC.'S Security Department.

44.5  The disclosure, transmittal, use, storage, distribution and disposition of
      all information, data, documentation and equipment produced or exchanged
      by either Party under the terms of this Contract shall be in accordance
      with the procedure utilized by VALENTEC SYSTEMS INC. for the protection of
      U.S. Government wort.

44.6  All of VALENTEC SYSTEMS INC.'S personnel, who are to perform services
      under this Contract in Israel, if any, shall be subject to Israeli
      security requirements. SOLTAM supplied questionnaires (Soltam to furnish
      form) shall be completed by VALENTEC SYSTEMS INC. personnel who are to
      perform services in Israel, if there are any, and submitted to the
      Director of SOLTAM's Security Department at least thirty (30) days prior
      to planned departure from the U.S.

44.7  VALENTEC SYSTEMS INC. agrees to insert security provisions, which conform
      to requirements of this Article in all subcontracts awarded to
      Subcontractors.

44.8  VALENTEC SYSTEMS INC. shall comply with U.S. security procedures at its
      plant inter alia, in order to implement the above security requirements
      upon the signing of this Contract and shall inform all employees and
      agents connected with the Contract of the provisions of this ARTICLE.

44.9  Buyer and IMOD personnel shall be subject to the Visit Request procedures
      of the U.S. Government, Seller and Subcontractors.

44.10 Notwithstanding any provisions in this Contract to the contrary, in no
      event shall SOLTAM deny VALENTEC SYSTEMS INC. consent to disclose
      information relating to this Contract to U.S. Government, if such
      disclosure is required by U.S. law or regulations.

44.11 The Parties' authorized representatives concerning all security matters
      relating to the performance of this Contract are as follows

              SOLTAM: Head of Security of SOLTAM and
              Director of Security
              Government of Israel
              Ministry of Defense
              Mission to the United States

                                                                   Page 24 of 41
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                            CONTRACT NO. KESHET 002

              VALENTEC SYSTEMS INC.

              Security Chief - Mr. John Billips
              Valentec Systems, Inc.
              2618 York Avenue
              Minden, LA 71105
              Telephone: (318)459-5014
              Telefax: (318)-459-5691       E-mail:jbillips@valentec.net

ARTICLE 45 - STOP WORK ORDERS

45.1  Buyer may, by written order to Seller at any time, require Seller to stop
      all, or any part, of the work called for by this Contract for a period of
      up to ninety (90) days after the stop work order is delivered to Seller
      and for any further period to which the parties may agree. Any such order
      shall be specifically identified as a stop work order issued pursuant to
      this ARTICLE. Upon receipt of such an order. Seller shall forthwith comply
      with its terms and take all reasonable steps to minimize the incurrence of
      cost allocable to the work covered by the order during the period of work
      stoppage. Within a period of ninety (90) days after a stop work order is
      delivered to Seller, or within any extension of that period to which the
      parties have mutually agreed to an extension, Buyer shall either:

            (i)   Cancel the stop work order; or

            (ii)  Terminate the work covered by such order by reason of Seller's
                  default or as provided in ARTICLE 20, Termination for
                  Convenience.

45.2  If a stop work order issued under this ARTICLE is cancelled or the period
      of the order or any extension thereof expires, Seller shall resume work.
      An equitable adjustment shall be made in the delivery schedule or Contract
      Price, or both, and the Contract shall be modified in writing accordingly,
      if:

      A.    The stop work order results in an increase in the time required for,
            or in Seller's cost properly allocable to, the performance of any
            part of this Contract; and

      B.    Seller asserts a claim for such adjustment within thirty (30) days
            after the end of the period of work stoppage;

ARTICLE 46 - FIELD PRICING SUPPORT

46.1  Seller agrees to the requirement for field pricing support as stipulated
      hereunder. This support will be provided by Defense Contract Management
      Command (DCMC) and Defense Contract Audit Agency and will normally include
      technical and cost analysis of Seller's proposal. IMOD shall request field
      pricing support through the DCMC International Logistics Office in New
      York, NY. Field pricing support will include an audit review by the
      cognizant contract audit activity before concluding negotiation of the
      Contract or any modification. Seller will submit cost or pricing data in
      connection with the pricing of this Contract or any modification to this
      Contract which affects the price of the Contract.

46.2  The U.S. Government (USG) representatives shall have the right to examine
      and audit all of Seller's books, records, documents, and other data,
      related to proposing, negotiating, pricing, or performing this Contract,
      in order to evaluate the accuracy, completeness, and currency of the cost
      or pricing data. The right of examination shall extend to all documents
      necessary to permit adequate evaluation of the cost or pricing data
      submitted, along with the computations and projections used. Seller

                                                                   Page 25 of 41
<PAGE>

                             CONTRACT NO. KESHET 002

      shall make available at its office at all reasonable times the materials
      described above for examination, audit, or reproduction, until 3 years
      after final payment under the Contract. General access to Seller's books
      and financial records shall be limited to USG representatives. The USG
      representatives shall verbally notify the IMOD immediately of data
      provided that is so deficient as to preclude review, or where Seller has
      denied access to records or to cost or pricing data considered essential
      to the performance of a satisfactory review. This verbal notification
      shall be promptly confirmed in writing to the IMOD describing the
      deficiency or the denial of access to data or records. Seller failure to
      provide adequate cost and pricing data may disqualify the Contract from
      consideration for FMF approval.

46.3  Field pricing support is intended to give the IMOD a detailed analysis of
      the proposal for use in the Contract negotiations to determine a fair and
      reasonable price. It normally includes an audit review by the cognizant
      audit activity and a technical analysis by DCMC. Seller has no objection
      that Buyer will receive from IMOD the results and conclusions of said
      audit.

      A.    Cost analysis will include, as appropriate:

            1.    Verification of cost or pricing data and evaluation of cost
                  elements.

            2.    Evaluating the effect of Seller's current practices on future
                  costs to ensure that the effects of inefficient or
                  uneconomical past practices are not projected into the future.

      B.    Comparison of cost proposed by Seller for individual cost elements
            with:

            1.    Actual costs previously incurred by Seller;

            2.    Previous cost estimates from Seller or from other offers for
                  the same or similar items;

            3.    Other cost estimates received in response to the IMOD's
                  request;

            4.    Independent cost estimates by technical personnel;

            5.    Forecasts or planned expenditures.

      C.    Verification that Seller's cost submissions are in accordance with
            U.S. DOD contract cost principles and procedures and, when
            applicable, the requirements and procedures of the Cost Accounting
            Standards.

      D.    Review to determine that all cost or pricing data necessary to make
            Seller's proposal accurate, complete, and current has been either
            submitted or identified in writing by Seller.

      E.    Analysis of the results of any make-or-buy program reviews, in
            evaluating Seller costs.

46.4  Technical analysis will include, at a minimum, a review and assessment of
      the quantities and kinds of material proposed; the need for the number and
      kinds of labor hours and the labor mix; any special tooling and facilities
      proposed; reasonableness of proposed scrap and spoilage factors; and any
      other data that may be pertinent to the cost or price analysis.

46.5  Any subcontracts meeting the $750,000.00 or more threshold will be subject
      to the same surveillance as Seller.

ARTICLE 47 - Miscellaneous

47.1  No cancellation, modification, amendment, deletion, addition or other
      change in this Contract or any provision hereof, or waiver of any right or
      remedy herein provided, shall be effective for any purpose unless
      specifically set forth in a writing signed by

                                                                   Page 26 of 41
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                            CONTRACT NO. KESHET 002

      the party to be bound thereby. No waiver of any right or remedy in respect
      of any occurrence or event on one occasion shall be deemed a waiver of
      such right or remedy in respect of such occurrence or event on any other
      occasion.

47.2  This Contract supersedes all other agreements, oral or written, heretofore
      made with respect to the subject hereof and the transactions contemplated
      hereby, and contains the entire agreement of the parties, except to the
      documents references in this Contract which were executed prior to this
      Contract coming into effect.

47.3  Seller shall not assign this Contract or its obligations under this
      Contract or any part of them without the prior written consent of Buyer,
      which consent shall not be unreasonably withheld, subject to provisions as
      may be determined by Buyer.

47.4  Any change, modification or amendment of this Contract shall be made in
      writing, shall be signed by the duly authorized representatives of the
      Parties and shall be subject to and shall have no force and effect without
      the previous written consent of IMOD and DSCA.

47.5  In no event shall either party be liable for indirect, incidental or
      consequential damages.

47.6  Any provision hereof prohibited by, or that is unlawful or unenforceable
      under, any applicable law of any jurisdiction, shall as to such
      jurisdiction be ineffective without affecting any other provisions of this
      Contract; provided, however, that if the provisions of such applicable law
      may be waived, they are hereby waived, to the end that this Contract be
      deemed to be a valid and binding agreement enforceable in accordance with
      its terms.

47.7  The provisions of this Contract shall be binding upon and inure to the
      benefit of Buyer and Seller and their respective successors and assigns,
      but this provision shall not be deemed to expand or otherwise affect the
      limitation on assignment and transfers set forth above, and no party is
      intended to or shall have any right or interest under this Contract,
      except as provided above.

47.8  This Contract may be executed in several counterparts in the English
      language, each of which shall be deemed to be an original and all such
      counterparts together shall constitute but one and the same instrument.

                                 End of Articles

                            (Signature page follows)

                                                                   Page 27 of 41
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                               CONTRACT NO. KESHET 002

IN WITNESS WHEREOF, the authorized representatives of the parties hereto have
executed this Contract on the dates set forth below

SOLTAM SYSTEMS LTD.                          VALENTEC SYSTEMS, INC.

By:   /s/ Benyammin Leagdone                 By:   /s/ Steve Shows
    ---------------------------                   -----------------------------
       Benyammin Leagdone                          Steve Shows

Title: Mortar Systems Program Mgr.           Title: Vice Pres. & G.M.

By:                                          By: /s/  Ronald M. Mackey
   -----------------------------                 ------------------------------
                                                 Ronald M. Mackey

Title:                                       Title: Contracts & Purchasing Mgr.

Date:                                        Date: Feb. 10, 2007
     ---------------------------

                                                                   Page 28 of 41