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                                                                   Exhibit 10.18

                                    AGREEMENT
                                       FOR

                  RENEWABLE ENERGY ECONOMIC DEVELOPMENT GRANTS

                                     BETWEEN

                               STATE OF NEW JERSEY

                      NEW JERSEY BOARD OF PUBLIC UTILITIES

                                       AND

                         OCEAN POWER TECHNOLOGIES, INC.
                                 1590 REED ROAD
                              PENNINGTON, NJ 08534

                                  AWARD NUMBER
                                        2

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TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
I.   AGREEMENT COVER SHEET.................................................    1

II.  GENERAL TERMS AND CONDITIONS..........................................    4
     A. PARTIES............................................................    4
     B. ELIGIBILITY........................................................    4
     C. CORPORATE AUTHORITY................................................    4
     D. ENTITLEMENT TO FUNDS...............................................    4
     E. PAYMENT OF FUNDS BY BPU............................................    5
     F. AVAILABILITY OF FUNDS..............................................    5
     G. INTELLECTUAL PROPERTY..............................................    5
     H. PUBLICITY POLICY...................................................    5
     I. COMPLIANCE WITH EXISTING LAWS......................................    5
     J. CONFLICT OF INTEREST...............................................    6
     K. REMEDIES...........................................................    6
     L. HEARINGS, APPEALS..................................................    8
     M. CHANGES TO SCOPE...................................................    8
     N. ASSIGNABILITY......................................................    8
     O. INDEMNIFICATION....................................................    8
     P. ENTIRE AGREEMENT...................................................    8
     Q. JURISDICTION AND CHOICE OF LAW.....................................    9
     R. CONSTRUCTION.......................................................    9
     S. NOTICES............................................................    9

III. POST AWARD REQUIREMENTS...............................................    9
     A. IDENTIFICATION OF KEY PERSONNEL....................................    9
     B. FINANCIAL MANAGEMENT SYSTEM........................................   10
</TABLE>

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<TABLE>
<S>                                                                           <C>
     C. USE OF FUNDS.......................................................   11
     D. MATCHING AND COST SHARING..........................................   11
     E. BUDGET REVISIONS AND MODIFICATIONS.................................   11
     F. MONITORING OF PROGRAM PERFORMANCE..................................   12
     G. ACCOUNTING PRINCIPLES..............................................   13
     H. ACCESS TO RECORDS..................................................   13
     I. INSURANCE..........................................................   13
     J. TAXES, ASSESSMENTS AND GOVERNMENTAL CHARGES........................   13

IV.  AWARD CLOSEOUT........................................................   14
     A. PROCEDURES.........................................................   14
     B. FINANCIAL AND PERFORMANCE REPORTING................................   14
     C. RECORD RETENTION...................................................   15
</TABLE>

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II.  GENERAL TERMS AND CONDITIONS

     A.   PARTIES

          Whereas, Ocean Power Technologies, Inc. (hereinafter "award
          recipient"), with its principal place of business located at 1590 Reed
          Road, Pennington, New Jersey, has been selected by the New Jersey
          Board of Public Utilities (hereinafter "BPU") to receive a grant award
          under the Renewable Energy Economic Development Program (hereinafter
          "REED Program").

          Award recipient and the BPU, intending to be legally bound hereto,
          accept and agree to abide by the following terms and conditions set
          forth in this Agreement and the proposal submitted by award recipient
          under the competitive solicitation entitled Ocean Demonstration of
          Next Generation Powerbuoy (hereinafter referred to as the "proposal").

     B.   ELIGIBILITY

          Award recipient represents and warrants that it is an incorporated
          organization, with its principal place of business located and
          registered to do business in the State of New Jersey on the date of
          execution of this Agreement. Award recipient represents and warrants
          that it is duly organized, validly existing, and in good standing
          under the laws of the State of New Jersey as of the time of execution
          of this agreement. Award recipient agrees that any product development
          or process improvement activities that result from this funding, will
          occur in its majority within New Jersey as outlined in the proposal.
          Award recipient agrees that it will maintain its primary place of
          business and principal operations in New Jersey, during the funding
          period and until all obligations under this agreement have been
          satisfied, unless otherwise agreed by the BPU. Violation of this
          provision without express written approval of the BPU constitutes
          default under this Agreement and may result in penalties pursuant to
          section I.K. herein.

     C.   CORPORATE AUTHORITY

          Award recipient represents and warrants that it has the corporate
          power and authority and legal right to execute and perform its
          obligations under this Agreement and that it has taken all necessary
          corporate action to authorize its execution and performance of
          obligations under this Agreement.

     D.   ENTITLEMENT TO FUNDS

          Upon execution of this Agreement, award recipient shall be entitled to
          receive a total of $499,486 in funding (hereinafter "award") from the
          BPU, subject to the terms and conditions stated herein, for the
          purposes set forth in the proposal, Attachment "A".

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     E.   PAYMENT OF FUNDS BY BPU

          Payment of funds for this award shall be made to award recipient upon
          receipt by the BPU of a properly executed copy of this Agreement,
          signed by an authorized officer of the award recipient. The BPU will
          advance funds to award recipient in an amount equal to fifty percent
          (50%) of this award, within thirty (30) days of receipt of a properly
          executed agreement. The remaining fifty percent (50%) of the award to
          be provided in equal payments during the next 6 quarters providing
          that award recipient continues to perform the work specified in the
          proposal to the satisfaction of the BPU.

          The period of funding shall be from the start date of December 1,
          2003, to the projected date of conclusion of the award supported
          activities (the "ending date"), which shall be May 31, 2005.

     F.   AVAILABILITY OF FUNDS

          The parties recognize and agree that initial and continued funding for
          this award is expressly dependent upon the availability to BPU of
          funds appropriated by or through the New Jersey Clean Energy Program
          or other such funding sources as may be applicable for the REED
          program. The BPU shall not be held liable for any breach of this
          agreement because of the absence of available funding appropriations.

     G.   INTELLECTUAL PROPERTY

          Award recipient warrants and represents that it owns or holds licenses
          for the use of all patents, trademarks, trade names, service marks,
          copyrights, and franchise and marketing rights or rights in any of the
          foregoing, as is necessary to engage in the award related activities.
          Any such patents trademarks, trade names, service marks, copyrights,
          and franchise and marketing rights or rights in any of the foregoing
          which result from the award supported activities shall be the property
          of award recipient.

     H.   PUBLICITY POLICY

          All publications resulting from publicity releases concerning award
          related activities shall acknowledge the support of the BPU and the
          New Jersey Clean Energy Program and award recipient shall coordinate
          all publicity for award related activities through the BPU project
          manager.

     I.   COMPLIANCE WITH EXISTING LAWS

          Award recipient agrees to comply with and require all contractors and
          consultants used by it in relation to the award supported activities
          to comply with all federal, state and municipal laws, rules and
          regulations applicable to all activities performed by award recipient
          in pursuit of and in relation to award supported activities.
          Specifically, and without limitation, award recipient agrees to comply

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          with and require all contractors and consultants used by it in pursuit
          of and in relation to the award supported activities to comply with
          the requirements of N.J.A.C. 17:27 et. seq. (Affirmative Action
          Rules), where applicable, P.L. 1975, c.127 (N.J.S.A 10:5-31 et. seq.)
          (Equal Opportunity in Public Works Contracts), where applicable, and
          all implementing regulations, and the Americans With Disabilities Act
          and implementing regulations and guidelines, where applicable. Failure
          to comply with these or any other applicable laws, rules or
          regulations shall be grounds for termination of this Agreement.

     J.   CONFLICT OF INTEREST

          Award recipient agrees to abide by the provisions of N.J.S.A 52:13D et
          seq.(the New Jersey State Employees Conflict of Interest Law)
          governing activities between award recipient and state officials,
          employees, special state officers and members of the Legislature. The
          provisions of N.J.S.A 52:13D et seq. are incorporated herein in their
          entirety, by reference thereto. Award recipient represents and
          warrants that it has not and will not at any time in the future act in
          violation of said statutory provisions. Any violation of said
          prohibitions shall render award recipient liable to debarment in the
          public interest.

     K.   REMEDIES

     The following definitions shall apply for the purposes of this section:

               Termination -- the termination of an award means the cancellation
               of an award, in whole or in part, at any time prior to the date
               of completion.

               Suspension -- the suspension of an award is an action by the BPU,
               which temporarily suspends funding under the award, pending
               corrective action by award recipient or pending a decision to
               terminate the award by the BPU.

               Disallowed costs -- are those charges to the program which the
               BPU or its representatives determine to be beyond the scope of
               the purpose of the award supported activities or are excessive or
               incurred during a period of suspension or after termination or
               are otherwise unallowable.

          Award recipient warrants and represents that all statements,
          representations and warranties made by award recipient in its
          application and proposal package to the BPU, and any other materials
          furnished in support of the request for funding are true. It is
          specifically understood by award recipient that all such statements,
          representations and warranties shall be deemed to have been relied
          upon by the BPU in its decision to make the award, and that if any
          such statements, representations or warranties were materially false
          at the time they were made or are breached during the term hereof, the
          BPU may, in its sole discretion, consider any such misrepresentation
          or breach an event of default and the BPU may take one or more of the
          following actions, as appropriate in the circumstances.

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     (1)  The BPU may suspend the award, withhold further funding and prohibit
          the award recipient from incurring additional obligations pending
          corrective action by the award recipient and disallow costs incurred
          during suspension.

     (2)  The BPU may terminate the award in whole or in part. The BPU shall
          promptly notify the award recipient, in writing, of the termination
          and the reasons for the termination, together with the effective date
          and, in case of partial termination, the portion to be terminated and
          the recoverable portion, if any. When an award is terminated pursuant
          to this paragraph, payments made to the award recipient shall be
          terminated and any funds already distributed that are determined by
          the BPU to be recoverable shall be returned within thirty (30) days of
          demand thereof by the BPU. Costs incurred after termination shall be
          disallowed.

     (3)  The BPU may disallow any costs.

     (4)  The BPU may demand immediate return of some or all of the award,
          excepting those funds rightfully disbursed by award recipient to third
          party entities.

     (5)  The BPU may pursue other remedies at law or in equity as may be within
          legal right.

          The BPU may also terminate the award at any time, in whole or in part,
          when the BPU determines that the continuation of the project would not
          produce beneficial results commensurate with the further expenditure
          of funds. The BPU shall promptly notify award recipient in writing, of
          the determination to terminate the award, together with the effective
          date and, in case of partial termination, the portion to be
          terminated. Award recipient shall cancel as many outstanding
          obligations as possible. Costs incurred after termination pursuant to
          this paragraph shall be disallowed.

          The costs of award recipient resulting from obligations incurred by it
          during a suspension, or after termination of an award, are not
          allowable unless the BPU expressly authorizes them in the notice of
          suspension or termination or subsequently. Such costs may be allowed
          if they are: (l) necessary and (2) not reasonably avoidable and (3)
          were properly incurred by the award recipient before the effective
          date of suspension or termination and (4) are not in anticipation of
          it and (5) in the case of a termination are non-cancelable and (6) the
          costs would be allowable if the award were not suspended or expired
          normally at the end of the funding period.

          No remedy herein conferred or reserved to the BPU is intended to be
          exclusive of any other available remedy or remedies, but each and
          every such remedy shall be cumulative and shall be in addition to
          every other remedy given under this Agreement or now or hereafter
          existing at law or in equity or by statute. No delay or omission to
          exercise any right or power accruing upon any default shall impair any
          such right or power or shall be construed to be a waiver thereof.

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          Section III of this agreement, award closeout procedures, shall apply
          in all cases of termination.

     L.   HEARINGS, APPEALS

          Upon taking an enforcement action pursuant to section I.K. above, the
          BPU will provide award recipient an opportunity for such hearing,
          appeal, or other administrative proceeding to which award recipient is
          entitled under any statute or regulation applicable to the action
          involved.

     M.   CHANGES TO SCOPE

          The BPU may request changes in the scope of the services to be
          performed hereunder. Such changes, including any increase or decrease
          in the amount of the funds provided herein, shall be mutually agreed
          upon by and between the BPU and award recipient, and must be
          incorporated in written amendments to this Agreement.

     N.   ASSIGNABILITY

          Award recipient shall not subcontract or assign any of the work or
          services to be performed by it in relation to award supported
          activities except as already stated in Attachment "A," without the
          express written approval of the BPU. All terms and provisions herein
          shall apply to all subcontractors or assignees.

     O.   INDEMNIFICATION

          Award recipient shall be solely responsible for and shall keep, save,
          hold harmless and indemnify the BPU and the State of New Jersey from
          and against any and all actions, costs, damages, disbursements,
          expenses including, but not limited to, attorney's fees, judgments,
          liabilities, losses, obligations, penalties, suits, proceedings,
          claims and matters of any kind whatsoever which may at any time be
          imposed on, incurred by, agreed to or asserted against the BPU and the
          State of New Jersey, arising out of any and all activities, acts,
          omissions, services performed and products provided by award
          recipient, including the award supported activities. The BPU and the
          State of New Jersey shall bear no liability in any form to any third
          party for any acts or omissions on the part of award recipient. Award
          recipient's liability under this paragraph shall continue for a
          five-year period after the closeout or termination of this agreement.

     P.   ENTIRE AGREEMENT

          This agreement and the attachments hereto embody the entire agreement
          and understanding between award recipient and the BPU, representing
          the State of New Jersey and supersede all prior agreements and
          understandings, both written and oral, between the parties relating to
          the subject matter herein. All modifications, waivers, and amendments
          hereto must be made in writing by mutual agreement of the parties,
          except as otherwise stated herein.

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     Q.   JURISDICTION AND CHOICE OF LAW

          Jurisdiction of any action hereunder shall lie in a court of competent
          jurisdiction in the State of New Jersey and shall be construed in
          accordance with the laws of the State of New Jersey applicable to
          contracts made and performed in the State of New Jersey.

     R.   CONSTRUCTION

          Whenever possible, each provision of the Agreement shall be
          interpreted in such a manner as to be effective and valid under the
          applicable law, but, if any provision of this Agreement shall be held
          to be prohibited or invalid under such applicable law, such provision
          shall be ineffective only to the extent of such prohibition or
          invalidity without invalidating the remainder of such provision or the
          remaining provisions of the Agreement.

     S.   NOTICES

          Upon request by the BPU, any notices, demands, and communications
          hereunder shall be given by certified or overnight mail and shall be
          addressed to:

          For Award Recipient:

               Charles F. Dunleavy
               Ocean Power Technologies, Inc.
               1590 Reed Road
               Pennington, NJ 08534

          For The State:

               New Jersey Board of Public Utilities
               44 S. Clinton Avenue, P.O. Box 350
               Trenton, NJ 08625-0350

               Any changes or additions to the notice provisions above shall be
               made in writing provided as stated above.

III. POST AWARD REQUIREMENTS

     A.   IDENTIFICATION OF KEY PERSONNEL

          Award recipient shall identify and maintain an individual with the
          principal responsibility for the management of all award related
          activities. This individual, designated the project manager, shall be
          William B. Powers.

          Award recipient shall identify and maintain an individual with the
          principal responsibility for maintaining an adequate financial
          management system as

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          described below. This individual, designated the financial manager,
          shall be Charles F. Dunleavy.

     B.   FINANCIAL MANAGEMENT SYSTEM

          The financial manager shall be responsible for maintaining a financial
          management system in compliance with this agreement. The financial
          manager shall notify the BPU immediately if award recipient cannot
          comply with the requirements established herein.

     The financial management system shall provide for:

     (1)  accurate, current and complete records of the financial results of
          this program, in conformity with generally accepted principles of
          accounting, capable of being reported in a format in accordance with
          the financial reporting requirements as described herein; and

     (2)  records that adequately identify the source and application of funds
          for BPU supported activities, containing information pertaining to
          awards and authorizations, obligations, unobligated balances, assets,
          liabilities, outlays or expenditures and income, and be maintained in
          conformity with generally accepted principles of accounting; and

     (3)  effective internal and accounting controls over all funds, property,
          and other assets; and

     (4)  comparison of actual expenditures or outlays with budgeted amounts for
          the award, which shall be related to performance or productivity data;
          and

     (5)  procedures for determining reasonableness, allowableness, and
          allocability of costs, consistent with the provisions of federal and
          state requirements; and

     (6)  source documentation.

          The BPU may review the adequacy of the award recipient's financial
          management system at any time during the period of the award. If the
          BPU determines that the award recipient's system does not meet the
          standards described in this section, additional information may be
          required by the BPU upon written notice to the award recipient. This
          information shall be provided to the BPU until such time as the BPU
          determines that the system meets with BPU approval. If award recipient
          fails to provide such information to the satisfaction of the BPU, or
          if the BPU determines that the award recipient has consistently failed
          to maintain the proper financial management system, the BPU may take
          action pursuant to section I.K, herein.

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     C.   USE OF FUNDS

          The funds provided herein may be used only for allowable costs. Award
          funds may be used for salaries, supplies, travel, purchase of
          services, equipment, and other direct project expenses, plus properly
          allocable indirect costs as set forth in the Proposal, and
          incorporated in the Award Budget. Funds may only be used for costs
          that are directly applicable to the project, not for general and
          administrative costs to the company.

          Award recipient may charge to the award only the costs resulting from
          obligations incurred during the funding period, unless carryover of
          unobligated balances is permitted, in which case the carryover
          balances may be charged for costs resulting from obligations of the
          subsequent program period.

          The award recipient must liquidate all obligations incurred under this
          award not later than ninety (90) days after the end of the funding
          period, unless specific authority to extend this deadline is granted,
          in writing, by the BPU.

     D.   MATCHING AND COST SHARING

          Award recipient shall be required to account for, to the satisfaction
          of the BPU, the matching and cost-sharing requirements as stated
          herein. The BPU requires that any funds it commits to support award
          related activities shall be matched as outlined in the proposal with
          non-state support. Non-state support may include cash and/or in kind
          support. In kind support includes the salary costs of the research
          team, use of company equipment, materials, and other resources devoted
          to the project by the company, its consultants, subcontractors,
          vendors, or other participating partners. Cash support includes third
          party equity investments or loans, funding from federal grants,
          foundations, and universities, cash commitments from distributors to
          support marketing, sales promotion, and/or customer service,
          investments by company principals, payments to outside vendors,
          consultants, or contractors for work performed related to the project.
          The matching support may include contributions by the sponsoring
          company for the expenses of the project, and contributions by
          individuals and/or organizations collaborating with the company. To
          qualify as cost sharing, all support must be available for expenditure
          during the funding period.

     E.   BUDGET REVISIONS AND MODIFICATIONS

          The "award budget" as used in this section means the agreed financial
          plan approved by the BPU that will be utilized to implement
          award-related activities. The award budget is appended as Attachment
          "A" hereto. Line item variances in the award budget, in amounts up to
          twenty five thousand dollars ($25,000) or ten percent (10%) of the
          total amount of the award, whichever is less, do not require the prior
          approval of the BPU but may be initiated by award recipient and
          reported in the financial reports. In the event that the financial
          reports indicate line item variances in excess of this amount (either
          under or over expenditure) and have not received

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          BPU pre-approval, the BPU may require that the amount of the variance
          over twenty five thousand dollars ($25,000) or ten percent (10%) of
          the total award be refunded to the State of New Jersey.

          All other budget revisions and modifications to the award budget in
          amounts in excess of twenty five thousand dollars or ten percent (10%)
          of the total amount of the award, must be approved in advance, in
          writing, by the BPU. Before any obligation is incurred which would
          result in any line item variance in excess of the variances permitted
          above, the award recipient must obtain an award budget amendment, in
          writing, from the BPU. The award recipient must also obtain prior
          written approval when a revision or modification will be necessary for
          any of the following reasons:

     (1)  changes in the scope, objective, or timing of the project or program;

     (2)  the need for additional funding, or to extend the period of
          availability of funds;

     (3)  the award recipient plans to transfer funds that would cause part of
          the award, or part thereof, to be used for purposes other than those
          originally indicated.

          If the award recipient is making program expenditures or providing
          grant services at a rate, which in the judgment of the BPU, will
          result in substantial failure to expend the award amount or provide
          services, the BPU shall so notify the award recipient. If, within
          fifteen (15) days of such notice, the award recipient is unable to
          develop, to the satisfaction of the BPU, a plan to rectify its low
          level of program expenditures or services, the BPU may, upon a thirty
          (30) day notice, reduce the award amount so that the revised award
          amount fairly projects program expenditures over the award period.
          This reduction shall take into account the award recipient's fixed
          costs and shall establish the committed level of activity for each
          program element of activity at the reduced amount.

     F.   MONITORING OF PROGRAM PERFORMANCE

          The award recipient, shall continually monitor the performance of
          award supported activities to assure that time schedules are being
          met, projected work units by time periods are being accomplished, and
          other performance goals are being achieved, as applicable, and as
          defined by the proposal, Attachment "A" hereto.

          The award recipient shall inform the BPU of the following types of
          conditions, which affect program objectives and performance as soon as
          they become known:

     (1)  problems, delays or adverse conditions which will materially impair
          the ability to attain program objectives, prevent the meeting of time
          schedules and goals, or preclude the attainment of project work units
          by established time periods, accompanied by a statement of the action
          taken, or contemplated, and any BPU assistance needed to resolve the
          situation; and

<PAGE>

     (2)  favorable developments or events which enable meeting time schedules
          and goals sooner than anticipated or at less cost, or producing more
          beneficial results than originally planned.

          The BPU may at its discretion make site visits to review program
          accomplishments and management control systems and to provide
          technical assistance as the BPU determines may be required.

     G.   ACCOUNTING PRINCIPLES

          Compliance with any provision of this Agreement relating to financial
          or accounting computation or reporting shall be determined in
          accordance with generally accepted principles of accounting.

     H.   ACCESS TO RECORDS

          The award recipient agrees to make available to the BPU, and any state
          or federal agency whose funds are expended in the course of this
          program, or any of their duly authorized representatives, pertinent
          accounting records, books, documents, electronic files, and other
          items as may be necessary to monitor and audit operations and
          finances. All visitations, inspections and audits, including visits
          and requests for documentation in discharge of the BPU's
          responsibilities, shall as a general rule provide for prior notice
          when reasonable and practical to do so. However, the BPU retains the
          right to make unannounced visitations, inspections, and audits as
          deemed necessary. The BPU reserves the right to have access to all
          work papers available to the award recipient in connection with audits
          made by the award recipient or by independent certified public
          accountants, registered municipal accountants, or licensed public
          accountants hired by the award recipient to perform such audits.

     I.   INSURANCE

          Award recipient agrees to carry general liability insurance and other
          such insurance against loss, damage and liability as is customary
          within its industry, to be held with insurance companies licensed to
          do business in New Jersey.

     J.   TAXES, ASSESSMENTS AND GOVERNMENTAL CHARGES

          Award recipient warrants and represents that all tax returns and
          reports of award recipient required by law to be filed have been duly
          filed and all taxes, assessments, fees and other governmental charges
          upon the award recipient or upon any of its respective properties,
          assets, income or franchises which are due and payable pursuant to
          such returns and reports, or pursuant to any assessment received by
          the award recipient have been paid other than those which may be
          presently payable without penalty or interest.

          Award recipient agrees to pay as they become due, all taxes,
          assessments and governmental charges, which may be required by law or
          contract to be paid by the

<PAGE>

          award recipient. Award recipient may in good faith contest such taxes
          and governmental charges and such taxes and charges may remain unpaid
          during the period of such contest.

IV.  AWARD CLOSEOUT

     A.   PROCEDURES

          The BPU shall close out the award provided herein when it determines
          that all applicable administrative action and all required work
          pertaining to the award have been completed by the award recipient.

          The date of completion of this program shall be when all activities
          related to the award are completed, the funding period has expired, or
          the BPU terminates the award, whichever occurs earliest.

          The award recipient shall submit a final report pursuant to section
          IV.B below upon the date of completion or termination of the award.
          The BPU may permit extensions when requested in advance, in writing,
          by the award recipient.

          Upon the date of completion, or termination of the award by the BPU,
          the award recipient will, together with the submission of the final
          report, refund to the BPU any unexpended funds or unobligated
          (unencumbered) cash advanced, except such sums that have been
          otherwise authorized in writing by the BPU to be retained.

          Award recipient must liquidate all obligations incurred under this
          award not later than ninety (90) days after date of completion or
          termination of the award, unless specific authority to extend this
          deadline is granted, in writing, by the BPU.

          Within the limits of the award amount, the BPU may make a settlement
          for any upward or downward adjustment of costs after these reports are
          received.

          In the event a final audit has not been performed prior to the
          closeout of the award, the BPU retains the right to recover any
          appropriate amount after fully considering the recommendations on
          disallowed costs resulting from the final audit.

          The award recipient shall account for any property acquired with award
          funds or received from the BPU.

     B.   FINANCIAL AND PERFORMANCE REPORTING

     (1)  Monthly reports will be sent to the BPU program manager with updates
          on each of the tasks outlined in the proposal and an expenditures for
          that month and cumulative to the project. A final report will also be
          provided to the BPU program manager.

<PAGE>

     (2)  If applicable, the award recipient shall provide to the BPU,
          concurrently with the furnishings thereof, copies of all reports sent
          to award recipient's shareholders, the Securities and Exchange
          Commission, or any securities exchange.

     C.   RECORD RETENTION

          Except as otherwise noted below, financial and program records,
          supporting documents, statistical records, and all other records
          pertinent to this award shall be retained for a period of three years,
          starring from the date of "submission of the final expenditure report,
          unless federal or state funding statutes require a longer period.

          If any litigation, claim, negotiation, action or audit involving the
          records is started before the expiration of the three year period, the
          records must be retained until completion of the action and resolution
          of all issues which arise from it, or until the end of the regular
          three year period, whichever is later.

          Records for nonexpendable property acquired with BPU funds shall be
          retained for three years after final disposition of the property.

          The retention period for real property and equipment records starts
          from the date of the disposition, replacement or transfer of the real
          property or equipment.

          The BPU may request transfer of certain records to its custody from
          the award recipient when it determines that the records possess
          long-term retention value and will make arrangements with the award
          recipient to retain any records that are continuously needed for joint
          use.

<PAGE>

IN WITNESS WHEREOF, the parties, duly authorized and intending to be legally
bound hereto, execute this agreement, as of the date last written below.

(Cassandra Kling)
Witness

                                        Ocean Power Technologies, Inc.
                                        Charles F. Dunleavy
                                        Chief Financial Officer

                                        Date 3 November 2003


                                        /s/ Charles F. Dunleavy
                                        ----------------------------------------


                                        New Jersey Board of Public Utilities


                                        /s/ Jeanne M. Fox
-------------------------------------   ----------------------------------------
Witness                                 Jeanne M. Fox
                                        President

                                        Date
                                             -----------------------------------


                                        APPROVED AS TO FORM:

                                        ATTORNEY GENERAL OF NEW JERSEY

11-03-03                                By: Brian Lipman
Date                                    Deputy Attorney General


                                        /s/ Brian Lipman
                                        ----------------------------------------

<PAGE>

                                  ATTACHMENT A

                                    AGREEMENT

                                     between

                               STATE OF NEW JERSEY

                      NEW JERSEY BOARD OF PUBLIC UTILITIES

                                       and

                         Ocean Power Technologies, Inc.

                                       (2)

       Proposal "Ocean Demonstration of Next Generation Powerbuoy," dated
                                 March 31, 2003

<PAGE>

                                  ATTACHMENT B

                                    AGREEMENT

                                     between

                               STATE OF NEW JERSEY

                      NEW JERSEY BOARD OF PUBLIC UTILITIES

                                       and

                         Ocean Power Technologies, Inc.

                                       (2)

                       FINAL PERFORMANCE REPORT GUIDELINES

     The Final Performance Report, which is required under terms of the BPU's
award agreements with Renewable Energy Economic Development Program award
recipients, is intended to provide recipients with a consistent means of
reporting their achievements resulting from BPU support. The Final Report should
be concise, yet sufficiently detailed to provide a comprehensive overview of the
activities, results and achievements of the funded project, relative to the
proposal. Variances from the proposal should be identified and explained.

     The Final Performance Report should be provided in the following format:

I.   Executive Summary (one page)

II.  Technical Report

     A.   Technical achievements of the grant period (compared explicitly
          against outcomes projected in grant proposal).

     B.   Unanticipated technical stumbling blocks.

     C.   Additional technical work likely to be required prior to commercial
          exploitation of the research by the New Jersey industrial partner.

III. Partnership Report

     A.   Nature of the matching contribution actually received from the New
          Jersey industrial partner.

     B.   Nature of the substantive collaboration evidenced by or accompanying
          the match.

     C.   Nature of the arrangements made for ownership/disposition of
          intellectual property (i.e., was there a research agreement
          executed?).

     D.   Assessment by the industrial partner of the commercial or strategic
          importance of the project outcomes (cite an individual by name who can
          be contacted for verification by the BPU).

<PAGE>

     E.   The industrial partner's future plans for knowledge developed during
          the project, whether owned by the university or the partner (e.g., any
          licensing and/or manufacturing plans). Be specific as to geographic
          locus of these activities.

IV.  Institutional Report (as applicable)

     A.   Assessment by the principal investigator of the impact which the
          project has had on the future research capacity of the sponsoring
          academic institution.

     B.   Plans for further development funding of the research, assuming that
          full commercialization has not been achieved during the grant period.

     C.   Publications resulting (include reprints with credit to BPU).

     D.   Patent applications/awards resulting (specify stage reached as of
          final report).

     E.   Licenses issued/issuing (specify stage reached as of final report).

     F.   Jobs created (direct and indirect)

     G.   Additional funding leveraged by BPU award.