Document:

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                               TENANT USE CONTRACT

                                     between

                                  IONATRON INC.

                                       and

                             MASON TECHNOLOGIES INC.

                                  July 14, 2004

                          BASIC ORDER AGREEMENT 04T002

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<PAGE>

I.      Use of Facilities.....................................................2

II.     Title to Property.....................................................3

III.    Alterations to and Movement of Property...............................4

IV.     Property Control System...............................................6

V.      Access to Facilities..................................................6

VI.     Indemnification;  Exclusion of Indirect,
         Incidental and Consequential Damages.................................6

VII.    Warranty..............................................................7

VIII.   Agreement Modification................................................8

IX.     Orders, Changes and Limitation of Liability...........................8

X.      Use by Others/Transfer/Assignment.....................................9

XI.     Representations.......................................................11

XII.    Payment for Use of Facilities.........................................11

XIII.   Services of MTI.......................................................12

XIV.    Inspection of Facilities..............................................15

XV.     Reporting of Explosives, Propellants, Etc.
         Stored on Army-Owned Installations...................................16

XVI.    Relayaway of Facilities...............................................17

XVII.   Liability for Facilities..............................................18

XVIII.  Permits and Licenses; Compliance with Law.............................21

XIX.    Maintenance and Utilization...........................................22

XX.     Termination...........................................................22

XXI.    Exclusion of Facilities Cost in Other Contracts.......................25

XXII.   Real Property.........................................................25

XXIII.  Contract Clauses......................................................26

XXIV.   Disputes and Governing Law............................................27

XXV.    Term..................................................................29

XXVI.   Insurance.............................................................32

XXVII.  Toxic and Hazardous Materials.........................................33

XXVIII. Pre-Existing Conditions...............................................34

XXIX.   Miscellaneous.........................................................34

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                          BASIC ORDER AGREEMENT 04T002

EXHIBITS TO THE AGREEMENT:

Exhibit A - Permitted Use

Exhibit B - Tenant Plans

Exhibit C - AMCCOMR 702-9

Exhibit D - Order #001

Exhibit E - Form ENG 43

Exhibit F - NISPOM Definition of Foreign Person(s)

EXHIBITS TO ORDER 001:

Exhibit A - The Facility

Exhibit B - Government and/or Contractor Owned Property (Reserved)

Exhibit C - Service Fees

Exhibit D - Maintenance Obligations

Exhibit E - ARMS Improvements/Charette/Plans

                                       ii
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                          BASIC ORDER AGREEMENT 04T002

      WHEREAS,  MASON  TECHNOLOGIES  INC.  (hereafter  referred  to as  "MTI" or
"Contractor")  has entered  into  Facility Use  Contract  #DAAA09-92-E-0007,  as
amended by P00001 through P00015 (as amended, the "Contract") with the U.S. Army
(the "Army") for use of certain Army  Facilities,  namely,  the Mississippi Army
Ammunition Plant (the "MSAAP") at Stennis Space Center, MS 39529-7099, and

      WHEREAS,  IONATRON INC. (hereafter referred to as "SUBCONTRACTOR") desires
to obtain from MTI the right to use and occupy certain Army  Facilities at MSAAP
and to obtain from MTI certain support services, and

      WHEREAS,  SUBCONTRACTOR's  requirements for the Facilities (as hereinafter
defined),  and  services  of MTI will be  evolving  over  time,  and MTI has the
capability to accommodate these requirements, and

      WHEREAS,  this document  (hereinafter  referred to as "Agreement or "Basic
Agreement")  is  a  written   instrument  of   understanding   between  MTI  and
SUBCONTRACTOR  which sets forth the  negotiated  provisions  which will apply to
Order No. 001  (attached  hereto as Exhibit D) as well as all future  Orders and
such Orders shall incorporate the provisions herein (unless otherwise  expressly
provided therein), and

      WHEREAS,  this Basic Agreement shall,  subject to the terms and conditions
contained herein,  become effective at 12:01 a.m., on the 15th day of July, 2004
(the "Effective Date").

      THEREFORE, MTI and SUBCONTRACTOR agree as follows:

                                  Page 1 of 39
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                          BASIC ORDER AGREEMENT 04T002

I.    Use of Facilities

      A.    SUBCONTRACTOR  shall  have  the  right  to  use  space,   buildings,
            improvements,  equipment,  and other  Army  and/or  Contractor-owned
            property  provided to SUBCONTRACTOR  under Orders issued pursuant to
            this Agreement  (referred to in combination as  "Facilities") at the
            MSAAP solely and  specifically  for the use  specified in the letter
            dated  April 28,  2004 from MTI to the Army and the  Army's  written
            approval of such (the "Permitted  Use"), a copy of which is attached
            hereto as Exhibit A, as well as the right of ingress  and egress and
            the  right,  in  common  with  others,  to  the  use  of  supporting
            facilities,  roadways and available parking areas. Any change in the
            Permitted  Use shall not be permitted  unless and until written Army
            approval  of the change is  obtained.  Each Order  issued  hereunder
            shall identify the Facilities for which use is authorized. No use of
            the Facilities other than the Permitted Use will be permitted.

      B.    Under the Contract,  MTI must comply with an Army-approved  property
            control  system (the  "Property  Control  System").  Pursuant to the
            terms of the  Property  Control  System,  Contractor  has  furnished
            SUBCONTRACTOR  with  a  (a)  tenant  maintenance  plan,  (b)  tenant
            property  control plan, (c) tenant  security plan, (d) tenant safety
            plan, (e) tenant fire protection  plan and (f) tenant  environmental
            plan, copies of which are attached hereto as Exhibit B (collectively
            referred to as the "Tenant  Plans"),  which  Tenant  Plans  allocate
            certain   responsibilities   between  Contractor  and  SUBCONTRACTOR
            relating to the use,  operation and  maintenance of the  Facilities.
            SUBCONTRACTOR  agrees that its use of  Facilities  at MSAAP shall at
            all times be in  accordance  with the Tenant  Plans,  as they may be
            changed  from  time to time,  provided,  however,  that any  changes
            initiated  by  the  Contractor  to  such  Tenant  Plans,  shall  not
            materially  increase   SUBCONTRACTOR'S   obligations  or  materially
            decrease  SUBCONTRACTOR'S rights under this Agreement. If changes in
            the  Property   Control  System  are  initiated  by  the  Army,  the

                                  Page 2 of 39
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                          BASIC ORDER AGREEMENT 04T002

            Contractor shall have the right to make corresponding changes to the
            Tenant   Plans   even   if   such   changes   materially    increase
            SUBCONTRACTOR'S  obligations or materially decrease  SUBCONTRACTOR'S
            rights under this Agreement,  provided, however, that in such event,
            SUBCONTRACTOR  shall be entitled (at its  election) to (a) terminate
            this Agreement, promptly vacate the Facilities,  removing all of its
            personal  property  therefrom and leaving the Facilities in the same
            condition it received them, reasonable wear and tear excepted,  with
            no  further  liability  to  Contractor,  and/or (b) seek (at its own
            expense) an equitable  adjustment  from the Army through a Sponsored
            Claim (as  defined in ss.  XXIV  below).  Contractor  shall  provide
            written  notification  to  SUBCONTRACTOR  of changes to the Property
            Control  System  which  affect  the  Tenant  Plans.  SUBCONTRACTOR'S
            non-compliance with the Tenant Plans shall be considered a breach of
            a material  provision of this  Agreement,  subject to the notice and
            cure periods set forth in ss. XX.

      C.    If  SUBCONTRACTOR  elects to terminate this Agreement and invoke its
            rights  under  ss.  XXIV,  it is  understood  that all the terms and
            conditions  of ss.  XXIV shall  remain in full force and effect with
            regard to such Sponsored Claim, notwithstanding such termination.

II.   Title to Property

      A.    Title  to  all   Facilities   shall  remain  with  the  Army  and/or
            Contractor.   Title  to  parts  of  the   Facilities   replaced   by
            SUBCONTRACTOR  (other than  SUBCONTRACTOR'S  trade  fixtures  and as
            provided in ss. III.A below) in carrying out maintenance obligations
            shall  pass to,  and  vest  in,  the  Army  and/or  Contractor  upon
            completion of their installation in the Facilities.

      B.    Title to the Facilities shall not be affected by their incorporation
            into,  or  attachment  to, any property not owned by the Army and/or
            Contractor, nor shall any item of the Facilities become a fixture or
            lose its identity as personal property by being attached to any real
            property. The SUBCONTRACTOR shall keep the Facilities free and clear
            of all  liens  and  encumbrances  and,  except  as may be  otherwise
            permitted by this  Agreement or  authorized  by Orders  issued under
            this Agreement or by the  Contractor,  shall not remove or otherwise
            part with  possession of, or permit the use by others of, any of the
            Facilities.

                                  Page 3 of 39
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                          BASIC ORDER AGREEMENT 04T002

III. Alterations to and Movement of Property

      A.    The  SUBCONTRACTOR  may  install,  arrange,  or  rearrange,  on Army
            premises,  readily  movable  machinery,  equipment,  and other items
            belonging to the SUBCONTRACTOR, provided, however, in the event such
            installations  or  arrangements  will  affect  any of  the  building
            systems  serving the Facilities,  SUBCONTRACTOR  shall provide prior
            written  notification  of such  activities to the Contractor and, if
            Contractor  incurs  additional  costs directly  attributable to such
            installations  and/or  arrangements,  SUBCONTRACTOR  shall reimburse
            Contractor  for such increased  costs.  Title to any such item shall
            remain in the  SUBCONTRACTOR  even though it may be attached to real
            property  owned  by  the  Army,  unless  the  Contractor  reasonably
            determines  that it is so  permanently  attached  that removal would
            cause  substantial  injury to the real property,  in which event, at
            SUBCONTRACTOR'S  election  (i) such  item  will  remain in place and
            SUBCONTRACTOR  will  have  no  obligation  to  remove  same  or (ii)
            SUBCONTRACTOR  shall have the right to remove such item, provided it
            agrees to pay the cost and a fee of seven percent (7%) of such costs
            to  Contractor  for  such  restoration  and  that  it  provides  the
            Contractor,  prior to the removal,  with such payment to restore the
            real property to which it is attached.  Contractor and SUBCONTRACTOR
            shall  attempt  to  reasonably  resolve  these  issues  prior to the
            attachment of personal property to real property, and, in any event,
            Contractor shall make the determination of permanent attachment in a
            timely  manner in order to update  real  property  records  of MSAAP

                                  Page 4 of 39
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                             BASIC ORDER AGREEMENT

            after   notification   and  discussions  with   SUBCONTRACTOR.   The
            SUBCONTRACTOR is responsible for clearly marking property  belonging
            to  it so  as  to  avoid  discrepancies  caused  by  co-mingling  of
            SUBCONTRACTOR  and Army  and/or  Contractor-owned  property.

      B.    The   SUBCONTRACTOR   shall  not  construct  or  install  any  fixed
            improvement or structural  alterations in or about Army buildings or
            other  real  property   without  advance  written  approval  of  the
            Contractor,  which  approval  shall  not be  unreasonably  withheld,
            conditioned  or  delayed,  except  that,  to the  extent  that  Army
            approval is required for such  improvements or alterations under the
            terms of the Contract,  Contractor shall not be deemed to have acted
            unreasonably  if it withholds,  conditions or delays its approval to
            the same extent that the Army so withholds, conditions or delays its
            approval.  Contractor  shall  have a  reasonable  period  of time to
            communicate  such  approvals.   Fixed   improvements  or  structural
            alterations,  as used herein,  mean any alteration or improvement in
            the  structure of the building or other real  property  that,  after
            completion,  cannot be removed without  substantial loss of value or
            damage to the Facilities, as determined by the Army. Notwithstanding
            the foregoing,  (a) all of  SUBCONTRACTOR'S  requirements  for fixed
            improvements or structural  alterations in real property  (including
            foundations  for  production  equipment)  shall be procured from the
            Contractor by  SUBCONTRACTOR's  submission of completed Form ENG-43,
            SUBCONTRACTOR  Work Request Form (attached  hereto as Exhibit E), to
            Contractor and (b) SUBCONTRACTOR may, at  SUBCONTRACTOR'S  sole cost
            and expense,  make  non-structural  alterations  to the  Facilities,
            provided that such non-structural  alterations do not (i) affect the
            building's exterior, (ii) adversely affect the building's systems or
            facilities,  (iii)  adversely  affect  any  service  required  to be
            furnished by Contractor to SUBCONTRACTOR or to any other occupant of
            MSAAP, or (iv) reduce the value or utility of the building.

                                  Page 5 of 39
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                          BASIC ORDER AGREEMENT 04T002

IV.   Property Control System

      The  SUBCONTRACTOR  shall fulfill the  requirements of the Tenant Plans on
      SUBCONTRACTOR'S  part to be performed,  including (i) conducting an annual
      inventory of all Army and/or  Contractor-owned  personal property, if any,
      in its  possession  and  reporting  the results of this  inventory  to the
      Contractor and (ii) reporting promptly all lost, damaged or destroyed Army
      and/or Contractor-owned  property to the Contractor.  The Contractor shall
      fulfill the  requirements of the Tenant Plans on  Contractor's  part to be
      performed.

V.    Access to Facilities

      The  Contractor,  the Army and  NASA,  and  their  respective  agents  and
      employees,  shall,  at reasonable  times and after  coordination  with the
      SUBCONTRACTOR (except such coordination is not required in the event of an
      emergency),  have access to the  Facilities  and the premises where any of
      the  Facilities  are  located,  provided  that any such access shall be in
      strict   compliance  with  any  and  all  security  plans   maintained  by
      SUBCONTRACTOR   pursuant  to  the  terms  of  SUBCONTRACTOR'S   government
      contracts (collectively, "Security Plans"). In the event Contractor incurs
      additional cost directly  attributable to SUBCONTRACTOR'S  Security Plans,
      SUBCONTRACTOR  agrees to pay  Contractor  for all such  costs and a fee of
      seven  percent  (7%) of such costs in  addition  to the Fixed  Service Fee
      identified in Orders issued  hereunder.  Nothing set forth herein  impairs
      the right of the Army,  NASA or other  governmental  agencies to engage in
      sovereign acts in order to respond to terrorist threats or other emergency
      situations,  nor does it create a right of compensation for harm caused by
      such sovereign acts.

VI.   Indemnification;  Exclusion  of  Indirect,  Incidental  and  Consequential
      Damages

      A.    The  SUBCONTRACTOR  hereby agrees to indemnify,  hold harmless,  and
            defend  the  Contractor  and the Army  against  claims for injury to
            persons or damage to  property  of the  CONTRACTOR  or others to the
            extent  arising  from  the   SUBCONTRACTOR's   negligence,   willful
            misconduct,  unusually  hazardous  activities,  possession,  use  or
            operation  of the  Facilities  and any  pollution  or  contamination
            arising therefrom.

                                  Page 6 of 39
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                          BASIC ORDER AGREEMENT 04T002

      B.    Contractor  hereby  agrees to  indemnify,  hold  harmless and defend
            SUBCONTRACTOR from and against any claims against  SUBCONTRACTOR for
            injury to persons or damage to property to the extent  arising  from
            Contractor's  negligence,  willful  misconduct,  unusually hazardous
            activities, and any pollution or contamination arising therefrom. No
            indemnification  is provided  hereby for claims  resulting  from the
            activities of the Army or of any prior operator of the Facilities or
            of other tenants of MSAAP.

      C.    Notwithstanding  anything  else to the  contrary in this  Agreement,
            neither SUBCONTRACTOR,  nor Contractor,  nor any of their respective
            affiliates, employees,  subcontractors or insurers shall be entitled
            to or liable for any indirect,  incidental or consequential damages,
            whether or not such damages arise in negligence, breach of Agreement
            or warranty, or otherwise.

VII.  Warranty

      A.    Neither the Army nor the  Contractor  make any warranty,  express or
            implied,  regarding  the work or services  provided by Contractor or
            the condition or fitness for use of any  Facilities.  SUBCONTRATOR'S
            exclusive  remedies  are as expressly  set forth in this  aGreement.
            Notwithstanding the foregoing,  Contractor WarrantS its conStruction
            and design servIces,  as exPressly set forth in article 3, paragraph
            D of Order #001 (ATTACHED HERETO AS Exhibit D).

                                  Page 7 of 39
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                          BASIC ORDER AGREEMENT 04T002

VIII. Agreement Modification

      The parties hereby agree that this Agreement may be unilaterally  modified
      by the  Contractor  in  order to  incorporate  unilateral  changes  to the
      Contract by the Army.  If such changes  shall  materially  decrease any of
      SUBCONTRACTOR'S  rights,  or  materially  increase any of  SUBCONTRACTOR'S
      obligations, under this Agreement,  SUBCONTRACTOR shall be entitled at its
      election to (a) terminate this Agreement,  promptly vacate the Facilities,
      removing all of its personal property therefrom and leaving the Facilities
      in the same condition it received them, reasonable wear and tear excepted,
      with no  further  liability  to  Contractor,  and/or  (b)  seek at its own
      expense an equitable adjustment from the Army through a Sponsored Claim.

IX.   Orders, Changes and Limitation of Liability

      A.    The  Contractor  has no obligation to furnish any  Facilities  under
            this  Agreement  until  specific  Orders are  mutually  agreed upon,
            negotiated, and executed.

      B.    Mutual  agreements  to  modify  the  terms  and  conditions  of this
            Agreement  and/or Orders issued  pursuant to this Agreement shall be
            incorporated by way of a written bilateral modification.

      C.    Changes

            Any  adjustments,   changes,  breaches  or  revisions  made  by  the
            SUBCONTRACTOR  or any party for which  SUBCONTRACTOR is responsible,
            which affect the Contractor's  cost or  responsibilities  under this
            Agreement or Orders issued  hereunder,  shall constitute a Change to
            the  Agreement  and/or  Orders  issued  hereunder and a Change Order
            mutually  agreed upon by the parties,  adjusting as applicable,  the
            Contractor's compensation and responsibilities, shall be executed by
            the  SUBCONTRACTOR  and  Contractor  with  approval by the Army,  as
            applicable,  and shall be incorporated by way of a written bilateral
            modification.  Contractor  shall  not  be  required  to  proceed  to
            accommodate  or  implement  such  Change  until a  Change  Order  is
            executed by the SUBCONTRACTOR, Contractor and as applicable approved
            by  the  Army.   Should  such  Change  affect  the   engineering  or
            construction  work  described in Exhibit D, Order #001, the terms of
            Article  3.C.  of such Order  shall  apply to the extent such Change
            affects Contractor's  engineering or construction services.  Nothing
            set forth in this Changes Article shall affect Contractor's right to
            terminate,  as provided for  elsewhere  in this  Agreement or Orders
            issued hereunder.

                                  Page 8 of 39
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                          BASIC ORDER AGREEMENT 04T002

      D.    Limitation Of Liability

            Notwithstanding  any other  terms,  conditions  or covenants in this
            Agreement to the contrary,  the aggregate limitation of liability of
            the Contractor  (including its employees,  affiliates,  contractors,
            insurers and agents) to the SUBCONTRACTOR  (including its employees,
            affiliates,  contractors,  insurers and agents) and anyone  claiming
            by,  through  or under the  SUBCONTRACTOR,  for any and all  claims,
            losses,  costs  or  damages  ("Claims")  of any  nature  whatsoever,
            arising  out  of,  resulting  from  or in  any  way  related  to the
            Agreement,  or  Contractor's  services  or work shall not exceed the
            amount of five hundred thousand  ($500,000.00),  if the Claim(s) are
            in  connection  with the design or  construction  work  described in
            Order #001 and forty  thousand  dollars  ($40,000.00)  for all other
            Claims arising in connection with this Agreement. Such limitation of
            liability   shall  apply  whether  such  Claims  arise  in  contract
            (including   warranty,   indemnity  or  breach),   Tort   (including
            negligence), strict liability or otherwise.

                                  Page 9 of 39
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                          BASIC ORDER AGREEMENT 04T002

X.    Use by Others/Transfer/Assignment

      A.    The SUBCONTRACTOR shall not subcontract,  lease, rent or release any
            of the  Facilities  to another  party  without  obtaining  the prior
            consent of the  Contractor,  which consent shall not be unreasonably
            withheld,  conditioned  or delayed,  except that, to the extent that
            Army  approval is required for such  subcontract,  lease,  rent,  or
            release  under the terms of the  Contract,  Contractor  shall not be
            deemed to have acted  unreasonably  if it  withholds,  conditions or
            delays its  approval to the same extent that the Army so  withholds,
            conditions or delays its approval.

      B.    The  SUBCONTRACTOR  shall not  transfer or assign any or all of this
            Agreement to another  party  without  obtaining the prior consent of
            the Contractor,  which consent shall not be  unreasonably  withheld,
            conditioned  or  delayed,  except  that,  to the  extent  that  Army
            approval is required  for such  transfer or  assignment,  Contractor
            shall not be  deemed to have  acted  unreasonably  if it  withholds,
            conditions  or delays its  approval to the same extent that the Army
            so withholds, conditions or delays its approval.

      C.    Notwithstanding   anything  to  the   contrary   contained  in  this
            Agreement,  SUBCONTRACTOR  shall be  permitted,  without  the  prior
            consent of the Contractor,  but upon prior notice to the Contractor,
            to  sublease  any  part  of  the  Facilities  to  an  Affiliate  (as
            hereinafter  defined),  or transfer or assign this  Agreement  to an
            Affiliate of SUBCONTRACTOR;  or to any person,  corporation or other
            entity  with  which  the  SUBCONTRACTOR  may  merge or to which  the
            SUBCONTRACTOR  may convey its business  conducted  at the  Facility,
            provided,  however, that (a) in each instance, such transferee shall
            expressly  agree  to be  bound  by  all  of  the  terms,  covenants,
            conditions  and  obligations  of  this   Agreement,   including  the
            Permitted Use; (b)  SUBCONTRACTOR  shall not be released from any of
            its  obligations   under  this  Agreement;   and  (c)  SUBCONTRACTOR
            acknowledges that the Army has the right to approve or disapprove of
            such transactions if, in the Army's sole judgment,  such assignee or
            transferee poses any security risk to the MSAAP.  "Affiliate"  shall
            mean  any   corporation  or  other  entity   directly   controlling,
            controlled by or under common control with SUBCONTRACTOR.

                                 Page 10 of 39
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                          BASIC ORDER AGREEMENT 04T002

      D.    SUBCONTRACTOR  shall  promptly  advise  Contractor  if  there is any
            material  change in control or  ownership  that  would  subject  the
            SUBCONTRACTOR or such affiliate, to ownership,  control or influence
            by any  foreign  person as such term is  defined  in  Exhibit F, the
            National  Industrial  Security  Program  Operating  Manual  (NISPOM)
            pursuant to Executive Order 12829. If SUBCONTRACTOR comes under such
            foreign ownership,  influence and control, and the Army directs that
            this Agreement be terminated for that reason,  Contractor shall have
            the right to terminate this Agreement  without liability of any kind
            to  SUBCONTRACTOR,  and  SUBCONTRACTOR  shall  promptly  vacate  the
            Facilities and shall promptly remove its personal property therefrom
            and  surrender  the  Facilities  in the same  condition,  or  better
            condition, than when furnished, reasonable wear and tear excepted.

XI.   Representations

      Contractor  and  SUBCONTRACTOR  each  represent to the other that: (i) the
      execution and delivery of this  Agreement and any  agreements  required by
      this Agreement have been duly  authorized and, upon execution by the other
      party,  will  constitute  valid  obligations,  enforceable  against  it in
      accordance  with their  terms;  and (ii)  neither  the  execution  of this
      Agreement,  nor the performance  thereof shall result in any breach of, or
      constitute a default  under,  or  violation  of any material  agreement to
      which it is a party or by which it is bound.

XII.  Payment for Use of Facilities

      Adequate  price  or other  consideration  may be  accepted  in lieu of the
      rental fees as set forth in FAR 52.245-9,  "Use and Charges  (April 1984)"
      so  long  as  agreed  to  in  writing  by  both  the  Contractor  and  the
      SUBCONTRACTOR.

                                 Page 11 of 39
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                          BASIC ORDER AGREEMENT 04T002

XIII. Services of MTI

      A.    Fixed  Services.  In  conjunction  with  SUBCONTRACTOR's  use of the
            Facilities,  Contractor  shall provide the following  services,  the
            cost  of  which  will  be   included   in  the  Fixed   Service  Fee
            SUBCONTRACTOR  pays  for the  use of the  Facilities  identified  in
            Orders issued hereunder,  collectively referred to as "Fixed Service
            Fee":

            1.    Fire Protection.  Contractor shall provide fire protection for
                  the Facilities in accordance  with the Tenant fire  protection
                  plan attached hereto as Exhibit B-1.

            2.    Security.   Contractor  shall  provide  security  services  in
                  accordance  with the Tenant  security plan attached  hereto as
                  Exhibit B-2.

            3.    Building  and System  Maintenance.  Contractor  shall  provide
                  building   and   system   maintenance   in   accordance   with
                  Contractor's  maintenance  obligations  as set forth in Orders
                  issued hereunder.

            4.    Environmental. Contractor shall provide environmental services
                  in  accordance  with the Tenant  environmental  plan  attached
                  hereto as Exhibit B-3. 5.  Safety.  Contractor  shall  provide
                  safety program  services in accordance  with its Tenant safety
                  plan attached hereto as Exhibit B-4.

      B.    Demand Services.  Contractor shall provide,  and SUBCONTRACTOR shall
            procure  all  of  its  requirements  from  and  shall  promptly  pay
            Contractor for, the following  demand  services,  in addition to the
            agreed upon Fixed Service Fee for the use of the Facilities,  at the
            rate or in the manner agreed to in each Order issued hereunder.

            1.    Electricity.  Contractor shall provide electrical power to the
                  Facilities in accordance with the  specifications set forth in
                  the Final Plans.  Periodically,  "Contractor  Scheduled" power
                  outages are  necessary.  SUBCONTRACTOR  will be given at least
                  thirty (30) days advance notice prior to the effective date of
                  a Contractor  Scheduled  power  outage.  However,  the utility
                  provider may also require  "Utility  Scheduled" power outages.
                  If  the  utility  company  informs  Contractor  of  a  Utility
                  Scheduled outage, Contractor shall give SUBCONTRACTOR at least
                  thirty (30) days notice,  provided the utility  provider gives
                  Contractor  thirty  (30)  days  notice.  Contractor  shall use
                  commercially   reasonable   efforts  to  schedule   Contractor

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                          BASIC ORDER AGREEMENT 04T002

                  Scheduled   power  outages  so  that  such  outages  will  not
                  adversely affect SUBCONTRACTOR'S  operations. If SUBCONTRACTOR
                  cannot  operate its business  operations in all or any portion
                  of the Facilities for more than two (2)  consecutive  business
                  days on account of such  Contractor  Scheduled  power  outage,
                  SUBCONTRACTOR  shall receive an abatement of the Fixed Service
                  Fee allocable to such portion of the Facilities. SUBCONTRACTOR
                  understands  that  Contractor is not a registered  utility and
                  that it procures  electricity  produced by local utilities and
                  sold to NASA for  transmission  to those who use Stennis Space
                  Center.  Contractor  shall have no liability to  SUBCONTRACTOR
                  for power  outages  caused by bad  weather or any cause  other
                  than as set forth in the preceding  sentence or as a result of
                  SUBCONTRACTOR'S own willful misconduct or negligence.

            2.    Water and Sewage.  Contractor shall provide water and sanitary
                  waste  treatment to the Facilities  used by  SUBCONTRACTOR  in
                  accordance with its existing  distribution  system (unless the
                  Plans identified in Orders issued hereunder require Contractor
                  to modify the existing distribution system, in which case such
                  distribution system shall be so modified).

            3.    Communications.  Contractor  shall  provide all  communication
                  capabilities, including, but not limited to, long distance and
                  internet service in accordance with its existing communication
                  system (unless the Plans identified in Orders issued hereunder
                  require  Contractor  to  modify  the  existing   communication
                  system,  in which case such  communication  system shall be so
                  modified).

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                          BASIC ORDER AGREEMENT 04T002

            4.    Natural  gas.  Contractor  shall  provide  natural  gas to the
                  Facilities  used  by  SUBCONTRACTOR  in  accordance  with  its
                  existing  distribution  system (unless the Plans identified in
                  Orders  issued  hereunder  require  Contractor  to modify  the
                  existing  distribution system, in which case such distribution
                  system shall be so modified).

            5.    Environmental  Assessments.  If  SUBCONTRACTOR  exercises  any
                  expansion  rights  granted to  SUBCONTRACTOR  in Orders issued
                  hereunder,  and as a result thereof  SUBCONTRACTOR is required
                  to   perform   a  record  of   environmental   considerations,
                  environmental   assessment,   or   an   environmental   impact
                  statement,  Contractor  shall  be  retained  to  provide  such
                  support  services  and  SUBCONTRACTOR   agrees  to  remunerate
                  Contractor for such support services by submitting a completed
                  Form ENG-43,  SUBCONTRACTOR  Work Request  form, to Contractor
                  and SUBCONTRACTOR  shall provide assistance and support in the
                  preparation of any required documentation.

            6.    Required  Services.  SUBCONTRACTOR  shall use the  services of
                  Contractor to restore the  Facilities to the same condition as
                  delivered upon  termination or expiration of this Agreement or
                  Orders issued  hereunder,  reasonable  wear and tear excepted,
                  and to  relayaway  the  Facilities  in  accordance  with other
                  provisions of this Agreement.

            7.    Miscellaneous  Support Services.  SUBCONTRACTOR may, from time
                  to time, request other support services from the Contractor or
                  from a third party,  including  but not limited to,  equipment
                  maintenance and custodial services. SUBCONTRACTOR shall submit
                  a completed Form ENG-43,  SUBCONTRACTOR  Work Request Form, to
                  Contractor  for  estimating  and  pricing  for  services  from
                  Contractor  covered in but not limited to Paragraphs  B.5, B.6
                  and B.7 above. Upon written  acceptance of the proposal by the
                  SUBCONTRACTOR, Contractor will schedule work.

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                          BASIC ORDER AGREEMENT 04T002

XIV.     Inspection of Facilities

      A.    "SUBCONTRACTOR'S  managerial  personnel"  as used in this  clause is
            defined as any of the SUBCONTRACTOR'S directors, officers, managers,
            superintendents,  or equivalent representatives who have supervision
            or direction of:

            1.    All or substantially all of the SUBCONTRACTOR'S business;

            2.    All or substantially all of the SUBCONTRACTOR'S  operations at
                  any one plant or separate location in which the Facilities are
                  installed or located; or

            3.    A  separate  and  complete  major   industrial   operation  in
                  connection with which the Facilities are used.

      B.    Subject  to the terms and  conditions  of  SUBCONTRACTOR'S  Security
            Plans as defined in ss. V, which  will be  submitted  within  thirty
            (30) days from the date the  SUBCONTRACTOR  finalizes  them with the
            U.S.  Government,  the Army  and the  Contractor  have the  right to
            inspect and test the building systems servicing the Facilities. Such
            inspections and tests shall be conducted during reasonable times and
            in coordination with the  SUBCONTRACTOR.  This right of the Army and
            the  Contractor  shall in no way be  construed  as a warranty of the
            condition of the  Facilities  nor of compliance  with required laws,
            regulations  and MSAAP rules.  Such  inspections  and tests shall be
            performed in a manner that will not interfere  with  SUBCONTRACTOR'S
            operations at the Facilities.  The  SUBCONTRACTOR  shall furnish all
            reasonable  assistance  for the safe and  convenient  performance of
            these duties.

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                          BASIC ORDER AGREEMENT 04T002

      C.    The  Contractor  may,  at any time,  require  the  SUBCONTRACTOR  to
            correct or replace  Facilities  that are defective,  without cost to
            the  Contractor  under Orders issued  hereunder,  if the defects are
            caused by fraud,  willful misconduct or lack of good faith of on the
            part of the SUBCONTRACTOR'S  managerial  personnel or the conduct of
            one or more of the SUBCONTRACTOR'S employees selected or retained by
            the  SUBCONTRACTOR  after  any  of  the  SUBCONTRACTOR'S  managerial
            personnel  has  reasonable  grounds to believe  that the employee is
            habitually  careless or  unqualified.

      D.    Corrected or replacement  Facilities shall be subject to this clause
            in  the  same  manner  as  Facilities   originally  granted  to  the
            SUBCONTRACTOR for use.

XV.   Reporting  of   Explosives,   Propellants,   Etc.   Stored  on  Army-Owned
      Installations

      A.    SUBCONTRACTOR  shall  provide an annual  listing  of all  propellant
            stocks,  if any,  on hand to  Contractor  no later than 15  February
            which includes all information  cited in paragraph  7.d(3),  AMCCOMR
            702-9, attached hereto as Exhibit C and incorporated herein.

      B.    SUBCONTRACTOR  shall report in writing to Contractor  all propellant
            stocks  it  receives,  if any,  onto  MSAAP.  This  report  shall be
            submitted  within 30 days of receipt of the stock and shall  include
            the  following  in  addition  to  the  information   required  under
            paragraph 7, subparagraphs d(3)(a) through (g), AMCCOMR 702-9:

            1.    Name and address of manufacturer, or DODIC if available.

            2.    Date of manufacture.

            3.    Method and unit of packaging.

            4.    Propellant   description   sheet,   ARRCOM  Form  214R  or  an
                  equivalent, if available, otherwise a narrative, supplying the
                  exact   chemical    formulation    including    original   (as
                  manufactured) percentage content of stabilizer identification.

            5.    Planned   schedule  of   utilization  of  the  propellant  and
                  anticipated   quantity   and  storage  time  of  any  residual
                  propellant.

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                          BASIC ORDER AGREEMENT 04T002

            6.    When a determination is made that a master  propellant  sample
                  is required  for testing,  SUBCONTRACTOR  shall be directed to
                  ship such sample at its own expense to a laboratory reasonably
                  designated by Contractor.

      C.    The above  reports  will be used to  monitor  the level of safety of
            SUBCONTRACTOR's   storage  practices  and  stored   materials.   The
            Contractor  will  notify the  SUBCONTRACTOR  in  writing  when it is
            determined  that there is a danger to the  Facilities  or  personnel
            thereon  including  a time  limit  within  which to  dispose of such
            material.  SUBCONTRACTOR  agrees  to  dispose  of any such  material
            within the stated time at its own expense.  SUBCONTRACTOR's  failure
            to comply  with any  requirements  as set forth in this  Article  is
            considered  a breach  of a  material  provision  of this  Agreement,
            provided  however,   that  if,  with  the  exercise  of  good  faith
            reasonable  efforts,  such material is of such nature that it cannot
            be disposed of within the stated time period, no default shall occur
            so long as SUBCONTRACTOR shall commence the disposal of the material
            within  such  stated  time  period and shall  thereafter  diligently
            prosecute  the  disposal  of  same.  Contractor  or  its  lower-tier
            subcontractors  shall have the sole responsibility to handle,  store
            and otherwise dispose of all propellant stocks and explosives bought
            onto the  Facilities  by any  occupant  of the MSAAP  other than the
            SUBCONTRACTOR (including all SUBCONTRACTOR'S  employees,  agents, or
            lower-tier  subcontractors,  or any of their  respective  employees,
            agents  or  invitees)  in  accordance  with  all  applicable   legal
            requirements.

XVI.  Relayaway of Facilities

     A.  Any Army property which had been initially laid-away at Army expense
         and was removed from layaway for active use by the SUBCONTRACTOR shall
         be relaidaway at the expense of the SUBCONTRACTOR to the same level of
         the initial layaway, less reasonable wear and tear. At least 120 days
         prior to cessation of active use of Army property, SUBCONTRACTOR shall
         identify the property to be relaidaway and shall provide to Contractor
         a rehabilitation plan based upon the most current approved Contractor
         maintenance plan, including an inventory listing which includes:

                                 Page 17 of 39
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                          BASIC ORDER AGREEMENT 04T002

                  Property nomenclature
                  Category
                  Army I.D. number
                  Tag number
                  Year of manufacture
                  Current condition code
                  Rehabilitation/rebuild recommended

XVII. Liability for Facilities

A.    SUBCONTRACTOR  assumes  the risk of,  and is  responsible  for,  any loss,
      damage  to or  destruction  of  the  Facilities  issued  to  SUBCONTRACTOR
      pursuant to the terms of this  Agreement,  occurring,  after the Occupancy
      Date as hereinafter defined (to the extent of the space that SUBCONTRACTOR
      then occupies) or  Commencement  Date,  whichever is earlier,  through the
      term of this Agreement,  except where such loss, damage, or destruction is
      caused by (i) the negligence, or willful misconduct of the Contractor, the
      Army or any other occupant of the facilities  located at MSAAP (other than
      the  SUBCONTRACTOR  or  any  of  its  employees,   agents,  or  lower-tier
      subcontractors,  or any of their respective employees, agents or invitees)
      or (ii) an act of God.  SUBCONTRACTOR  will commence and prosecute  repair
      and/or  replacement  of the  Facilities  as  expeditiously  as  reasonably

                                 Page 18 of 39
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                          BASIC ORDER AGREEMENT 04T002

      possible (except in cases where the SUBCONTRACTOR has not assumed the risk
      under  the  preceding  sentence),  provided  that  Contractor  shall  make
      available  to  SUBCONTRACTOR  insurance  proceeds,  if any, it received on
      account of such loss or damage.  However,  notwithstanding  the foregoing,
      the  Contractor is not expected or required to maintain any such insurance
      and SUBCONTRACTOR acknowledges Contractor does not intend, nor is required
      to  maintain  such  insurance.  In the event  that  SUBCONTRACTOR  has not
      assumed the risk  pursuant to the terms of this  Paragraph,  SUBCONTRACTOR
      shall have the option, but not the obligation, to repair or replace at its
      own expense the  Facilities in accordance  with the terms of the preceding
      sentence  and  SUBCONTRACTOR  shall be entitled  to a pro-rata  adjustment
      based upon the percent of unusable square footage in the Fixed Service Fee
      otherwise  required under this Agreement during the period of repairs.  At
      the   termination  or  expiration  of  this  Agreement  or  Orders  issued
      hereunder,  SUBCONTRACTOR shall return all Facilities in as good condition
      as when received, except for reasonable wear and tear and except for items
      lost,  damaged or destroyed as a result of causes for which  SUBCONTRACTOR
      has not assumed the risk under the first sentence of this  Paragraph.  All
      removable furniture,  equipment, and improvements placed on the Facilities
      at the expense of SUBCONTRACTOR shall be the property of SUBCONTRACTOR and
      shall  be  removed  by  SUBCONTRACTOR  at  its  expense  by  the  date  of
      termination or expiration of this Agreement.  If  SUBCONTRACTOR  shall not
      remove all effects from the  Facilities  as above agreed,  the  Contractor
      shall remove and store the same, and SUBCONTRACTOR  will pay Contractor at
      demand  any and all  reasonable  out-of-pocket  expenses  incurred  in the
      removal  and storage of said  effects for any length of time during  which
      the same shall be in  Contractor's  possession;  and Contractor may at its
      option  without  notice  sell the  effects  of the same for such  price as
      Contractor  deems best and apply the proceeds of the sale upon any amounts
      due under the Agreement,  including the expenses for the removal and sale,
      and  the  balance,  if  any,  shall  be  paid  to the  SUBCONTRACTOR.  Any
      reasonable  out-of-pocket  costs of  removal  and  storage  in  excess  of
      proceeds of such sale shall be paid by SUBCONTRACTOR. Contractor shall not
      be liable for any loss or damage  resulting from removal,  storage or sale
      of the effects as set forth herein.

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                          BASIC ORDER AGREEMENT 04T002

      B.    When  there  is any  loss or  destruction  of,  or  damage  to,  the
            Facilities:

            1.    SUBCONTRACTOR  shall promptly notify Contractor and shall take
                  all reasonable  steps to protect the  Facilities  from further
                  damage, separate the damaged and undamaged Facilities, put all
                  the  Facilities  in the  best  possible  order,  and  promptly
                  furnish  to  Contractor,  and in any event  within 15 days,  a
                  statement of:

                  a)    the Facilities lost or damaged;

                  b)    the time and origin of the loss or damage;

                  c)    all known interests in commingled  property of which the
                        Facilities are a part; and

                  d)    any  insurance  covering any part of or interest in such
                        commingled property.

            2.    SUBCONTRACTOR   shall  make  such  repairs,   replacement  and
                  renovation  at its  own  expense  of the  lost,  destroyed  or
                  damaged  Facilities  for  which  it has  assumed  the  risk as
                  required  to  restore  them  to  as  good  condition  as  when
                  received.

            3.    Even when the  SUBCONTRACTOR  has not assumed the risk of loss
                  of Facilities  under ss. XVII.A above,  the  Contractor or the
                  Army shall not be required to replace or repair lost, damaged,
                  or  destroyed  Facilities  at the  Contractor's  or the Army's
                  expense; provided, however, that if the Contractor chooses, in
                  its sole discretion,  to replace or repair such lost,  damaged
                  or destroyed  Facilities,  (i) the  Contractor  shall  replace
                  and/or  repair  such  Facilities  to as  good a  condition  as
                  delivered to SUBCONTRACTOR,  (ii)  SUBCONTRACTOR's use will be
                  interrupted  for such  reasonable  times as are  necessary for

                                 Page 20 of 39
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                          BASIC ORDER AGREEMENT 04T002

                  such activity and (iii)  SUBCONTRACTOR  shall be entitled to a
                  pro-rata   adjustment  in  the  Fixed  Service  Fee  from  the
                  Contractor,  otherwise  required in Orders  issued  under this
                  Agreement during the period of repairs.  If the Facilities are
                  so  severely  damaged  or  destroyed  by causes  for which the
                  SUBCONTRACTOR  has not  assumed  the risk of loss,  damage  or
                  destruction under ss. XVII.A.  above that the Permitted Use is
                  no  longer  possible,  SUBCONTRACTOR  shall  have the right to
                  terminate this Agreement in whole or in part, effective on the
                  date of damage or  destruction of the  Facilities.  Contractor
                  and  SUBCONTRACTOR   shall  negotiate  a  mutually   agreeable
                  pro-rata   adjustment   in  the  Fixed  Service  Fee,  if  the
                  termination is partial.

XVIII. Permits and Licenses; Compliance with Law

      A.    SUBCONTRACTOR,  at its own  cost,  shall  procure  all  permits  and
            licenses  required under safety and  environmental  requirements and
            standards,   whether   statutory  or   regulatory,   applicable   to
            SUBCONTRACTOR'S  operation at the Facilities.  If an existing permit
            must be modified,  SUBCONTRACTOR  shall obtain the  modification and
            pay all costs.  Upon request of  SUBCONTRACTOR  accomplished  by its
            submission of completed Form ENG-43,  SUBCONTRACTOR Work Request, to
            Contractor,  the Contractor  shall join in any  applications for any
            permits or licenses  required to be obtained by  SUBCONTRACTOR,  and
            shall   otherwise   cooperate  with   SUBCONTRACTOR   in  connection
            therewith.

      B.    All permit  applications and submissions shall be made in accordance
            with law and  regulation.  Contractor  shall be  notified in writing
            thirty  (30) days prior to any  permit  application  being  filed by
            SUBCONTRACTOR,  and SUBCONTRACTOR shall provide copies of all permit
            applications  as filed to  Contractor.  SUBCONTRACTOR  shall provide
            Contractor with copies of all permits obtained upon receipt.

      C.    Both  parties  hereto  shall  comply  with  all   applicable   laws,
            regulations   and   ordinances   that  apply  to  their   respective
            responsibilities  under this Agreement and shall  indemnify and hold
            the other party harmless from loss, liability,  cost, expense, fines
            and  penalties  resulting  from  their  failure  to  comply  in  the
            execution of their respective responsibilities under this Agreement.
            If  SUBCONTRACTOR  is required to accept any costs  associated  with
            structural  modifications  or repairs to real property on account of
            the foregoing, Contractor agrees to apply the Sponsorship provisions
            of ss. XXIV herein.

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                          BASIC ORDER AGREEMENT 04T002

XIX.  Maintenance and Utilization

      A.    Except as otherwise provided in Paragraph B below, the SUBCONTRACTOR
            shall be responsible  for all cost of proper  maintenance and repair
            of the  Facilities  in  accordance  with the terms of Orders  issued
            hereunder.  The  SUBCONTRACTOR's  obligation under this clause shall
            continue until this Agreement expires or is terminated in accordance
            with the terms and conditions  herein and the  Facilities  have been
            returned  to  Contractor  in  accordance  with this  Agreement.  The
            removal of Army  property  to storage or its  contemplated  transfer
            does not relieve the SUBCONTRACTOR from this responsibility.

      B.    The Contractor is responsible  for the maintenance and repair of the
            building and systems in  accordance  with the terms of Orders issued
            hereunder.

      C.    The SUBCONTRACTOR has the  responsibility for the proper maintenance
            and repair of equipment  and Army and/or  Contractor-owned  personal
            property,  if any,  provided  under  Orders  issued  hereunder.  The
            SUBCONTRACTOR  may use the services of Contractor in accordance with
            other provisions of this Agreement.

XX.   Termination

      A.    If the Army terminates its Contract with the Contractor  pursuant to
            the terms  thereof for any reason  other than for the default of the
            Contractor,  and  the  Army  or any  other  successor  facility  use
            contractor does not assume  responsibility  for this Agreement,  the
            Contractor may terminate this Agreement and/or Orders issued thereto
            without  liability  of  any  kind,  except,  if  the  Contractor  so
            terminates this Agreement,  Contractor  shall at its sole discretion
            either (a) seek an equitable  adjustment with the Army in accordance
            with  FAR Part 31 and FAR Part 49 on  behalf  of and in  cooperation

                                 Page 22 of 39
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                          BASIC ORDER AGREEMENT 04T002

            with the  SUBCONTRACTOR  to the extent the costs associated with the
            termination are recognized by the Army, or (b) in lieu of (a) above,
            offer to enter into a fair and reasonable Sponsorship Agreement with
            SUBCONTRACTOR  pursuant to ss. XXIV of this Agreement that would, if
            accepted,  allow SUBCONTRACTOR to seek an equitable  adjustment from
            the Army under  Contractor's  sponsorship.  Upon  receipt of payment
            from   the  Army  of  any   equitable   adjustment   duly   owed  to
            SUBCONTRACTOR,  Contractor will promptly remit to SUBCONTRACTOR  its
            portion of such  adjustment.  This  provision  shall not  prevent or
            diminish any other rights or remedies the  SUBCONTRACTOR may have to
            settle claims it might have with the Army caused by a termination of
            the Agreement under this clause.  If Contractor  elects to terminate
            this Agreement  under this ss. XX, it is understood  that all of the
            terms and  conditions of this ss. XX and the terms and conditions of
            ss.  XXIV shall  remain in full force and effect with regard to such
            Sponsored Claim, notwithstanding such termination.

      B.    If the Army  terminates  its Contract with the Contractor due to the
            default of the Contractor, the SUBCONTRACTOR shall reserve the right
            to seek recovery  against the Army pursuant to the Army's  agreement
            expressed in the Army letter dated June 23, 2004 attached hereto and
            incorporated  herein  as  part of  Exhibit  A.  The  SUBCONTRACTOR's
            exclusive remedy for such  termination  shall be to pursue it rights
            against the Army pursuant to such letter.  Contractor  does not have
            any express or implied  obligations  or liabilities in the event the
            Contract is  terminated  for default by the Army,  including but not
            limited to termination due to Contractor's  fault or negligence.

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                          BASIC ORDER AGREEMENT 04T002

      C.    In the event (a) any  amount due under  this  Agreement  is not paid
            within ten (10) days after Contractor shall have given SUBCONTRACTOR
            notice that same is due and unpaid, and SUBCONTRACTOR  shall fail to
            pay such amount within ten (10) days after Contractor sends a second
            written  notice that the same is due and unpaid (which second notice
            may not be given until the expiration of the first ten-day  period),
            or (b) SUBCONTRACTOR  shall have been debarred from contracting with
            the  Government  or  shall  have  failed  to cure a  default  in the
            performance  of any term,  condition  or covenant of this  Agreement
            (other than the payment of a sum of money)  within  thirty (30) days
            after written  notice  thereof from  Contractor,  or if such default
            cannot reasonably be completely cured in such time, if SUBCONTRACTOR
            shall not promptly  commence  the cure of such  default  within said
            thirty (30) days and shall not have diligently  prosecuted the same,
            Contractor,  besides any other rights or remedies it may have by law
            or otherwise, shall have the immediate right of entry and may remove
            all persons and property from the  Facilities.  Such property may be
            removed  and  stored  at the  cost  of and for  the  account  of the
            SUBCONTRACTOR.  Contractor  shall also have the  immediate  right to
            terminate  all  demand  services.   Should  SUBCONTRACTOR  elect  to
            re-enter,  or should  Contractor take  possession  pursuant to legal
            proceedings  or  pursuant  to  any  notice   provided  for  by  law,
            Contractor may either terminate this Agreement  without liability of
            any  kind to  SUBCONTRACTOR,  or may,  from  time to  time,  without
            terminating  this  Agreement,  re-let  said  Facilities  or any part
            thereof  for such term or terms  (which may be for a term  extending
            beyond the term of this  Agreement)  and at such rates and upon such
            other  terms  and  conditions  as  Contractor  in  the  exercise  of
            Contractor's sole but reasonable  discretion may deem advisable with
            the right to make alterations and repairs to said  Facilities.  Upon
            each  such  re-letting,  SUBCONTRACTOR  shall  be  liable  to pay to
            Contractor,  in  addition to any  indebtedness  other than the Fixed

                                 Page 24 of 39
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                          BASIC ORDER AGREEMENT 04T002

            Service Fee  identified in Orders issued  hereunder,  the reasonable
            cost and  expense of such  re-letting  and of such  alterations  and
            repairs  actually  incurred  by  Contractor  and  deemed  reasonably
            necessary by Contractor to effect such  re-letting,  and the amount,
            if any, by which the Fixed  Service Fee  reserved in this  Agreement
            for the period of such  re-letting (up to but not beyond the term of
            this  Agreement)  exceeds the amount  agreed to be paid as the Fixed
            Service Fee for the Facilities  for such period of such  re-letting.
            Such  deficiency  shall  become due and  payable  monthly,  as it is
            determined,  on the first  (1st) day of each month in the  remaining
            term of this Agreement,  through such  re-letting.  Contractor shall
            use commercially reasonable efforts to re-let the Facilities.

XXI.  Exclusion of Facilities Cost in Other Contracts

      The SUBCONTRACTOR agrees that it will not include, in the cost or price of
      any goods produced or services  performed under government prime contracts
      or subcontracts using these Facilities, any provision, allowance or charge
      (1) for the cost  (other  than the costs  borne by the  SUBCONTRACTOR)  of
      acquisition of the Facilities provided by Orders issued hereunder,  or (2)
      for the amortization or depreciation of Army Facilities provided by Orders
      issued hereunder.

XXII. Real Property

      A.    Any  new   construction   or  permanent   alterations   to  existing
            structures,  including additions or deletions of any fixtures, which
            SUBCONTRACTOR  is  permitted by  Contractor  to  undertake,  must be
            recorded   in  the  real   property   records  by  the   Contractor.
            SUBCONTRACTOR  agrees to  provide  as-built  drawings  and all other
            documentation required to be submitted because of such construction,
            alterations, additions or deletions under the terms of the Contract.

      B.    For any  changes or  alterations  made to the  Facilities  hereunder
            after the effective date of this  Agreement,  the  Contractor  shall
            have  the  option  of  causing  any  building   alterations  or  new
            construction not  specifically  approved by the Contractor to either
            be removed and the  building  restored to its prior  condition or to
            accept such alterations and new construction  abandoned in place and
            such alterations and new  construction  shall become the property of
            the Contractor and/or the Army.

                                 Page 25 of 39
<PAGE>

                          BASIC ORDER AGREEMENT 04T002

XXIII.   Contract Clauses

      FAR 52.203-7 (July 1995)  ANTI-KICKBACK  PROCEDURES is incorporated herein
      by reference except for subparagraph (c)(1).

      The following  provisions of the FAR are incorporated herein by reference,
      with  appropriate  changes made to identify the Contractor  instead of the
      government  and the  SUBCONTRACTOR  instead  of the  Contractor  or  Prime
      Contractor with the exception of #6 (the  government  shall have the right
      to audit):

      1.    DEFINITIONS                                 FAR 52.202-1 (Dec 2001)

      2.    GRATUITIES                                  FAR 52.203-3 (Apr 1984)

      3.    COVENANT AGAINST CONTINGENT FEES            FAR 52.203-5 (Apr 1984)

      4.    SECURITY  REQUIREMENTS                      FAR 52.204-2 (Aug 1996)
            (excluding paragraph(c))

      5.    DEFENSE PRIORITY AND                        FAR 52.211-15 (Sep 1990)
            ALLOCATION REQUIREMENTS

      6.    AUDIT AND RECORDS- NEGOTIATION -            FAR 52.215-2  (Jun 1999)
            ALTERNATE I  (Jan 1997)

      7.    ORDER OF PRECEDENCE                         FAR 52.215-8 (Oct 1997)

      8.    CONVICT LABOR                               FAR 52.222-3 (Jun 2003)

      9.    CONTRACT WORK HOURS AND                     FAR 52.222-4 (Sep 2000)
            SAFETY STANDARDS ACT -
            OVERTIME COMPENSATION

      10.   EQUAL OPPORTUNITY.                          FAR 52.222-26 (Apr 2002)

      11.   EQUAL OPPORTUNITY FOR SPECIAL               FAR 52.222-35 (Dec 2001)

                                 Page 26 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

            DISABLED VETERANS, VETERANS OF
            THE VIETNAM ERA, AND OTHER
            ELIGIBLE VETERANS

      12.   AFFIRMATIVE ACTION FOR WORKERS              FAR 52.222-36 (Jun 1998)
            WITH DISABILITIES

      13.   DRUG-FREE WORK FORCE                        DFAR 252.223-7004
                                                        (Sep 1988)

      14.   ASSIGNMENT OF CLAIMS                        FAR 52.232-23 (Jan 1986)

      15.   AUTHORIZED DEVIATIONS IN CLAUSES            FAR 52.252-6 (Apr 1984)

XXIV. Disputes and Governing Law

      A.    Any claim, controversy or dispute arising under this Agreement or as
            a result  of any  breach  thereof  or in any  other  manner  related
            hereto,  whether before or after  termination,  shall upon demand of
            either  party  be  finally   resolved  by  binding   arbitration  in
            proceedings  conducted by a single  arbitrator  under the Commercial
            Arbitration Rules of the American Arbitration Association ("AAA") in
            New  Orleans,  Louisiana,  or such other  locale as the  parties may
            agree at the time. The arbitrator shall be an attorney with at least
            ten years experience with federal  government  contract  claims.  If
            both parties so request in their initial  demand for  arbitration or
            in its initial  response  thereto,  the parties  shall first seek in
            good faith to resolve the dispute by means of non-binding  mediation
            under the AAA's  Commercial  Mediation  Rules,  before resolving the
            matter by binding arbitration.

      B.    This  Agreement  shall be governed  and  interpreted  under  federal
            procurement  law,  as set forth in  applicable  federal  procurement
            statutes and  regulations,  as interpreted by the federal courts and
            boards of contract  appeals,  where such body of law  addresses  the

                                 Page 27 of 39
<PAGE>

            issues at hand.  Where  federal  contract  law does not  address the
            issues  to  be  resolved,  this  Agreement  shall  be  governed  and
            interpreted in accordance with the laws of the State of Mississippi,
            without  reference to its  conflicts of law rules.

      C.    If,  under  any  circumstances,   SUBCONTRACTOR  seeks  a  pro  rata
            adjustment from Contractor or an equitable  adjustment from the Army
            via the  Sponsorship  provisions  set forth  below,  for any  claims
            related to this Agreement and/or the Facilities  provided hereunder,
            Contractor  shall, at its sole discretion  either:  (a) negotiate an
            adjustment  with  the   SUBCONTRACTOR;   or  (b)  if  liability  for
            SUBCONTRACTOR'S  damages  reasonably lies with the Army,  Contractor
            shall offer to negotiate  with  SUBCONTRACTOR  a fair and reasonable
            Sponsorship  Agreement that would, if accepted,  allow SUBCONTRACTOR
            to (i) seek an equitable adjustment from the Army under Contractor's
            sponsorship,  (ii) appeal any  Contracting  Officer's final decision
            under   Contractor's   sponsorship,   and/or   (iii)   appeal  under
            Contractor's sponsorship any subsequent adverse judgment rendered by
            a Board of Contract  Appeals or federal court until all appeals have
            been  exhausted.   Claims  made  or  defended  under  a  Sponsorship
            Agreement are herein  referred to as "Sponsored  Claims" and will be
            at  SUBCONTRACTOR'S  expense and risk,  with legal counsel chosen by
            SUBCONTRACTOR,  with such  counsel  to be  approved  by  Contractor.
            Approval of such  counsel by  Contractor  shall not be  unreasonably
            delayed or  withheld.  Notwithstanding  any other  provision in this
            Agreement,  any finding of fact or  conclusion of law set forth in a
            final decision of the  Contracting  Officer under the Contract,  and
            any final and non-appealable decision of a federal court or board of

                                 Page 28 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

            contract appeals, that is binding upon the Contractor and related to
            this  Agreement  shall  also  be  binding  on  both  Contractor  and
            SUBCONTRACTOR   for   purposes   of  this   Agreement,   subject  to
            SUBCONTRACTOR'S   rights  under  any   Sponsorship   Agreement.   If
            Contractor  makes  an  offer  to  enter  Sponsorship  Agreement  and
            SUBCONTRACTOR  accepts it, the parties shall seek, in good faith, to
            negotiate a mutually acceptable  Sponsorship Agreement that complies
            with the terms set forth  above,  and if they  cannot  agree,  their
            disagreement  shall  constitute  a  dispute  to  be  resolved  under
            Paragraph A of this Article, except that non-binding mediation shall
            be  undertaken  if both  parties  request at the time of the initial
            demand for  arbitration.  In order to resolve  such a dispute,  each
            party shall prepare an Impasse Version of the Sponsorship  Agreement
            within 5 business days following the demand for arbitration, and the
            arbitrator  shall select the Impasse  Version that appears in his or
            her judgment and  experience the most fair and  reasonable,  without
            making any changes therein except for those necessary to reflect the
            requirements  set forth in this  Paragraph C and the  parties  shall
            promptly  execute and implement the Impasse Version  selected by the
            arbitrator.  The arbitrator shall use AAA's Expedited Procedures for
            any  such  arbitration  and  shall  rule  solely  upon  the  written
            submissions  of  the  parties.   This  Impasse   Version/arbitration
            procedure  set forth  above  shall  apply  whenever  the parties are
            required to  negotiate a  Sponsorship  Agreement in good faith under
            the terms of this Agreement.

      C.    The terms "final decision", "appeal" and "judgment", as used in this
            Article  of the  Agreement,  have  the  meaning  given  them  in the
            Contract Disputes Act of 1978, 41 U.S.C. ss.ss.601-613,  as amended.
            The  SUBCONTRACTOR  shall  indemnify  and hold  Contractor  harmless
            without  limit from any and all liability of any kind incurred by or
            imputed  to  SUBCONTRACTOR  under 41  U.S.C.  ss.  604,  "Fraudulent
            Claims,"  if  SUBCONTRACTOR  is  unable to  support  any part of the
            Sponsored  Claim and it is determined by a final and  non-appealable
            judgment   that  such   inability  is   attributable   to  fraud  or
            misrepresentation  of  fact,  provided  that  Contractor  offers  to
            negotiate  in  good  faith  a  Sponsorship   Agreement  under  which
            SUBCONTRACTOR  would be tendered  the right to defend and appeal the
            fraud allegation.

                                 Page 29 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

XXV.  Term

      A.    The term of this  Agreement is for five (5) years (the  "Term"),  to
            commence  on the  Commencement  Date as  defined in Order 001 and to
            expire on the last day of the month in which  occurs the fifth (5th)
            anniversary  of  the  Commencement  Date,   subject,   however,   to
            extensions described in Paragraph B below.

      B.    SUBCONTRACTOR  shall  have the right and  option to extend  the Term
            from the date  upon  which it  would  otherwise  expire  for two (2)
            separate  consecutive  renewal  periods of five (5) years each (each
            such period being  hereinafter  called a "Renewal  Period") upon the
            same terms and  conditions  as are herein set forth  except that the
            Fixed  Service Fee for each Renewal  Period shall be  determined  in
            accordance with this Paragraph.  If SUBCONTRACTOR elects to exercise
            any one or more of said  options to renew,  it shall do so by giving
            notice of such  election to Contractor on or before the date that is
            twelve (12) months  before the  beginning of the Renewal  Period for
            which the Term is to be renewed by the exercise of such  option.  If
            SUBCONTRACTOR  elects to exercise any one or more of said options to
            renew,  the Term shall be  automatically  extended  for the  Renewal
            Period(s)  covered by the option or options so exercised.  The Fixed
            Service Fee for the Renewal  Period shall be  determined as follows:
            ninety (90) days before the  expiration  of the  then-current  Term,
            Contractor and  SUBCONTRACTOR  shall commence  negotiations  in good
            faith to attempt to agree upon the Fixed  Service Fee. If Contractor
            and  SUBCONTRACTOR  cannot reach agreement by sixty (60) days before
            the   expiration   of  the   then-current   Term,   Contractor   and
            SUBCONTRACTOR  shall,  no later  than  thirty  (30) days  before the
            expiration  of  the  then-current   Term,   designate  a  reputable,
            qualified,  independent  attorney  with  at  least  ten  (10)  years
            experience in government contracts, familiar with Fixed Service Fees
            then being  charged in the MSAAP and the rentals then being  charged
            in   comparable   buildings  in  the  vicinity  of  the  MSAAP  (the
            "Arbitrator").  AAA  (single)  binding  arbitration  rules  shall be
            invoked  should the parties  disagree with respect to the designated
            Arbitrator. Within ten (10) days after such appointment,  Contractor

                                 Page 30 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

            and  SUBCONTRACTOR  shall  each  submit a letter to the  Arbitrator,
            setting forth each of the respective parties' proposed Fixed Service
            Fee for the Renewal  Period in question  and the  rationale  used in
            determining    it    (respectively,    "Contractor    Letter"    and
            "SUBCONTRACTOR'S Letter"). If the proposals set for the Contractor's
            Letter and Subcontractor's Letter differ by less than $50,000.00 per
            annum,  then the  Fixed  Service  Fee  shall be the  average  of the
            proposals  set  forth in  Contractor's  Letter  and  SUBCONTRACTOR'S
            Letter.  If the  estimates  set  forth in  Contractor's  Letter  and
            SUBCONTRACTOR'S  Letter differ by $50,000.00  per annum or more, the
            Arbitrator shall conduct such  investigations  and hearings as he or
            she may deem  appropriate  and shall,  within thirty (30) days after
            the date of his or her  appointment,  choose either the proposal set
            forth  in   Contractor's   Letter  or  the  estimate  set  forth  in
            SUBCONTRACTOR'S  Letter to be the Fixed  Service Fee and such choice
            shall be binding upon Contractor and SUBCONTRACTOR.  Notwithstanding
            anything in the  foregoing to the  contrary,  the  Arbitrator  shall
            chose a Fixed Service Fee that at a minimum allows the Contractor to
            recoup  reasonable  anticipated  costs  and  reasonable  anticipated
            profit.  The fees and  expenses  of the  Arbitrator  shall be shared
            equally by the Contractor and the SUBCONTRACTOR.

      C.    In the Contract  modification P00002, the Army authorized Contractor
            to enter into tenant use agreements not to exceed  twenty-five  (25)
            years, notwithstanding the fact that this time period may exceed the
            term of the  Contract,  and  contractually  agreed  to  require  any
            successor facility use contractor to accept the terms and conditions
            of  subcontracts  in place and in accordance  with the Army's letter
            dated June 10, 2004 (attached hereto as part of Exhibit A), the Army
            has  authorized  Contractor  to enter into a contract  up to fifteen
            (15)  years  with  SUBCONTRACTOR.  Contractor  agrees  in  its  sole
            discretion  to enforce  such rights on behalf of  SUBCONTRACTOR,  if
            necessary, in accordance with Article XXIV.

                                 Page 31 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

XXVI. Insurance

      A.    From and after the Commencement Date or Occupancy Date, whichever is
            earlier,   SUBCONTRACTOR  shall  maintain  the  following  insurance
            polices in amounts not less than the following limits (or greater if
            required by law):

         1.   Worker's Compensation and Employer's Liability.

            a)    State: Statutory

            b)    Applicable Federal: Statutory

            c)    Employer's Liability:
                  $100,000 Each Accident
                  $500,000 Disease, Policy Limit
                  $100,000 Disease, Each Employee

            d)    Including   "Waiver  of  Our  Right  to  Recover  from  Others
                  Endorsement"

      2.    Comprehensive or Commercial General Liability.

            a)    Bodily injury and property  damage
                  $1,000,000  Per Occurrence
                  $5,000,000 General Aggregate

                  (1)   including   coverage   for   explosion,   collapse   and
                        underground property damage

                  (2)   including Contractual Liability (Hold Harmless Coverage)

                  (3)   including Fire Damage Liability

            b)    including  Additional  Insured  Endorsement  designating Mason
                  Technologies Inc.

      3.    Business Automobile Liability.

            The policy shall provide coverage for all owned, hired and non-owned
            automobiles  used in  connection  with  performing  work  under this
            Agreement.

                                 Page 32 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

                        a)    Bodily Injury
                              $200,000 Per Person
                              $500,000 Per Occurrence

                        b)    Property Damage
                              $20,000 Per Occurrence

                        c)    or Combined  Single Limit of
                              $520,000

            4.    Property Insurance.

                  All  risks  of  direct  physical  loss  to the  Facilities  on
                  replacement cost valuation basis.

      B.    At all times during  performance,  the SUBCONTRACTOR  shall maintain
            with the Contractor a current  certificate of insurance  showing the
            insurance  required by  Paragraph A above and  providing  for thirty
            (30) days written notice to the Contractor by the insurance  company
            prior to any  cancellation  or material  change in policy  coverage.
            SUBCONTRACTOR'S   failure  to  maintain  a  current  certificate  of
            insurance,  or any of the insurance policies  certified therein,  is
            considered a breach of a material provision of this Agreement.  Each
            policy of insurance  identified  above shall name  Contractor  as an
            Additional  Insured,  and  SUBCONTRACTOR  shall  waive its rights of
            subrogation against Contractor.

XXVII. Toxic and Hazardous Materials

      The  SUBCONTRACTOR  and its  contractors  shall  prohibit  the storage and
      disposal of  non-defense  toxic and hazardous  materials on the Facilities
      for non-DOD  production unless otherwise  exempted by the Secretary of the
      Army pursuant to 10 USC ss. 2692. Toxic or hazardous materials, regardless
      of  ownership,  brought  onto the  Facilities  that  will be  consumed  or
      incorporated  into products  within a reasonable  time frame,  and removed
      from the Facilities upon completion of the manufacturing  process, are not
      considered  to have been  "stored" for purposes of the above cited statue.
      The  SUBCONTRACTOR  and its contractors  shall dispose of excess hazardous
      and  toxic  material  or  waste  generated  by  the  SUBCONTRACTOR  or its
      contractors on the Facilities in accordance with applicable  environmental
      laws and  regulations,  but in no event shall storage of such materials or
      waste be permitted  after  expiration  or  termination  of this  Agreement
      without written  approval by the Contractor.  Notwithstanding  anything in
      the  foregoing to the  contrary,  SUBCONTRACTOR  shall be permitted to use
      limited  quantities of hazardous  material at the  Facilities as described
      and approved in the Permitted Use.

                                 Page 33 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

XXVIII. Pre-Existing Conditions

      The Army has, in the  Contract  modification  P00002,  retained  the risk,
      liability, responsibility and obligation to pay for and remedy any and all
      pre-existing conditions at MSAAP including, but not limited to, violation,
      remediation,  corrective actions and closure and post-closure  obligations
      under State and Federal  environmental  statutes and  regulations.  If the
      Army should decline to comply with the said provision,  and  SUBCONTRACTOR
      is  harmed  thereby,  Contractor  agrees  to  negotiate  in  good  faith a
      Sponsorship  Agreement  so that  SUBCONTRACTOR  may seek  (as a  Sponsored
      Claim) to  enforce  said  provision,  at  SUBCONTRACTOR'S  risk,  cost and
      expense.

XXIX. Miscellaneous

      A.    Waiver/Amendment.  No waiver, alteration,  modification or amendment
            of this  Agreement  shall be valid  unless in writing  and signed by
            both  parties.  No failure on the part of either  party to exercise,
            and no delay in exercising,  any right  hereunder shall operate as a
            waiver thereof; nor shall any single or partial exercise of any such
            right  preclude any other or further  thereof or the exercise of any
            other right under this Agreement.

      B.    Entire Agreement.  This Agreement and the attached Orders constitute
            the entire agreement of the parties with respect to the right to use
            the Facilities and supersedes all prior agreements and undertakings,
            both written and oral, between or among the parties hereto.

                                 Page 34 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

      C.    Relationship of Parties.  In all matters relating to this Agreement,
            both  parties  will be  solely  responsible  for the  acts of  their
            employees,  officers, directors, agents and contractors.  Employees,
            agents  or   contractors  of  one  party  shall  not  be  considered
            employees,  agents or contractors of the other party.  Neither party
            shall have the right,  power or authority to create any  obligation,
            express or implied,  on behalf of the other party. The SUBCONTRACTOR
            agrees to represent  all business  activities in its own name and in
            no way  represent  the  SUBCONTRACTOR'S  company or its employees as
            representatives or agents of the Contractor.

      D.    Severability.  In the event  that any  provision  of this  Agreement
            shall be found to be void or unenforceable,  such findings shall not
            be construed to render the other provisions of this Agreement either
            void or unenforceable, and all other provisions shall remain in full
            force  and  effect  unless  the  provisions  which  are  invalid  or
            unenforceable shall  substantially  affect the rights or obligations
            granted to or undertaken by either party.

      E.    Reopener.  This Agreement may be reopened,  at the request of either
            party, on each annual anniversary date for renegotiation or addition
            of  terms  and  conditions  to be  accomplished  by  mutual  written
            agreement; provided, however, that this provision does not create an
            obligation  on the part of  either  party  to  accept  any  proposed
            amended or additional terms and conditions.

      F.    Publicity.  The SUBCONTRACTOR agrees that the Contractor may use the
            name  and/or  logo  of  SUBCONTRACTOR  in  order  to  publicize  the
            SUBCONTRACTOR'S  presence  at MSAAP,  provided,  in each  case,  the
            Contractor  obtains the  SUBCONTRACTOR'S  prior written  consent for
            such  use.   Contractor   hereby   agrees  to  indemnify   and  hold
            SUBCONTRACTOR  harmless  from all loss,  cost,  damage  and  expense
            including,  without limitation,  reasonable attorneys' fees, arising
            out of Contractor's  violation of this Paragraph E. This Paragraph E
            shall survive the expiration or sooner termination of the Term.

                                 Page 35 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

      G.    If (i)  SUBCONTRACTOR  has  notified  Contractor  of its  failure to
            perform an obligation hereunder,  (ii) after receipt of such notice,
            Contractor  fails  promptly to commence and diligently to proceed to
            cure such default,  and (iii)  Contractor  remains in default in the
            performance  of such  obligation  for a period of  thirty  (30) days
            after the date of  SUBCONTRACTOR'S  notice  (or after  such  shorter
            period  as may be  appropriate  under the  circumstances),  and (iv)
            Contractor  is not then (at the  expiration  of such 30-day or other
            appropriate period) in the process of proceeding  diligently to cure
            such  default,   then   SUBCONTRACTOR  may  cure  such  default  and
            Contractor shall pay to SUBCONTRACTOR  within thirty (30) days after
            demand the reasonable cost paid by SUBCONTRACTOR.

      H.    Liquidated  Damages.  SUBCONTRACTOR  shall  pay  to  Contractor,  as
            liquidated  damages,  150% of the  applicable  Fixed  Service Fee as
            defined in Orders  issued  hereunder  that  applies for all the time
            SUBCONTRACTOR  shall retain  possession  of the premises or any part
            thereof after the termination of this Agreement, whether by lapse of
            time or  otherwise;  but the  provisions  of this  clause  shall not
            operate  as  a  waiver  by  Contractor  of  any  right  of  re-entry
            hereinabove  provided;  nor shall any  waiver by  Contractor  or its
            right to terminate this Agreement for breach of covenants affect its
            right to terminate  this  Agreement for any later breach of the same
            or another covenant.

      I.    Force  Majeure.  Each party agrees that the other party shall not be
            responsible for any delay or failure in completion or performance of
            any  of  its  obligations  hereunder  due to  fire,  flood,  natural
            catastrophe or any other occurrence commonly known as force majeure,
            including war, riots, embargoes, strikes, or other concerted acts of
            workers,  casualties or accidents,  acts of the government in either
            its  sovereign  or  contractual  capacity,  acts of God or any other
            causes or circumstances  beyond the control and without the fault or
            negligence of the other party.  Scheduled  completion dates shall be
            revised as mutually  agreed if a delay or failure to perform  arises
            from any such  cause.  The  parties  further  agree  that,  anything
            contained  in  this  Agreement  to  the  contrary   notwithstanding,
            incidental and  consequential  damages,  if any, are not recoverable
            from either party.

                                 Page 36 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

      J.    Army Consent;  Equitable  Adjustments.  In any case where the rights
            conferred upon SUBCONTRACTOR  require the consent or approval of the
            Army pursuant to the terms of the Contract,  (a)  Contractor  hereby
            agrees  to  diligently  pursue  such  consent  or  approval  and  to
            reasonably  cooperate with, and assist,  SUBCONTRACTOR  in obtaining
            same  and (b) if the  Army  consents  or  approves  any  request  of
            SUBCONTRACTOR, Contractor shall have no rights to disapprove or deny
            consent to such request.  Notwithstanding anything in this Agreement
            to contrary, in the event that the Contractor appears to be entitled
            to an  equitable  adjustment  under the terms of the  Contract  as a
            result of Army  actions that impede or delay or increase the cost of
            SUBCONTRACTOR'S use of or work at the Facilities,  the SUBCONTRACTOR
            shall have a similar  right to an  equitable  adjustment,  but shall
            enforce it  exclusively  through  means of a  Sponsored  Claim.  The
            Contractor  and  SUBCONTRACTOR  will  at   SUBCONTRACTOR'S   request
            negotiate a Sponsorship Agreement under which SUBCONTRACTOR may seek
            the equitable adjustment as a Sponsored Claim.

      K.    Administrative Offices.  Notwithstanding  anything in this Agreement
            to  the   contrary,   Contractor   and   SUBCONTRACTOR   agree  that
            SUBCONTRACTOR  shall  have the right to occupy  office  space at the
            Facilities (the  "Occupancy  Date") prior to the  Commencement  Date
            upon terms and  conditions to be mutually  agreed upon and described
            in Orders issued hereunder.

      L.    This  Agreement  may be executed  by the parties  hereto in separate
            counterparts,  each of which when so executed and delivered shall be
            an original, but all such counterparts shall together constitute one
            and the same instrument. Each counterpart may consist of a number of
            copies  hereof each signed by less than all, but together  signed by
            all of the parties  hereto.  Facsimile

                                 Page 37 of 39
<PAGE>

            signatures on this Agreement and any of the agreements and documents
            executed in connection herewith shall be deemed original signatures
            for all purposes.

                                 Page 38 of 39
<PAGE>

                         BASIC ORDER AGREEMENT 04T002

     IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers this 14th day of July, 2004.

CONTRACTOR:                                           SUBCONTRACTOR:
MASON TECHNOLOGIES INC.                               IONATRON INC.

BY:                                  BY:
   -----------------------               -----------------------
   Kim R. Spiers                         Thomas C. Dearmin
   Vice-President & General Manager      President & Chief Executive Officer
   Authorized Representative             Authorized Representative

DATE:                              DATE:
     -----------------------             -----------------------

                                 Page 39 of 39
<PAGE>

BASIC AGREEMENT NO. 04T002

IONATRON

EXHIBIT A - PERMITTED USE

The following documents, attached hereto as EXHIBIT A, constitute the
SUBCONTRACTOR's permitted use of the Facilities as defined in the Agreement

Letter dated April 28, 2004 from MTI to the Army

         SUBJECT: Conceptual Approval -- Ionatron Building 9101

Letter dated May 10, 2004 from the Army to MTI

         SUBJECT: Conceptual Approval -- Ionatron Building 9101

E-Mail dated May 17, 2004 from MTI to the Army

         SUBJECT: Ionatron Conceptual Approval

Letter dated June 10, 2004 from the Army to MTI

         SUBJECT: Conceptual Approval -- Ionatron Building 9101

Letter dated June 18, 2004 from MTI to the Army

         SUBJECT: Request for Information for IONATRON Tenant Use Contract

Letter dated June 23, 2004 from the Army to MTI

         SUBJECT: Ionatron/Mason Technologies Incorporated (MTI), Facility-Use
                  Agreements, DAAA09-92-E-0007
<PAGE>

                             Mason Technologies Inc.
                                 Day & Zimmerman
               Building 9100, Stennis Space Center, MS 39529-7099
                                 (228) 689-8000

April 28, 2004                                      IN ANSWER REPLY TO: 04-04-09

THRU:                Administrative Contracting Officer
                     Contract No. DAAA09-92-E-0008
                     Mississippi Army Ammunition Plant
                     Stennis Space Center, MS 39529-7099

ATTENTION:           SJMMS-CR

TO:                  DEPARTMENT OF THE ARMY
                     U.S. Army Joint Munitions Command
                     1 Rock Island Arsenal
                     Rock Island, IL 61299-6000

ATTENTION:           Mr. Doug Borgeson

SUBJECT:             Conceptual Approval -- Ionatron
                     Building 9101

Dear Sir:

Attached please find a conceptual proposal submitted for your approval regarding
Ionatron's use of Building 9101 to assemble the Directed Energy Weapon System.
The prospect has requested use of the center of Building 9101, which is 117,318
square feet in size.

As such, we hereby request:

o     Authorization  to  execute  up to a  twenty  five  (25)  year  tenant  use
      contract;

o     Relief of liability from Acts of God in accordance with FAR 52.245-8; and

o     Recognition  that in the event  governmental  requirements are implemented
      which   impact  or  affect   the   plans  of   Clause   A-2  of   Contract
      DAAA09-92-E-0007  as they are flowed down to the above,  Ionatron may seek
      equitable   adjustment  from  the  government  through  the  facility  use
      contractor.

o     Recognition  of Ionatron as  third-party  beneficiary to clause H-1 of the
      Facility Use Contract in relation to pre-existing conditions at MSAAP.
<PAGE>

If further information is required, please contact Wayne Gouguet at (228)
689-8170 or wgouguet@msaap.com.

Sincerely,

MASON TECHNOLOGIES INC.

/s/ Kim R. Spiers
Kim R. Spiers

Vice-President & General Manager

Attachment
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

1.    LOCATION DESCRIPTION 117,318 square feet, Building 9101

2.    DESCRIPTION OF PROPOSED USE:

      Ionatron  Inc. is a publicly  traded  development  stage  company that has
      developed and tested a proprietary new Directed Energy Weapon  technology,
      which, in a non-lethal mode, can direct electrical  discharges through the
      atmosphere to disable  vehicles,  such as cars,  trucks or boats,  without
      banning  the  vehicles'  occupants.  These  discharges  can also shut down
      electronic  and  communications  equipment.  When  fully  developed,  this
      technology  will also have the  capability  of  stunning  personnel,  in a
      manner similar to a common  TASER(R) -- but in a wireless  manner and over
      much longer distances.  Ionatron has already commenced the production of a
      limited  number of prototypes  for customer  evaluation and testing within
      the customers' specific  environments and missions.  Ionatron believes its
      technology is superior to many of the other Directed  Energy  technologies
      in development,  due to its low average power  requirements  and potential
      compact size. Ionatron's technology is also multifunctional in capability,
      with various military,  homeland defense and law enforcement applications.
      Ionatron has recently secured several US Government  contracts and had its
      technology funded as a line item in the 2004 DOD Defense Budget.  Ionatron
      expects  to use the cash from the  merger  to  accelerate  its  technology
      development   and   prototyping   activities.   Ionatron   currently   has
      approximately $20M in backlogged projects and expects this to grow to $80M
      in 2005.

      Ionatron  is  interested  in leasing,  initially,  117,318 sq. feet in the
      center of Building 9101 due north of the existing office areas to assemble
      the directed energy weapon system. The potential exists for expansion once
      the development technology enters the production phase.

      Ionatron  will  perform  testing of  ultra-short  lasers in an indoor test
      range to be built us part of the new ARMS  facility  modifications.  There
      will be no emissions or special  requirements  for this testing other than
      the laser safety  systems which are included with the  development  of the
      test  facility.  Testing will involve High Voltage power supplies and High
      Voltage discharges,  including  Ionatron's man-made lightning  technology.
      This will be  accomplished  within a special  indoor test range  contained
      within a Faraday cage to preclude  the release of any EMI.  Testing of the
      effects  of  Ionatron's  man-made  lightning  technology  against  targets
      furnished by  Ionatron's  customers  will be performed  inside a specially
      fabricated  enclosure to preclude EMI emissions.  There will be no testing
      that causes any generation of hazardous waste or atmospheric emission. The
      electromagnetic  (EMI)  emissions  from the testing will be contained by a
      Faraday cage and should not impact any surrounding areas.
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

3.    LIST OF BUILDINGS/STRUCTURES REQUIRED

      Building 9101

4.    LIST OF GOVERNMENT REQUIRED EQUIPMENT

      Phones and misc. smaller equipment.

5.    ESTIMATED PERIOD OF USE

      Five-year contract with multiple year options up to 25 years.

6.    EMPLOYMENT LEVEL 200 persons within two years

7.    IMPACTS

      EMERGENCY PRODUCTION ASSIGNMENT

      Building 9101 is not an emergency production building.

      CRITICAL SKILL RETENTION

      Tenant will provide  critical  skills in the form of quality  technicians,
      gauge/laboratory    technicians,    production   engineers,    machinists,
      accountants/personnel management and data processing technicians.

      INFRASTRUCTURE

      Tenant would provide no support to other tenants.

      PROJECT

      Not Applicable

      CONSIDERATION/REVENUE

      Estimated, $700,000 annually (negotiations continue, consideration will be
      directly related to ARMS expenditure); see attachment

      NTV'S

      Tenant is requesting no NTV's
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

      CULTURAL RESOURCES

      No structures on the installation are of any cultural significance.  MSAAP
      has  on  file  a  letter  from  the  SHPO  stating  no  structures  on the
      installation are of any cultural significance.  No cultural resources will
      be affected by this activity

      OTHER EXISTING TENANTS

         Activity should have no affect on other tenants in adjacent areas.

8.    REQUESTED ARMS INCENTIVES

      ARMS funding valued at  approximately  $4.5 million is anticipated at this
      time to be required to modify the area.  In general  terms,  modifications
      include but are not limited to (see attachment):

      o     Air    conditioning    of    approximately    52,570   sq.   ft   of
            manufacturing/assembly  space  which will  include  construction  of
            walls and installation of a dropped ceiling.

      o     Necessary  utility  distributions  to include  electrical hot water,
            compressed air.

      o     Complete  clean up of area to  include  removal  of  excess  utility
            systems.

      o     Refurbishment of floors to include filling of pits and trenches.

      o     Removal of unnecessary  abandoned  production  equipment and support
            structures.

9.    ENVIRONMENTAL CRITERIA

      a.    Is the activity/process DoD or Non-DoD related?  Explain. (10 U.S.C.
            2692) Non-DOD, DOD and other federal agencies

b.    Hazardous Waste Generation

      1.    Will the  activity/process  require the use of  hazardous  materials
            (DoD or Non-DoD)? Yes, non-DOD Federal Agency

            What  type?  Limited  quantities  of  hazardous  materials  will  be
            introduced   related  to  operation  and   maintenance   activities.
            (Solvents,   paints,  pesticides,  fuel,  lubricating  oils,  engine
            coolants, welding gases, etc)

            Quantities?  Projected  storage?  (40 CFR 260-272,  10 U.S.C.  2692)
            Isopropyl  alcohol-<20  gallons,  solvent based paints-<50  gallons,
            welding gear-<10 cylinders
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

      2.    If Non-DoD use, in  accordance  with 10 U.S.C.  2692 (b-8)  (Section
            2843-Exception  to the  prohibition  on the storage and  disposal of
            non-defense  toxic  and  hazardous  materials),  has  approval  been
            obtained from the Secretary of the Army? No,  materials used will be
            in small quantities and will be consumed.

            If approval from the Secretary of the Army has not been granted,  an
            exception  must be obtained for storage and disposal of  non-defense
            toxic and hazardous  materials on military  installations.  Will the
            materials  brought onto the installation be consumed or incorporated
            into an approved process? (10 U.S.C. 2692) Yes, will be consumed.

      3.    Will the activity/process generate hazardous waste? If any hazardous
            waste is generated  it would  probably be as a result of listed pent
            solvents removed from a parts washer.

            If yes, what type/waste  stream?  Isopropyl  alcohol (spent solvent)
            Quantity? Minimal - <10 gallons/month

            Specific EPA waste codes? D001

            What is the projected rate of Generation per month? (44) CFR 2.6.34)

            Total hazardous waste generation will be <220 lb/mo CESQG -

            Projected generation -- less than 120 gallons annually

      4.    Will the projected  rate of  generation of hazardous  waste cause or
            could it cause the storage of this waste to exceed the  accumulation
            timeframe for on-site storage allowed by 40 CFR 262? Explain. No.

      5.    What will the  method be for proper  disposal  of  hazardous  waste?
            Explain in detail All waste hazardous,  non-hazardous, and universal
            will be disposed of in accordance with state and federal regulations
            at an appropriate facility.

            Does the facility contractor  contemplate using any of the permitted
            hazardous waste Treatment, Storage, Disposal Facilities (TSDF) owned
            by the Army? Explain in detail. No.

            If the hazardous waste is to be disposed of off-site, please provide
            the name of permitted TSDF and their EPA  identification  number(s).
            (40 CFR  262.12,  264)  Because  of the  minimal  volumes  of wastes
            involved, Ionatron will use a local waste broker.
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

      6.    Does the  activity/process  involve bringing hazardous waste on-site
            for use, treatment, storage, or disposal? Explain in detail. (40 CPR
            264,265) No

      7.    Will  demilitarization  by thermal  treatment of  ammunition be done
            on-site? Is the material related to DoD ammunition items? No

            What type of  material/hazardous  waste will be brought on-site?  No
            hazardous waste will be brought on site.

            Is  the  facility  contractor  willing  to  obtain  the  appropriate
            hazardous  waste TSDF  permit  for their  specific  operation(s)  if
            denied the use of any owned permitted TSDF facilities? N/A

            What facilities will be used? N/A

            What will be the duration of use? N/A

            How  will  the  ash/residue  from the  demilitarization  process  be
            handled/disposed of? N/A

            Is a similar demilitarization operation currently being performed at
            your facility? (40 CFR. 260-265, 10 U.S.C. 2692) N/A

      8.    Are  proposed  activities  & processes  stipulated  in the  existing
            current PCRA permit?  No RCRA permit. A new EPA ID Generator ID will
            be obtained for Ionatron operations.

      9.    Will  the  proposed  activities/processes  require  the  use  of the
            on-post sanitary landfill? MSAAP does not have an active landfill.

            How will the disposal of solid waste be handled and by whom? (40 CFR
            258).  Solid waste  designated for disposal will be disposed of at a
            commercial offsite landfill.

      10.   The  facilities  use/coordination  contractor  may be  contractually
            bound to reimburse the  Government  for fines and penalties  paid by
            the Government due to violation(s) of environmental laws/regulations
            caused  by  your  operations.  Is  the  facilities  use/coordination
            contractor  willing to accept this liability?  MTI will abide by the
            contractual requirements of our Army agreement.

c.    Environmental Baseline Study (EBS)
<PAGE>

      1.    Has an Environmental  Baseline Study (BBS) been performed?  Yes. See
            attached.

d.    Permits:

      1.    What type of Federal,  State,  or Local  permits is required for the
            activity/process? None

      2.    Is the  proposed  activity/process  currently  identified  under  an
            approved/current operation permit? Explain in detail. No

      3.    Will the existing permit be used in the event the waste stream is in
            conjunction  with permit  restrictions?  Explain.  (CWA,  CAA, RCRA,
            etc.) No

      4.    What are the expected air emissions from projected operations?  Will
            a permit to operate a new stationary source be required? None

            Will the  projected  activities  contribute  to an  increase  in the
            facility's overall VOC

                           emissions? Explain. (42 U.S.C. 7401-7671) None

      5.    Is your facility  located in a National Ambient Air Quality Standard
            (NAAQS) non-attainment area? MSAAP is located in an attainment area.

      6.    What arc the expected wastewater effluents? Does the existing permit
            require  modifications?  Explain.  (40 CFR 122.1) No Domestic sewage
            goes to the on-site NPDES permitted treatment plant.

      7.    Will  the  facility  contractor  be  willing  to  obtain  their  own
            operating permit for identified operations and designate yourself as
            the "Operator" of the facility(ies)?  Explain. (CWA, CM, RCRA, etc.)
            MTI will abide by the contract's requirements of our Army agreement.

      8.    In the event a Notice of Violation (NOV) is issued to the Government
            as a  result  of  the  facility  contractor's  operations  exceeding
            any/all  permit  limitations,  will you reimburse the Government for
            any fines/fees  incurred  relating to the NOV(s)?  MTI will abide by
            the contractual requirements of our Army agreement.

e.    Ozone Depletion Potential

      1.    Will the activity/process require the use of Class 1 Ozone Depleting
            Substances? Explain. (40 CFR 82) No
<PAGE>
                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

f.    National Environmental Policy Act

      1.    Is the  facility  contractor  willing to abide by the  environmental
            documentation  requirements as stipulated by NEPA in accordance with
            Army Regulation (AR) 200-2? (42 U.S.C. 4321) Yes.

      2.    Has  the   activity/process   previously   been   conducted  at  the
            installation?  Explain.  (42 U.S.C.  4321) Yes, assembly  activities
            have occurred at MSAAP.

      3.    Is  there  approved/NEPA   documentation   on-site  that  adequately
            discusses the proposed  activity/process?  Explain. (42 U.S.C. 4321)
            Yes, the original EIS addressing the construction of the MSAAP.

      4.    Will the  activity/process  require  preparation of an Environmental
            Assessment  (EA)?  Environmental  Impact  Statement  (EIS)?  Is  the
            projected use adequately covered by a Categorical  Exclusion (CX) as
            identified  in AR  200-2?  A REC CX will be  generated  to cover the
            construction effort.

g.    Environmental Program

      1.    Will the  facility  contractor  allow  the  ACO/COR  staff  and this
            Headquarters  to  review  any/all  aspects  of  the  subcontractor's
            operations relating to environmental compliance? Yes

      2.    Will the facility contractor be wilting to abide by the requirements
            as stipulated under SARA Title UI, Community Right-to-Know?  (40 CFR
            302, 355, 370) Yes

      3.    Will the facility contractor be willing to abide by the requirements
            as  stipulated  in  Executive  Order 12856  (Right-to-Know  Laws and
            Pollution Prevention Requirements)? Yes

      4.    Will the  proposed  facility  use  utilize  any  current or proposed
            CERCLA  sites/operations?  Explain in detail.  (40 CFR  355.20)  No.
            There are no CERLA sites located at MSAAP' under the control of JMC.

                          ENVIRONMENTAL BASELINE STUDY

1.    PROPOSED ACTION:  Ionatron intends on using the center of 9101 to assemble
      and test proprietary advanced Directed Energy Weapon technology.
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

2.       BASELINE ACTION: A baseline study was conducted for the proposed action
         cited in paragraph 1 above. The baseline consisted of the following:

      a.    A comprehensive record search completed on April 23, 2004 included a
            review of the following areas:

            MSAAP Environmental Impact Statement, dated January 1976

            EPA Draft RCRA Facility Assessment, dated Sept 1993

            NPDES Permit, dated November 2002

            Phase II Environmental Assessment,  Building 9101, dated December 4,
            1998

      b.    The building  under  consideration  was examined on May 29, 2003 and
            evaluated for the intended use by the following means:

            1.    Reviewed aerial photos.

            2.    Visually inspection of the specific arcs.

            3.    Personal   experience  as  an   environmental   engineer  from
                  1980-1990

3.    SUMMARY:  A phase LI  Environmental  Assessment was conducted in 1998 as a
      prerequisite  to The  Boeing  Co.  locating  in  building  9101.  No major
      environmental  hazards were found. Low levels of  Tricidoroethylene  (TCE)
      were found beneath the slab.  Some lead based paint was found to have been
      used in the building.  General petroleum  contamination  consistent with a
      metal working  facility is present.  No PCB transformer oil is believed to
      exist

      Completed by: Wayne Gouguet
      April 23, 2004
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

                   RECORD OF ENVIRONMENTAL CONSIDERATION (REC)

PROJECT TITLE: Ionatron, Bldg. 9101

BRIEF DESCRIPTION:  Ionatron intends on using the center of 9101 to assemble and
test proprietary advanced Directed Energy Weapon technology.

ANTICIPATED DATE AND/OR DURATION OF PROPOSED ACTIONS: Fall construction 2004.

REASON FOR USING RECORD OF ENVIRONMENTAL CONSIDERATION (CHOOSE ONE):

a.    Adequately  covered in an (EA, EIS,  dated January 1976. The EA/EIS may be
      reviewed at the Mississippi Army Ammunition  Plant,  Stennis Space Center,
      Mississippi.

B.    IS CATEGORICALLY EXCLUDED UNDER THE PROVISION OF CX A-7 AR 200-2. APPENDIX
      A (AND NO EXTRAORDINARY CIRCUMSTANCES EXIST AS DEFINED IN PARAGRAPH 4-3).

No significant  construction  efforts other than  modifications  to the existing
structure are foreseen.

//signed//

Wayne Gouguet                                        April 23, 2004

-----------------------                              ----------------------
Mason Technologies Inc.                              Date
Facility Contractor
<PAGE>

                                    IONATRON
                                  BUILDING 9101
                    REQUEST FOR USE OF FACILITIES/ARMS FUNDS
                               MANDATORY CHECKLIST
                                 MISSISSIPPI AAP

                             DEPARTMENT OF THE ARMY

                 HEADQUARTERS, U.S. ARMY JOINT MUNITIONS COMMAND

                              1 ROCK ISLAND ARSENAL

                           ROCK ISLAND, IL 61299-6000

REPLY TO
ATTENTION OF:

ARMS OFFICE                                                         May 10, 2004

SUBJECT: Conceptual Approval - Ionatron Building 9101

Ms. Kim R. Spiers
Vice-President & General Manager
Mason Technologies Incorporated
Building 9100
Stennis Space Center, MS 39529-7099

Dear Ms. Spiers:

      Reference is made to your Conceptual  Approval  request of April 28, 2004,
for Ionatron's use of Building 9101; Re: 04-04-009.

      The Armament Retooling and Manufacturing  Support Team has completed their
review of the  conceptual  proposal  and  hereby  grants  conditional  approval,
pending  receipt of  funding,  for  Ionatron  use of 117,318  square feet in the
center of Building 9101 to assemble the Directed Energy Weapon system.

Additionally, authorization is given for:

o     A five (5) year contract with use of mutual options;

o     Relief of liability from Acts of God in accordance with FAR 52.245-8;

o     Recognition  that in the event  governmental  requirements are implemented
      which impact or affect the plans of Clause A-2 of DAAA09-92-E-0007 as they
      flow down to the above,  that MTI may seek equitable  adjustment  from the
      Government through the facility use contractor and;

o     Recognize  Ionatron  as a 3rd  party  beneficiary  to  clause  H-1  of the
      facility  use  contract  in  relation  to   pre-existing   conditions   at
      Mississippi Army Ammunition Plant.
<PAGE>

The point of contact is the undersigned,  borgesond@us.army.mil  Mr.  Borgeson's
phone number is 309-782-6115.

                                                         Sincerely,

                                                         /s/ Douglas A. Borgeson
                                                         Douglas A. Borgeson
                                                         Contracting Officer
<PAGE>

Bonnie Barnum

From:              Kim Spiers

Sent:              Wednesday, June 16, 2004 10:01 AM
To:                Bonnie Barnum; Kim Spiers
Subject:           FW: IONATRON CONCEPTUAL APPROVAL
Importance:        High

--Original Message----
From:              Kim Spiers
Sent               Monday, May 17, 2004 2:47 PM
To:                `Borgeson, Douglas Mr AFSC; `krspiers@msaap.com'; `Mesa,
                   Susan (Sue) Ms AFSC'; Terry Stevenson (E-mail)';. `JOHN
                   CECCONI (E-mail); `Wayne Gouguet (E-mail 2)'
Cc                 `Brown, Pamela'; `Stieger, Rick Mr AFSC'
Subject:           RE: IONATRON CONCEPTUAL APPROVAL
Importance:        High

Just got a call from Washington as plans have been made to bring  Ionatron's CEO
and Gov.  Barbour  to MS for the  contract  signing  on  Thursday,  May 20.  I'm
inserting  the language  Ionatron has  restated in its  proposal  regarding  the
contract term and renewal  options.  MTI cannot sign up to this language without
the approval as requested in our conceptual  request. I need to let them know by
tomorrow if we will be able to incorporate the Army's full consent.

B.    SUBCONTRACTOR  shall have the right and option to extend the Term from the
      date  upon  which  it  would  otherwise  expire  for  three  (3)  separate
      consecutive renewal periods of five (5) years each (each such period being
      hereinafter  called a "Renewal Period") upon the same terms and conditions
      as are herein set forth  except that fixed  service  fee for each  Renewal
      Period  shall be  promptly  negotiated  in good faith by the  parties.  If
      SUBCONTRACTOR elects to exercise any one or more of said options to renew,
      it shall do so by  giving  notice of such  election  to  Contractor  on or
      before the date that is twelve (12)  months  before the  beginning  of the
      Renewal Period for which the Term is to be renewed by the exercise of such
      option.  If  SUBCONTRACTOR  elects  to  exercise  any  one or more of said
      options to renew, the Term shall be automatically extended for the Renewal
      Period (s) covered by the option or options so exercised.

C.    In the Contract  modification  P00002,  the Army authorized  Contractor to
      enter into tenant use  agreements  not to exceed  twenty-five  (25) years,
      notwithstanding  the fact that this time period may exceed the term of the
      Contract,  and contractually  agreed to require any successor facility use
      contractor to accept the terms and conditions of subcontracts in place and
      in the Army's approval to Request for Consent has authorized Contractor to
      enter into a contract  up to  twenty-five  (25) years with  SUBCONTRACTOR.
      Contractor  agrees to enforce such rights on behalf of  SUBCONTRACTOR,  if
      necessary.

Thank you.
<PAGE>

                             DEPARTMENT OF THE ARMY
                 HEADQUARTERS, U.S. ARMY JOINT MUNITIONS COMMAND
                              1 ROCK ISLAND ARSENAL
                           ROCK ISLAND, IL 61299-6000

REPLY TO
ATTENTION OF:

ARMS OFFICE                                                        June 10, 2004

SUBJECT: Conceptual Approval - Ionatron Building 9101

Ms. Kim R. Spiers
Vice-President & General Manager
Mason Technologies Incorporated

Building 9100

Stennis Space Center, MS 39529-7099

Dear Ms. Spiers:

Reference is made to your  Conceptual  Approval  request of April 28, 2004,  for
Ionatron's use of Building 9101; Re: 04-04-009.

The  Armament  Retooling  and  Manufacturing  Support  (ARMS)  Team has  further
reviewed  the  Ionatron  conceptual  proposal  and finds that the  subcontractor
language you proposed in your e-mail of May 17,  2004,  to Mr.  Borgeson and Ms.
Susan Mesa is acceptable.

Additionally,  the ARMS team  authorizes  Ionatron use of 117,318 square feet in
the center of Building  9101 to assemble  the  Directed  Energy  Weapon  system,
pending receipt of funding in the amount of $2,000,000.00.

The point of contact is the undersigned,  borgesond@us.army.mil  Mr.  Borgeson's
phone number is 309-782-6115.

                                                             Sincerely,

                                                             Douglas A. Borgeson
                                                             Contracting Officer

CF:

AMSFS-CCA-I PCO/Mr. Stieger
MSAAP PCO/SJMMS-CR/Mr. Cecconi
MSAAP/SJMMS-CAP/Mr. Stevenson
<PAGE>

                             Mason Technologies Inc.
                                 Day & Zimmerman
               Building 9100, Stennis Space Center, MS 39529-7099
                                 (228) 689-8000

June 18, 2004                                       IN ANSWER REPLY TO: 04-04-09

THRU:                Administrative Contracting Officer
                     Contract No. DAAA09-92-E-0008
                     Mississippi Army Ammunition Plant
                     Stennis Space Center, MS 39529-7099

ATTENTION:           SJMMS-CR

TO:                  DEPARTMENT OF THE ARMY
                     U.S. Army Joint Munitions Command
                     1 Rock Island Arsenal
                     Rock Island, IL 61299-6000

ATTENTION:           Mr. Doug Borgeson

SUBJECT:             Request for Information for IONATRON Tenant Use Contract

Dear Sir:

During our recent and on-going  negotiations with IONATRON,  the following issue
has been presented by Ionatron regarding use of the MSAAP facilities:

1.    In the event that the Government  terminates  MTI's Facility Use Contract,
      and  provided  that  Ionatron  is not  in  default  of  any of the  terms,
      conditions  or covenants  of its tenant use  contract  with MTI beyond any
      applicable notice and cure periods,  will the Army agree to: (I) recognize
      IONATRON's  tenant use  subcontract  and not disturb its possession of the
      Facilities thereunder?;  (ii) if MTI is replaced with a successor facility
      use  contractor,  cause such facility use contractor to agree to recognize
      IONATRON's  tenant use  subcontract  and not disturb its possession of the
      Facilities  thereunder;  and (iii) if the Army transfers possession of the
      Facilities  covered by MTI's  Facility Use Contract to another  Government
      Agency,  will the Army make its  agreements  under (i) and (ii) binding on
      the  successor  Government  Agency  as a part  of  IONATRON's  tenant  use
      subcontract?

We respectfully  request written response on behalf of Ionatron no later than 25
June 2004 so that we may successfully conclude contract negotiations.
<PAGE>

Should you have any questions please contact the undersigned at (228) 689-8729.

Sincerely,

MASON TECHNOLOGIES INC.

/s/ Kim R. Spiers
Kim R. Spiers
Vice-President & General Manager
<PAGE>

                             DEPARTMENT OF THE ARMY
                 HEADQUARTERS, U.S. ARMY JOINT MUNITIONS COMMAND
                              1 ROCK ISLAND ARSENAL
                           ROCK ISLAND, IL 61299-6000

REPLY TO
ATTENTION OF:

ARMS OFFICE                                                        June 23, 2004

SUBJECT:    Ionatron/Mason   Technologies   Incorporated   (MTI),   Facility-Use
            Agreements, DAAA09-92-E-0007

Ms. Kim R. Spiers
Vice-President & General Manager
Mason Technologies Incorporated
Building 9100
Stennis Space Center, MS 39529-7099

Dear Ms. Spiers:

References:

a.    Facilities Use contract, DAAA09-92-E-0007/P00002, dated 22 August 1995:

b.    Mason Technologies  Incorporated letter of August 12, 2003,  Subject:  Use
      Agreements; and

c.    ARMS Office  letter of 25  September  2003,  SUBJECT:  Mason  Technologies
      Incorporated (MTI), Facility-Use Agreements, DAAA09-92-E-0007; and

d.    Mason  Technologies  Incorporated  letter  of  Jims  18,  2004,  regarding
      information for Ionatron Tenant Use Contract Re: 04-04-009.

Reference  a., page 2 of 4 states:  "Tenant use contract  length  authorization,
termination, and liability under facility use contracts

A.    The government  hereby  authorizes the contractor to enter into tenant use
      contracts under this facility use contract during the term of the facility
      as approved by the  government  for time periods not to exceed twenty five
      years (25) years from the date of the tenant use contract, notwithstanding
      the fact that said time periods may exceed the term of this contract."

The letter in reference b. states; "The terms and conditions of the Facility-Use
contract  provide  that  the  terms  of  subcontracts  will be  included  in any
successor  contractor  (sic)  contract.  In  the  event  there  is no  successor
contract,  the Army  intends  to comply  with the terms  and  conditions  of all
tenant-use agreements for existing subcontractors."
<PAGE>

Further,  it is suggested  that you review the  Facility-Use  contract terms and
conditions of DAAAO9-93-E-0008/P00002, as the narrative on page 2 further spells
out the  condition  by which  any  follow-on  Facility-Use  Contractor  would be
responsible to . (Encl 1)

Additionally,  it is requested  that submit a proposal  for the IONATRON  effort
which is not in excess of $2,000,000.00.

In the event that you  require  further  assistance  the point of contact is Ms.
Susan M. Mesa, 309-782-0321.

                                                         Sincerely,

                                                         /s/ Douglas A. Borgeson
                                                         Douglas A. Borgeson
                                                         Contracting Officer

ENCL
as

CF:
AMSFS-CCA-I PCO/Mr. Stieger
MSAAP PCO/SJMMS-CR/Mr. Cecconi
MSAAP/SJMMS-CAP/Mr. Stevenson
<PAGE>

BASIC AGREEMENT NO. 04T002
IONATRON

EXHIBIT B - TENANT PLANS

The following documents attached hereto constitute the SUBCONTRACTOR's Tenant
Plans as referenced in the Agreement.

EXHIBIT B-I       TENANT - FIRE PROTECTION AND PREVENTION
                  PROGRAM
                  No. GP-1-042-102.10T

EXHIBIT B-2       TENANT - SECURITY PLAN
                  No. PL 04-090-007-T

EXHIBIT B-3       TENANT - ENVIRONMENTAL PLAN
                  No. PL O1-042-003-T

EXHIBIT B-4       TENANT - SAFETY PROGRAM PLAN
                  No. PL 01-042-100-T

EXHIBIT B-5       RESERVED

EXHIBIT B-6       TENANT - PROPERTY CONTROL PLAN
                  No. PL 03-060-100-T

BASIC ORDER AGREEMENT 04T002        EXHIBIT B
<PAGE>

MASON TECHNOLOGIES INC.                                 No.:  GP 01-042-102.10-T
Mississippi Army Ammunition Plant                      Rev.:  Basic
Procedure Type:  Plan                                  Date:  June 28, 2004
Title:   TENANT - FIRE PROTECTION AND                  Area:  Ionatron Inc.
         PREVENTION PROGRAM                    Contract No.:  04T002

--------------------------------------------------------------------------------

                            REVIEWS AND CONCURRENCES

Originator/Environmental, Safety & Health Manager:   illegible         7/2/04
                                                  ------------------------------

Engineering & Facility Maintenance Director:         illegible         7/2/04
                                            ------------------------------------

                                    APPROVALS

Contract Administrator:    illegible        7/2/04
                       ------------------------------

                                                  ------------------------------
                                                            DATA CENTER
                                                             APPROVED
                                                               ISSUE
                                                             Ionatron
                                                               No. 2
                                                              7/2/04
                                                  ------------------------------

NOTE: This procedure is for MTI use only. Copies without the red issue stamp are
      not officially-controlled copies and, therefore, may not contain current
      information.

                                                                               1
<PAGE>

MASON TECHNOLOGIES INC.                                 No.:  GP 01-042-102.10-T
Mississippi Army Ammunition Plant                      Rev.:  Basic
Procedure Type:  Plan                                  Date:  June 28, 2004
Title:   TENANT - FIRE PROTECTION AND                  Area:  Ionatron Inc.
         PREVENTION PROGRAM                    Contract No.:  04T002

--------------------------------------------------------------------------------

PROCEDURE CHANGES/REVISIONS

         Revision      Change     Page(s)                      Total
          Letter        No.       Affected     Authority       Pages
          ------        ---       --------     ---------       -----
       Initial Issue                         June 28, 2004       4

                                                                               2
<PAGE>

MASON TECHNOLOGIES INC.                                 No.:  GP 01-042-102.10-T
Mississippi Army Ammunition Plant                      Rev.:  Basic
Procedure Type:  Plan                                  Date:  June 28, 2004
Title:   TENANT - FIRE PROTECTION AND                  Area:  Ionatron Inc.
         PREVENTION PROGRAM                    Contract No.:  04T002

--------------------------------------------------------------------------------

                                TABLE OF CONTENTS

Topic                                                                       Page

         COVER/TITLE PAGE......................................................1

         PROCEDURE CHANGES/REVISIONS...........................................2

         TABLE OF CONTENTS.....................................................3

1.0      PURPOSE...............................................................4

2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES.................................4

3.0      FACILITY CONTRACTOR RESPONSIBILITIES..................................4

                                                                               3
<PAGE>

MASON TECHNOLOGIES INC.                                 No.:  GP 01-042-102.10-T
Mississippi Army Ammunition Plant                      Rev.:  Basic
Procedure Type:  Plan                                  Date:  June 28, 2004
Title:   TENANT - FIRE PROTECTION AND                  Area:  Ionatron Inc.
         PREVENTION PROGRAM                    Contract No.:  04T002

--------------------------------------------------------------------------------

1.0      PURPOSE

         This plan establishes areas of responsibility and procedures for
         protection of personnel and property from fire and explosion hazards
         within the Tenant/Subcontractors facility and surrounding area
         consistent with sound engineering and economic principles and current
         national standards and codes,

2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES

         The Tenant/Subcontractor shall:

         a.       Maintain a high degree of fire safety by adopting and
                  enforcing sound fire prevention measures;

         b.       Promptly attack fires with available extinguishing devices
                  when the fire is in an incipient state;

         c.       Require the timely evacuation of personnel from a fire area;

         d.       Promptly activate the building fire alarm at the manual pull
                  station;

         e.       Promptly notify the Stennis Space Center fire department
                  (extension 8191) and MTI security personnel by phone to
                  include details concerning type of fire, extent of fire,
                  building number, location in building, hazard to life
                  potential, callers name and phone number from which call is
                  made;

         f.       Prohibit parking in fire lanes;

         g.       Prohibit the blocking of fire exits, aisles and passageways by
                  obstacles that could impede, block or obstruct the orderly
                  exit of personnel from the area;

         h.       Conduct a visual inspection of said facility on a frequent
                  basis to monitor the status of all fire prevention and
                  protection devices, rules and regulations;

         i.       Train all employees in the use of fire extinguishers and alarm
                  devices;

         j.       Conduct annual unannounced fire drills to monitor the
                  preparedness of employees with regard to evacuation
                  procedures.

3.0      FACILITY CONTRACTOR RESPONSIBILITIES

         The Facility Contractor shall insure that the SSC Fire Department will:

         a.       Perform monthly fire inspections, to include portable fire
                  extinguishers;

         b.       Perform periodic tests of alarm and sprinkler systems.

                                                                               4
<PAGE>
MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                            REVIEWS AND CONCURRENCES

Originator/Engineering & Facility Maintenance Director: illegible 7/2/04
                                                       -------------------------

                                    APPROVALS

Contract Administrator: illegible 7/2/04
                        -----------------------

                                                  ------------------------------
                                                            DATA CENTER
                                                             APPROVED
                                                               ISSUE
                                                             Ionatron
                                                               No. 2
                                                              7/2/04
                                                  ------------------------------

NOTE:    This procedure is for MTI use only. Copies without the red issue stamp
         are not officially-controlled copies and, therefore, may not contain
         current information.

<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

PROCEDURES CHANGES/REVISIONS

        Revision         Change         Page(s)                           Total
         Letter            No.          Affected         Authority        Pages
         ------            ---          --------         ---------        -----

     Initial Issue                                     June 28, 2004        7

<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                                TABLE OF CONTENTS

Topic                                                                       Page
-----                                                                       ----

         COVER/TITLE PAGE......................................................1
         PROCEDURE CHANGES/REVISIONS...........................................2
         TABLE OF CONTENTS.....................................................3
         1.0      PURPOSE......................................................4
         2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES........................4
         3.0      FACILITY CONTRACTOR RESPONSIBILITIES.........................7

<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

1.0      PURPOSE

         This plan establishes areas of responsibility and procedures for the
         physical security of government, contractor and tenant/subcontractor
         property in accordance with the terms and conditions of the agreement
         between the Facility contractor and tenant/subcontractor.

2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES

         The Tenant/Subcontractor shall instruct all employees:

         a.       In the security rules and regulations of the Stennis Space
                  Center and Mississippi Army Ammunition Plant sites;

         b.       Not to attempt to enter Restricted, Exclusion or Limited
                  access security areas without proper authorization and to
                  restrict all travel within the Mississippi Army Ammunition
                  Plant to direct routes to and from the employee's work site;

         c.       In the proper method of wearing Security badges and in
                  procedures for lost or forgotten badges;

         d.       In safe motor vehicle operation on site including traffic
                  regulations and penalties;

         e.       To complete DA Form 3626 (private vehicle-registration/driver
                  record) to include proof of liability insurance;

         f.       That random inspections will be conducted on all vehicles and
                  property carried by personnel entering and leaving the site,
                  and shall instruct all employees as to the proper compliance
                  procedures;

         g.       In proper parking Locations and procedures;

         h.       That Government/Facility contractor items will not be
                  authorized for removal at any time;

         i.       That contraband may not be transported into the installation.
                  Employees discovered with firearms or explosives will be
                  immediately relieved of their duties and escorted off site;

         j.       Not to deface, destroy or disturb any notice, sign, fence,
                  building equipment or other item;

         k.       Not to solicit, peddle, canvass or conduct personal business
                  on the site;

         l.       Not to visit other buildings or personnel on the Mississippi
                  Army Ammunition Plant Site unless on authorized business along
                  with the prior approval of the visited company.

<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

         m.       That the maximum number of authorized vehicles permitted for
                  registration is two. All registered decals issued must be
                  returned to MTI upon cessation of use (i.e. termination of
                  employment, sale of vehicle, windshield replacement, etc.)
                  regardless of the condition of the decal.

         n.       Operators and passengers of vehicles are required to wear seat
                  belts and that posted speed limits will be enforced.

         The Tenant/Subcontractor shall:

         a.       Have all visitors comply with standard operating procedures of
                  the SSC/MSAAP sites;

         b.       State where deliveries will be made, where shipments will be
                  Loaded;

         c.       Describe how keys will be controlled;

         d.       Notify the Facility contractor's Security department and the
                  Hancock County Sheriff's department if a situation arises that
                  could develop or lead to a labor disturbance. Civil
                  disturbances will be handled by the Hancock County Sheriff.

         The Tenant/Subcontractor shall comply with the following incident
         reporting procedure:

         Incidents may include any of the following:

         a.       Fire or explosion of any type.
         b.       Theft or loss by employees/visitors; or, break-ins of unknown
                  origin.
         c.       Terrorist activities or acts of work place violence.

         Following immediate action to secure emergency response as outlined
         below, all incidents will be promptly reported to MTI Security (Tel #:
         8824). MTI, in turn, will promptly notify the Army Commander's
         Representative, or an Army staff representative in the CR's absence, as
         necessary.

         It is understood that the security provided by the Contractor does not
         include armed guards and is insufficient to prevent terrorist attacks,
         and under no circumstance shall the Contractor be responsible (whether
         in breach of contract or in negligence) to the SUBCONTRACTOR for such
         attacks or for any harm caused thereby or by acts of war or civil
         insurrection.

                  1.  Fire/Explosion

                      a.  Emergency Response/Notifications:

                          (1)  Automatic Surveillance Fire Alarm System

                               o    NASA Fire Department notified automatically
                                    through the alarm system
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                               o    NASA notifies MTI Security. (Redundancies:
                                    Tenant Notification and MTI Security
                                    monitoring of alarm condition)

                               o    MTI Security response:

                                    >>       Notify MTI Management and Army CR.

                                    >>       Traffic control for NASA Fire
                                             Department.

                                    >>       Notify neighboring facility
                                             occupants.

                          (2)  Manual Alarm, Call to 8191 (NASA Emergency Desk)

                               o    NASA Emergency Desk dispatches NASA Fire
                                    Department and notifies MTI Security.
                                    (Redundancy: Tenant Notification)

                               o    MTI Security response:

                                    >>       Notify MIT Management and Army CR.

                                    >>       Traffic control for NASA Fire
                                             Department.

                                    >>       Notify neighboring facility
                                             occupants.

                          (3)  Manual Alarm, Call to 8824 (MTI Security)

                               o    MTI Security Responsibilities:

                                    >>       NASA Fire Department of Fire
                                             Emergency

                                    >>       Notify MTI Management and Army CR.

                                    >>       Traffic control for NASA Fire
                                             Department

                                    >>       Notify neighboring facility
                                             occupants.

                  2.  Theft

                      a.       Emergency Response/Notifications:

                               Manual Telephone Alarm indicating
                               incident/break-in in progress:

                               o    Individual making the discovery will notify
                                    MTI Security at 8824 and Hancock County
                                    Sheriff for immediate response

                               o    MTI Security will:

                                    >>       Notify MTI Management and Army CR.

                                    >>       Provide traffic control/assistance
                                             to Hancock County Sheriff

                                    >>       Notify neighboring facility
                                             occupants.

                  3.  Terrorist Activities/Work Place Violence

                      a.       Emergency Response/Notification:

<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SECURITY PLAN                             Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                               Manual Telephone Alarm indicating violent
                               emergency in progress.

                               o    Individual making the discovery will notify
                                    MTI Security at 8824 and Hancock County
                                    Sheriff for immediate armed response.

                               o    MTI Security will:

                                    >>       Notify MTI Management and Army CR

                                    >>       Provide traffic control/assistance
                                             to Hancock County Sheriff.

                                    >>       Notify neighboring facility
                                             occupants.

3.0      FACILITY CONTRACTOR RESPONSIBILITIES

         The Facility Contractor shall:

         a.       Upon tenant occupancy, brief the tenant in security rules and
                  regulations of the Stennis Space Center and Mississippi Army
                  Ammunition Plant sites;

         b.       Randomly inspect all vehicles and the property being carried
                  by personnel entering and exiting the plant. Inspections will
                  include examination of the interior of the vehicle, all
                  compartments such as glove boxes, trunks and engine areas, and
                  examination of lunch boxes and other containers located within
                  the vehicle or being carried by the person.

         c.       Control access to the facility by issuance of identification
                  badges to be worn by all personnel and registered decals to be
                  attached to vehicles of personnel. Tenant/subcontractors will
                  be badged with the Mississippi Army Ammunition Plant badge to
                  be separately identified by a yellow background. The charge
                  for replacement, lost or unreturned badges is $50 per badge.
                  The charge for an unreturned decal is $50 per decal.
                  Additionally, for badges and/or decals not returned to MTI,
                  written notification of badges and/or decals to be removed
                  from MTI's records is required along with acknowledgement of
                  charges to be billed.

         d.       Maintain identification of motor vehicles owned by persons
                  employed on or who frequently visit the installation. The
                  following must be complied with by the registrant at the time
                  of registration: evidence of current registration (tag),
                  possession of a valid State driver's licensee, certification
                  to the continuing possession of motor vehicle liability as
                  required by the State, and evidence of satisfactory completion
                  of a safety and mechanical inspection by the state or
                  jurisdiction.

<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - ENVIRONMENTAL PLAN                        Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                            REVIEWS AND CONCURRENCES

Originator/Environmental, Safety & Health Manager: illegible 6/30/04 illegible
                                                  ------------------------------
7/2/04
---------

Engineering & Facility Maintenance Director: illegible 7/2/04
                                            ------------------------------------

                                    APPROVALS

Contract Administrator: illegible 7/2/04
                       ------------------

                                                  ------------------------------
                                                            DATA CENTER
                                                             APPROVED
                                                               ISSUE
                                                             Ionatron
                                                               No. 2
                                                              7/2/04
                                                  ------------------------------

NOTE: This procedure is for MTI use only. Copies without the red issue stamp are
      not officially-controlled copies and, therefore, may not contain current
      information.

                                                                               1
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - ENVIRONMENTAL PLAN                        Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

PROCEDURES CHANGES/REVISIONS

        Revision       Change         Page(s)                          Total
         Letter          No.          Affected          Authority      Pages
         ------          ---          --------          ---------      -----

     Initial Issue                                    June 28, 2004      6

                                                                               2
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - ENVIRONMENTAL PLAN                        Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                                TABLE OF CONTENTS

Topic                                                                       Page
                                                                            ----

    COVER/TITLE PAGE...........................................................1
    PROCEDURE CHANGES/REVISIONS................................................2
    TABLE OF CONTENTS..........................................................3
    1.0      PURPOSE...........................................................4
    2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES.............................4
    3.0      FACILITY CONTRACTOR RESPONSIBILITIES..............................5

                                                                               3
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - ENVIRONMENTAL PLAN                        Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

1.0      PURPOSE

         This plan establishes guidelines by which the tenant/subcontractor will
         comply with applicable State, Federal and Army environmental
         regulations to protect the environment from the effects of discharges,
         emissions and spills from activities at the MSAAP.

2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES

         The Tenant/Subcontractor shall:

         a.       Maintain a high degree of environmental awareness.

         b.       Designate a point of contact to interface with MTI
                  Environmental, Safety & Health Manager for addressing
                  environmental compliance.

         c.       Ensure waste materials generated are handled and disposed of
                  properly in accordance with applicable Federal, State and Army
                  regulations.

         d.       Be responsible for obtaining all permits/notifications which
                  are tenant specific to include Resource, Conservation and
                  Recovery Act (RCRA) and Air Permitting.

         e.       Provide copies of permits, notification and routine reports
                  such as SARA Title III, SARA Schedule R and Annual Hazardous
                  Waste Reports to MTI.

         f.       Properly maintain points of hazardous waste accumulation.

         g.       Prevent the release of contaminates to the surrounding
                  environment.

         h.       Perform the appropriate Federal and State environmental
                  reporting.

         i.       Provide training through classroom and/or on the job training
                  to adequately train personnel to spill response, hazardous
                  waste container control, general environmental understanding,
                  and housekeeping.

         j.       Maintain management control over new chemicals introduced on
                  site to include MSDS and a description developed by the
                  subcontractor/tenant of specific uses at the facility and
                  proposed storage locations. Acquire approval from MTI for all
                  chemicals, requiring an MSDS, prior to bringing them on site.
                  Approval may take up to 30 days. Approval is required before
                  chemicals are brought on site.

         k.       Maintain controls to contain aqueous materials such as
                  overflow alarms, management practices, etc.

         l.       Restrict introduction of non-domestic waste into sanitary
                  system.

         m.       Participate in recycling programs where feasible.

                                                                               4
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - ENVIRONMENTAL PLAN                        Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

         n.       Immediately notify Mason Technologies Inc. of all
                  spills/incidents on the facilities.

         o.       Report spills to regulatory agencies.

         p.       Maintain compliance with all Federal, State and Army
                  Environmental Regulations.

3.0      FACILITY CONTRACTOR RESPONSIBILITIES

         The Facility Contractor shall:

         a.       Review, through an audit program, that all activities
                  conducted at MSAAP are in compliance with applicable Federal,
                  State, Local and US Army Environmental Regulations.

                                      NOTE

                           Neither MTI's review and approval of tenant
                           operations nor inspections, audits, observation and
                           reports by MTI on tenant operation shall in any way
                           relieve the tenant of the full responsibility for
                           operating in compliance with all federal, state,
                           local and Army rules and regulations..

         b.       Have the Environmental, Safety & Health Manager audit the
                  exterior of the building quarterly and the interior
                  bi-annually.

         c.       In writing, report noted deficiencies to subcontractor/tenant
                  for correction.

         d.       Maintain all common permitting requirements such as NPDES
                  surface and waste water treatment and drinking water.

         e.       Maintain responsibility for all regulatory reporting and
                  sampling of said common permitting.

         f.       Maintain permits for Army sponsored activities.

         g.       Be responsible for responding to spill situations exterior to
                  subcontractor/tenant buildings.

         h.       Have the Environmental, Safety & Health Manager represent the
                  tenant/subcontractor at the Environmental Workgroup to act on
                  environmental issues covered in applicable regulations and
                  permits.

                                                                               5
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SAFETY PROGRAM PLAN                       Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                            REVIEWS AND CONCURRENCES

Originator/Environmental, Safety & Health Manager: illegible 7/2/04
                                                  ------------------------------

Engineering & Facility Maintenance Director: illegible 7/2/04
                                             -----------------------------------

                                    APPROVALS

Contract Administrator: illegible
                       -------------

                                                  ------------------------------
                                                            DATA CENTER
                                                             APPROVED
                                                               ISSUE
                                                             Ionatron
                                                               No. 2
                                                              7/2/04
                                                  ------------------------------

NOTE:    This procedure is for MTI use only. Copies without the red issue stamp
         are not officially-controlled copies and, therefore, may not contain
         current information.

                                                                               1
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SAFETY PROGRAM PLAN                       Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

PROCEDURES CHANGES/REVISIONS

        Revision       Change         Page(s)                              Total
         Letter          No.          Affected            Authority        Pages
         ------          ---          --------            ---------        -----

      Initial Issue                                     June 28, 2004        5

                                                                               2
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SAFETY PROGRAM PLAN                       Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                                TABLE OF CONTENTS

Topic                                                                       Page
-----                                                                       ----

         COVER/TITLE PAGE......................................................1
         PROCEDURE CHANGES/REVISIONS...........................................2
         TABLE OF CONTENTS.....................................................3
         1.0      PURPOSE......................................................4
         2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES........................4
         3.0      FACILITY CONTRACTOR RESPONSIBILITIES.........................5

                                                                               3
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SAFETY PROGRAM PLAN                       Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

1.0      PURPOSE

         This plan establishes areas of responsibility and procedures for
         implementing a safety program to provide a safe and healthful
         workplace, free from recognized hazards in accordance with federal,
         state and Mississippi Army Ammunition Plant laws, rules and regulations
         to include OSHA standards for general industry, 29CFR1910.

2.0      TENANT/SUBCONTRACTOR RESPONSIBILITIES

         The Tenant/Subcontractor shall:

         a.       Survey all work areas and operations on a frequent basis to
                  determine potentially hazardous work elements or operational
                  functions;

         b.       Train employees in the proper use of equipment and devices;

         c.       Provide proper protective clothing and equipment when
                  appropriate;

         d.       Investigate all work related injuries;

         e.       Insure proper tools and equipment are maintained and used in
                  the proper manner;

         f.       Require employees to wear, when appropriate, protective eye
                  wear with side shields, protective steel toe shoes, body
                  harness with lanyard when working on platforms above ground
                  level, and hard hats when working below areas with overhead
                  operations in progress;

         g.       Make available to employees, when appropriate, ear plugs, dust
                  masks, hard hats, back support devices, heavy duty gloves,
                  rubber gloves, wrist supports, fire retardant aprons or
                  coveralls, ear muff hearing protectors, and air purifying
                  respirator masks;

         h.       Provide first aid items to include first aid kits, stretcher,
                  blankets, anti-infection gloves, eye wash stations, eye glass
                  cleaning stations and emergency shower;

                                                                               4
<PAGE>

MASON TECHNOLOGIES INC                                     No.:  PL 01-042-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type: Plan                                      Date:  June 28, 2004
Title: TENANT - SAFETY PROGRAM PLAN                       Area:  Ionatron Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

         i.       Provide for employee safety courses to maintain a high level
                  of awareness;

         j.       Require use of backup alarms for forklifts and other vehicles
                  and use of horns when visibility is less, than 100%;

         k.       Provide access to and require a MSDS sheet on all materials;

         l.       Require compliance with the safety program as a condition of
                  employment.

3.0      FACILITY CONTRACTOR RESPONSIBILITIES

         The Facility Contractor shall:

         a.       Upon tenant occupancy, brief the tenant in the safety rules
                  and regulations of the Mississippi Army Ammunition Plant;

         b.       As mutually agreed with the tenant, coordinate annual reviews
                  of the safety program;

                                      NOTE

                           Neither MTI's review and approval of said tenant plan
                           nor inspections, audits, observations and reports by
                           Mason Technologies Inc. or tenant operations shall in
                           any way relieve the tenant of the full responsibility
                           for maintaining a safe workplace in compliance with
                           all federal, state, local and plant rules and
                           regulations.

         c.       Upon tenants request and proper completion of Form ENG-43,
                  Tenant/Subcontractor Work Request Form, provide additional
                  specific safety services, not included in the fixed services,
                  for a fee.

                                                                               5
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                            REVIEWS AND CONCURRENCES

Originator/Contract Administrator: illegible 6/30/04
                                  -------------------

                                    APPROVALS

Contract Administrator: illegible 6/30/04
                       -------------------

                                                  ------------------------------
                                                            DATA CENTER
                                                             APPROVED
                                                               ISSUE
                                                             Ionatron
                                                               No. 2
                                                              7/2/04
                                                  ------------------------------

NOTE:    This procedure is for MTI use only. Copies without the red issue stamp
         are not officially-controlled copies and, therefore, may not contain
         current information.

                                                                               1
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

PROCEDURE CHANGES/REVISIONS

         Revision         Change        Page(s)                        Total
          Letter           No.          Affected     Authority         Pages
          ------           ---          --------     ---------         -----
      Initial Issue                                 June 28, 2004       10

                                                                               2

<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                                TABLE OF CONTENTS

Topic                                                                      Page
-----                                                                      ----

         COVER/TITLE PAGE......................................................1

         PROCEDURE CHANGES/REVISIONS...........................................2

         TABLE OF CONTENTS.....................................................3

1.0  PURPOSE...................................................................5

2.0  SCOPE/APPLICABILITY.......................................................5

3.0  GENERAL...................................................................5

4.0  RESPONSiBILITIES..........................................................5

5.0  PROCEDURES/INSTRUCTIONS...................................................6

   5.1.  Property Management...................................................6

   5.2.  Acquisition...........................................................7

   5.3.  Receiving.............................................................7

   5.4.  Identification........................................................7

   5.5.  Records...............................................................7

   5.6.  Movement..............................................................8

   5.7.  Storage...............................................................8

   5.8.  Physical Inventories..................................................9

   5.9.  Reports...............................................................9

   5.10.  Consumption..........................................................9

   5.11.  Utilization..........................................................9

   5.12.  Maintenance..........................................................9

   5.13.  Subcontractor Control...............................................10

                                                                               3
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

   5.14.  Disposition.........................................................10

6.0  REFERENCES...............................................................10

                                                                               4
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

1.0      PURPOSE

         This plan establishes guidelines and procedures for control of
         Government Property loaned to tenants in conjunction with the Facility
         Use Contract at the Mississippi Army Ammunition Plant.

2.0      SCOPE/APPLICABILITY

         The contents of this plan are applicable to all tenants under contract
         to Mason Technologies Inc. in possession of LOANED Government Property
         under the provisions of the facility Use Contract.

3.0      GENERAL

         The objectives of this plan are:

         o        To provide specific instructions to tenants under contract to
                  MTI of their requirements and responsibilities to MTI for
                  Government Property in their possession.

         o        To designate responsibilities within the MTI organization for
                  administration and control of Government Property.

         o        To provide for MTI and government surveillance requirements
                  relative to the terms of the Facility Use Contract.

         o        A briefing will be held by MTI following the contractual
                  agreement between MTI and the tenant to explain and/or clarify
                  tenant obligations cited in this plan.

4.0      RESPONSIBILITIES

         It is the responsibility of the Contract Administrator, under the
         supervision of the Vice-President & General Manager to control the
         Record Accountability Government Property in the possession of tenants.

         It is the responsibility of the Work Control Manager to issue Work.
         Order instructions to the tenant in accordance with the MTI Maintenance
         Plan. The Work Control Manager will issue specific Maintenance Plans
         relative to each tenant under contract.

         It is the responsibility of the Engineering & Facility Maintenance
         Director to provide maintenance services on Government Property in
         accordance with approved work orders if so specified in the terms and
         conditions of the contract between MTI and the tenant. The Engineering
         & Facility Maintenance Director is responsible for performance of
         required walk through facility inspections to include a review of the
         condition of equipment and facilities.

                                                                               5

<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

         It is the responsibility of the Logistic Manager to provide a list of
         loaned Government Property annually to tenants for the purpose of
         conducting wall-to-wall inventories. The Logistic Manager shall post
         the results of the annual inventories to the accountable record of
         Government Property.

         It is the responsibility of the Tenant, under the terms and conditions
         of their contract to MTI to protect, preserve, maintain and account for
         all Government Property loaned to them. Further, the tenant shall
         comply with all aspects of this plan and subsequent changes thereto
         issued by Mason Technologies Inc.

5.0      PROCEDURES/INSTRUCTIONS

         MTI will administer and control Government owned property in accordance
         with the Government approved Property System. The procedural
         requirements contained herein are in accordance with the Federal
         Acquisition Regulation (FAR), Subpart 45, and the terms and conditions
         specified in the Facility Use Contract for the Mississippi Army
         Ammunition Plant.

5.1.     Property Management

         a.       It is the responsibility of the tenant to maintain and control
                  all Government owned property in their possession. The tenant
                  shall promptly report all Government property determined to be
                  Lost, Damaged, or Destroyed to the Logistic Manager. The
                  Contract Administrator may notify the Government and initiate
                  an investigation (via military police report) if relief of
                  responsibility/accountability is sought. If relief is not
                  sought, a suggested method of retribution will be offered.

         b.       Under the terms and conditions of the Facility Use Contract,
                  MTI may be financially liable for all Government Property in
                  their possession, including Government Property loaned to
                  tenants. MTI requires any Government owned property that is
                  lost, damaged or destroyed to be replaced in kind if relief of
                  responsibility/accountability is not sought. Title to
                  Government property replaced by the tenant will be vested in
                  the Government. If mutually agreed between MTI and the tenant,
                  the tenant may elect to reimburse MTI for such losses.
                  Reimbursement for lost, damaged or destroyed property will
                  normally be a Fair Market Value.

         c.       The Contract Administrator will process all reports of lost,
                  damaged or destroyed Government property in accordance with
                  the MTI Government approved Property Plan and OP 03-060-103,
                  Section 15.

         d.       Government property furnished tenants on loan will be assigned
                  a condition code. The tenant is responsible for reviewing this
                  code and documenting deficiencies not otherwise noted or
                  detected. It is the responsibility of the tenant to return
                  loaned Government property to MTI after completion of use or
                  end of contract in the same condition as loaned less fair wear
                  and rear encountered during the period of the loan.

                                                                               6
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

5.2.     Acquisition

         Proposals or requests for loan of government owned equipment shall be
         submitted to the MTI Logistic Manager for processing to the Government.

5.3.     Receiving

         Not Applicable

5.4.     Identification

         a.       The tenant shall maintain adequate equipment identification of
                  loaned Government property in their possession. Items of
                  Government property initially furnished to the tenant will be
                  properly identified and numbered by the MTI Logistic Manager.
                  Maintenance of the numbered identification process is the
                  responsibility of the tenant. Questions regarding property
                  number assignments may be directed to the MTI Logistic
                  Manager.

         b.       The tenant shall identify all tenant owned property in a
                  manner such that co-mingling does not pose problems during
                  audits of property, and precludes accidental unauthorized
                  removal of Government property from the Mississippi Army
                  Ammunition Plant.

         c.       The MTI Logistic Manager will assure that identification of
                  Government owned property loaned to tenants is in accordance
                  with the MTI Government approved Property Plan and OP
                  03-060-103, Section 12.

         d.       The MTI Logistic Manager will visually sample the
                  identification of Government property as part of the annual
                  Inventory Surveillance of loaned Government property in the
                  possession of tenants.

5.5.     Records

         a.       MTI will establish and maintain adequate control records for
                  all Government property loaned to tenants under the provisions
                  of the Facility Use Contract at the Mississippi Army
                  Ammunition Plant.

         b.       All records of Government owned property, including Government
                  owned property loaned and in the possession of tenants will be
                  in accordance with the MTI/Government approved Property Plan
                  PL 03-060-100.

         c.       A separate listing of Government owned property loaned and in
                  the possession of tenants, shall be maintained by the MTI
                  Logistic Manager. These lists will be utilized in performance
                  of the following functions:

                                                                               7
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

                  1.       Initialization and control of tenant inventory of
                           loaned Government owned property.

                  2.       Be provided to the Government Property Administrator
                           upon request to facilitate surveillance and audit
                           activities.

                  3.       Become a source document when applicable for updates
                           (additions, deletions and status changes) to the
                           official MTI accountable records of Government
                           property.

                  4.       Be included as part of MTI's contract with the
                           tenant.

                  5.       Copies shall be furnished to tenants at the time of
                           contract signing.

                  6.       MTI's record system will be capable of locating any
                           item of Government property loaned to a tenant within
                           a reasonable period of time.

                  7.       The tenant will assure that Government property
                           loaned to them can be located in their facility
                           within a reasonable period of time.

5.6.     Movement

         a.       Government owned property in the possession of tenants shall
                  not be moved from the building locations the equipment is
                  assigned without prior approval from the MTI Logistic Manager.

         b.       Movement of loaned equipment to and from the tenant facility
                  will be in accordance with the MTI/Government approved
                  Property Plan and OP 03-060-103, Section 4.

         c.       Property Pass authority will not be granted a tenant. Tenants
                  requiring removal of government property for performance of
                  their work will obtain property passes from MTI Authorized
                  Personnel.

         d.       Tenants will assure that proper care and packaging will be
                  employed if there is internal movement of loaned Government
                  property within their facility.

5.7.     Storage

         a.       The tenant shall assure proper care and/or preservation of
                  loaned Government Property stored within the confines of their
                  facility.

         b.       Tenants shall assure that acceptable housekeeping practices
                  are employed within their facility.

                                                                               8
<PAGE>

MASON TECHNOLOGIES INC.                                    No.:  PL 03-060-100-T
Mississippi Army Ammunition Plant                         Rev.:  Basic
Procedure Type:  Plan                                     Date:  June 28, 2004
Title:  TENANT - PROPERTY CONTROL PLAN                  Tenant:  Ionatron, Inc.
                                                  Contract No.:  04T002
--------------------------------------------------------------------------------

5.8.     Physical Inventories

         a.       Tenants shall perform an annual wall-to-wall physical
                  inventory of loaned Government property in their possession.
                  All Government property inventoried must be visually sighted
                  by the tenant. The results of the inventory shall be reported
                  to the MII Logistic Manager by the specified due date
                  requested. Any Government owned property found missing during
                  the annual inventory shall be promptly reported to the MTI
                  Logistic Manager for LD&D actions.

         b.       The MTI Logistic Manager shall submit to the tenant a current
                  listing of Government owned property approximately 45 days
                  prior to the specified due date.

         c.       The MTI Logistic Manager will promptly post updated
                  information, including dates of inventory to the MTI
                  accountable record of Government Property.

         d.       Records of tenant inventories will be maintained by the MTI
                  Logistic Manager in accordance with the MTI/Government
                  approved Property Plan and OP 03-060-103, Section 7.

         e.       The MTI Logistic Manager will promptly report any LD&D actions
                  to the Government PA as a result of tenant inventories.

5.9.     Reports

         Government reporting requirements for tenant activities will be in
         accordance with the Facility Use Contract.

5.10.    Consumptions

         Not Applicable

5.11.    Utilizations

         a.       The tenant shall be required to report utilization data on
                  Mobile equipment in accordance with the Facility Use Contract
                  and the MTI/Government approved Property Plan PL 03-060-100.

         b.       The tenant will not be required to report utilization data on
                  other equipment in their possession.

5.12.    Maintenance

         The tenant is required to assure maintenance is performed in accordance
         with the individual tenant Maintenance Plan. The individual plans, if
         required by contract, shall be in accordance with the Facility Use
         contract and the MTI/Government approved Maintenance Plan.

                                                                               9
<PAGE>

5.13.    Subcontractor Control

         Not Applicable

5.14.    Disposition

         a.       The tenant under no circumstances other than delivery to the
                  MTI Logistic Manager shall dispose of any loaned government
                  property.

         b.       The MTI Logistic Manager shall be required to dispose of all
                  Government owned property in accordance with the MTI
                  Government approved Property Plan and GP 03-060-103, Section
                  30.

6.0      REFERENCES

         FAR, Subpart 45

         DOD FAR Supplement Part 245

         PL 04-401-001, Maintenance Plan

         PL 03-060-100, Property Plan

         GP 03-060-103, Section 4 - Storage and Movement

         GP 03-060-103, Section 7 - Types of Physical Inventories

         GP 03-060-103, Section 12 - Marking and Identification of Property

         GP 03-060-103, Section 15 - Lost, Damaged & Destroyed Property

         GP 03-060-103, Section 30 - Disposition of Property

                                                                              10
<PAGE>

BASIC AGREEMENT NO. 04T002
IONATRON

EXHIBIT C - AMCCOMR 702-9

The following document is attached hereto as EXHIBIT C:

AMCCOM Regulation No. 702-9 - AMMUNITION SURVEILLANCE PROCEDURES FOR AMCCOM
INSTALLATIONS

BASIC ORDER AGREEMENT 04T002        EXHIBIT C

<PAGE>

                                                                  *AMCCOMR 702-9

                             DEPARTMENT OF THE ARMY
        HEADQUARTERS, U.S. ARMY ARMAMENT, MUNITIONS AND CHEMICAL COMMAND
                        Rock Island, Illinois 61299-6000

AMCCOM REGULATION
No.            702-9                                                  6 May 1987

                                Product Assurance

           AMMUNITION SURVEILLANCE PROCEDURES FOR AMCCOM INSTALLATIONS

Supplementation of this regulation is permitted. One copy will be furnished to
Commander, AMCCOM, ATTN: AMSMC--QAD, Rock Island, IL 61299-6000.

                                                                       Paragraph
Purpose........................................................................1
Applicability..................................................................2
Explanation of Terms...........................................................3
Policies.......................................................................4
Responsibilities...............................................................5
Procedures for Inspection of Industrial Materiel...............................6
Instructions for Specific Items................................................7
Evaluating Contractor Performance..............................................8
Inspection Schedules and Records (GOCO Organizations Only).....................9
Surveillance Records and Reports..............................................10
Distribution of Depot Surveillance Record (DSR) and Ammo Data Cards...........11

APPENDIXES

A.       Ammunition Surveillance Functional Responsibilities and Staffing
B.       Geographical Grouping of Ammunition Plants

1.       Purpose.

         a. This regulation, together with SB 742-1 and DARCOM-R 702-20,
prescribes policies, responsibilities, and procedures for conducting
surveillance of field service ammunition, explosives, and components at U.S.
Army Armament, Munitions and Chemical Command (AMCCOM) subordinate installations
and activities.

         b. This regulation also provides specific guidance for industrial
stocks reportable by AMCCOMR 740-1 and materiel in the Conventional Ammunition
Working Capital Fund (CAWCF) Account managed in accordance with (IAW) ARRCOMR
700-23, and instructions for management of the Ammunition Surveillance Program.
Additional guidance on unique situations will be provided by AMSMC-QAS.

*This regulation supersedes AMCCOMR 702-9, 16 December 1986

<PAGE>

2.       Applicability.

This regulation applies to:

         a. Headquarters (HQ), AMCCOM, Government-owned, Contractor--operated
(GOCO) and Government -owned, Government-operated (GOGO) Army Ammunition Plants
(AAP); Crane Army Ammunition Activity; U.S. Army Armament Research, Development
and Engineering Center; U.S. Army Chemical Research, Development and Engineering
Center; and AMCCOM arsenals with an ammunition--related mission. Metal parts
manufacturing plants and similar facilities which store no ammunition, except
for small quantities for guard use, are specifically exempted from this
regulation. The parts of this regulation that pertain to evaluating or
facilitating evaluation of contractor performance are not applicable to GOGO
installations, arsenals, or subordinate activities.

         b. Conventional and chemical ammunition (nonlethal), including all
loaded and inert components, propellants, bulk explosives, finished items,
special test/experimental explosive materials, and packing material on hand at
the aforementioned installations. Installations without resident Quality
Assurance Specialists (Ammunition Survei1lance) (QASAS; which store lethal
chemical material will be provided with surveillance support IAW DAR COM-R
702-20.

3.       Explanation of Terms.

         a. Ammunition Surveillance: A variety of functions relating to
ammunition logistics management. included in these functions are: the
inspection, test, and evaluation of ammunition materiel to determine the current
degree of serviceability and rate of deterioration; safety of ammunition
materiel and explosives during storage, handling, demililitarization, and
transportation, including propriety of storage, blocking, bracing, and
suitability of transport equipment; and assurance that ammunition materiel and
explosives supply disciplines are properly exercised.

         b. Industrial Stocks: Components, parts, assemblies, raw materials,
explosives, packaging materials, and any other material on hand at an industrial
type processing complex for the purpose of manufacturing or assembly of another
item.

         c. Special Test Material: Ammunition or explosives dedicated to, or
especially constructed for, purposes of special tests, experiments, malfunction
investigations, or engineering evaluations. Items may be calibration lots of
standard design, uncataloged variations of standard patterns, experimental
designs, of foreign manufacture, or otherwise of unfamiliar configuration.

         d. Field Service Stock: Conventional ammunition, including components,
accepted for troop issue and use that is managed by a National Inventory Control
Point (NICP).

         e. CAWCF: An account established at selected GOGO and GOCO ammunition
manufacturing facilities for the purpose of accounting for HQ, AMCCOM,
centrally--procured industrial stocks of conventional ammunition components and
for completed items awaiting test or shipment to the field service account or
customer.

         f. Quality Check (applies to Security Assistance Program (SAP)
shipments only): A verification of materiel condition, more severe than normal
inspection, assuring serviceability, appearance, completeness, preservation,
packaging, packing, and marking, grant aid agreements, or other special
requirements, are IAW applicable directives prior to shipment.

                                       2
<PAGE>

         g. (QASAS Home Station: An installation designated by HQ, AMCCOM, as
the duty station for assignment of QASAS. The home station provides QASAS
support for a geographical area.

         h. QASAS: A member of the Department of the Army Career Program,
described by AR 690-950-20.

4.       Policies.

         a. Every AMCCOM subordinate organization with a mission that includes
storage of ammunition and explosives will perform surveillance of ammunition in
storage JAW AR 740-1, SB 742--1, and this regulation. Organizations which do not
have the capability of performing required inspections shall provide, in March,
an annual listing of stocks, by lot number, to Commander, AMCCOM, ATTN;
AMSMC--QAS, Rock Island, 1L 61299-6000, to obtain support.

         b. At GOCO AAPs, functions listed in SB 742-1 and AR 740-1 as QASAS
duties will be conducted by the Surveillance element called for, in the plant
contract and this regulation.

         c. Materiel assigned to NICP accounts will be inspected JAW specific
instructions contained in SB 742-1.

         d. Industrial stocks including CAWCF account materiel will be Inspected
IAW specific instructions contained in paragraphs 6 and 7 of this regulation.

         e. Special test materiel will be inspected for safety in storage as a
minimum. Additional inspection requirements and intervals may be established by
the applicable project manager or the Contracting Officer's Representative (COR)
staff (QASAS).

         f. Deviations from inspections and procedures required by this
regulation must be specifically authorized by the Associate Director of Product
Assurance (AMSMC--QAI), HQ, AMCCOM.

5.       Responsibilities.

         a. The Associate Director of Product Assurance (AMSMC--QAI), HQ,
AMCCOM, will:

                  (1) Provide staff supervision of ammunition surveillance
         programs at AMCCOM subordinate installations/activities.

                  (2) Develop and disseminate surveillance policy and
         procedures.

                  (3) Authorize deviations from this regulation.

                  (4) Audit surveillance programs periodically to assure
         compliance with program instructions and provide a written report to
         the plant commander.

                  (5) Group the AMPs for assignments of QASAS.

         b. Commanders of AMCCOM subordinate installations/activities with
ammunition material in storage will implement the Ammunition Surveillance
Program. When a commander Is not assigned to an AAP or when the COR functions
are assigned to other than the commander, the responsibilities of the commander
apply to the official assigned to COR functions.

                                       3
<PAGE>

         c. Commanders of subordinate GOGO installations/activities will assure
that any portions of the ammunition surveillance program performed by another
activity IAW a host/tenant agreement are appropriately executed.

         d. Commanders of GOCO subordinate installations will:

                  (1) Evaluate the performance of the operating contractor IAW
         paragraph 8.

                  (2) Assure that the contractor provides inspection support and
         facilities to Government inspectors as required. Contractor work
         schedules, inspection records, and lot number listings must be provided
         on a regular basis to ensure effective and efficient evaluation of
         contractor performance.

                  (3) Provide QASAS support to installations within geographical
         areas, (home station commanders only).

                  (4) Forward written notification of contractor discrepancies
         to the contractor for resolution and response.

                  (5) Provide assigned QASAS with direct access to the commander
         on ammunition surveillance and explosive safety matters.

Note: The operating contractors at the GOCO AAPs will perform the surveillance
of stocks in storage to the extent required by the appropriate contract.

         e. QASAS assigned to GOCO installations will:

                  (1) Perform functions identified as Government
         responsibilities and evaluate contractor performance of surveillance
         IAW paragraph 8. QASAS are assigned to an individual plant or to a
         geographic area with responsibility for all plants in that area. See
         appendix B for identity of plants grouped by area.

                  (2) Conduct on-site review of all plants in the area of
         responsibility, normally on a monthly basis. When justified by
         workload, and/or low rate of discrepancies, a written request to reduce
         frequency to quarterly or semiannually may be submitted to AMSMC-QAS.
         AMSCS-QAS will coordinate with the commander of the concerned plant
         before approving any reduction of frequency. In all cases, on-site
         presence of the QASAS is required to ensure requirements of paragraph 8
         are met.

                  (3) Serve as the Government operational focal point on matters
         governed by this regulation. This includes coordination locally and
         with HQ, AMCCOM.

                  (4) Prepare Standing Operating Procedures (SOPs) for
         evaluation of contractor performance of all operations covered by
         paragraph 8. Review contractor's written SOP for operations covered by
         paragraph 10.

                  (5) Conduct special inspections to ascertain true conditions
         when there is reason to suspect that stored components or finished
         items are not assigned proper condition code.

                                       4
<PAGE>

                  (6) Perform SAP quality check inspection for materiel
         suitability, prior to shipment to foreign governments. Quality
         standards, procedures, and reporting requirements for Army SAP
         shipments are in SB 742-2 and AMCCOM Suppl to DARCOM-R 702-3. Where
         feasible and when the supply requirement is known in advance, SAP
         inspections should be performed concurrently with the production
         process to preclude unpack and repack.

                  (7) Additionally, QASAS training and experience permits
         performance of other duties as assigned by the installation commander.
         Such functions may include chemical surety functions or evaluation of
         contractor performance of contractual requirements in areas other than
         ammunition surveillance such as ammunition storage, transportation, and
         explosive safety.

6.       Procedures for Inspecting Industrial Account Materiel (including
         CAWCF).

         a. Inspections of troop issuable ammunition in level A packaging may be
conducted as specified in SB 742-1, unless otherwise directed in paragraph 7.

         b. Components, including inert components and packing materiel will he
subject to initial surveillance inspection at the end of 1 year from the date of
receipt or the date of local manufacture. This inspection will be as defined by
SB 742-1 for initial receipt inspection and will be performed not later than 3
months after the 1-year period. Thereafter, periodic inspections will be
performed every 2 years, except as otherwise directed in paragraph 7.

         c. Serviceable lots will be assigned condition code D when the
appropriate due date for Inspection is exceeded by 3 months, and condition code
D will apply until the required inspection is performed.

         d. Pre--issue inspection will be performed if materiel which has not
been inspected within the specified interval is selected for issue off the
installation or if the inspector determines that additional inspection is
advisable prior to releasing the materiel for shipment. SAP quality checks will
be performed IAW 58 742--2.

         e. When stocks are stored under adverse conditions, the materiel may be
examined on a lot basis more frequently, as determined necessary.

         f. When materiel intended for storage is received from another storage
activity and the UM Form 3022--R (Army Depot Surveillance Record) (DSR) shows
that required inspections/ tests were performed within the specified time
interval, inspection for damage In transit will be performed. If additional
inspection is Indicated, the scope will be as determined necessary by the
inspector in charge.

         g. Sample sizes and acceptance/rejection numbers:

                        SAMPLE SIZE  ACCEPT/REJECT  NUMBERS MAJOR  (DEFECTIVES)
                         SAA OTHER     CRITICAL         AC-RE          MINOR
                                         AC-RE                         AC-RE
OUTER PACK              20      20      0    1          1  2           2    3
INNER PACK              20      20      0    1          1  2           2    3
BELT (SAA)              20              0    1          1  2           2    3
ITEM (OTHER)                    20      0    1          1  2           2    3
ITEM (SAA THRU 30 mm)  300              0    1         14  15         21    22

Note: Inner pack and item samples must be selected from a minimum of 10 outer
packs. Additional outer packs must be inspected at either the inspection or
storage location(s) to make a total sample size of 20.

                                       5
<PAGE>

Note: If rounds are linked, 20 belts should be inspected for defective links and
subjected to a torsion test and a dead weight test as required by SB 742--1.

         h. Inspection samples will be selected on a random basis. Explosive
loaded items and components will normally be removed from storage and
transported to the inspection site. Packs and containers will be carefully
opened and the contents removed and inspected for nonstandard conditions.
Following inspection, the items will be repacked as nearly as possible to
original condition and returned to storage. Inspections at the storage site must
be conducted in compliance with all safety regulations.

         i. All inspections and tests prescribed by this regulation will be
performed using applicable technical data (drawings, specifications, data cards,
etc.) and adhering to explosive safety requirements.

         j. Definition and classification of defects in SB 742-1 will be used.

         k. SOPs will tie prepared for inspections and requirements of this
regulation. SOPs will be reviewed by QASAS and approved by the AAP
commander/CUR.

         l. Components will be inspected for deterioration. However, readily
discernible defects attributed to manufacture, transportation, or handling will
be noted and charged to the lot only when considered to be representative of the
lot. Finished items will be inspected for issue and use characteristics. This
includes the item, packs, and palletization.

         m. DA Form 3022-R will be prepared and kept up-to-date for each lot or
serially numbered explosive item, component, or packing material. See paragraph
10.

         n. The condition codes prescribed by AR 725-50 and implementing
instructions will be used to classify all stocks.

7.       Instructions for Specific items.

         a. Black Powder: Black powder containers which show evidence of
moisture pickup will be removed from the magazine, transported to inspection
site, and opened. Contents will be inspected for evidence of loss of
serviceability through moisture absorption (partial lumping). Any evidence of
moisture absorption will be reported by letter to Commander, AMCCOM, ATTN:
AMSMC-QAS, Rock Island, IL 61299-6000. RCS exempt: AR 335-15, paragraph 5-2c(3).

         b. Initiating Explosives: Initiating explosives are very sensitive to
friction, heat, or impact. Bulk initiating explosives are stored wet. Every
effort shall be made to prevent the liquid from freezing; if frozen, the
explosive materiel shall not be handled. Following inspections shall be
performed on each container and contents, as applicable.

                  (1) Inspection shall be conducted annually (September is
         recommended) prior to onset of cold weather to assure concentrations of
         alcohol will prevent freezing of the alcohol--water solution.
         Hydrometer readings will be taken from each container. The Inspection
         should include visual inspection of all interior packs and components
         (such as sawdust, cloth bags) for defects listed in appropriate
         specification. However, contents (explosive filled bags) will not be
         removed from containers solely for the purpose of inspection. The
         annual inspection may be performed in conjunction with the following
         monthly inspection.

                                       6
<PAGE>

                  (2) Monthly inspection shall be conducted for the following
         defects:

         (a) Containers and covers cracked, allowing leakage or evaporation.

         (b) Gaskets (if present) cracked, broken, or not properly secured to
flange of cover.

         (c) Major rusting or pitting of metal containers.

         (d) Water--alcohol solution not at proper level within container.

Note: Immediate corrective action will be taken on any defects noted.

         c. Bulk Explosives and Oxidizing Materials:

                  (1) High Explosives. Containers of high explosives (TNT,
         tetryl, composition A, A--3, B, and C--3, picric acid, explosive D,
         etc.) will only be opened for inspection of contents during periodic
         inspections when outer packs display signs of unserviceability. Any
         abnormality will be recorded.

                  (2) Oxidizing Materials. Peroxides of barium, strontium, etc.,
         are very hygroscopic and normally the container will not be opened
         until the material is to be used. Moisture releases nascent oxygen from
         these compounds. This and the corrosive hydroxide residue can corrode
         the container, causing contamination of the Contents. The container
         will be inspected to determine serviceability. When defective
         containers are encountered, a request for disposition instructions will
         be submitted to Commander, ATTN: AMSMC-QAS, Rock Island, IL 61299-6000.
         RCS exempt: AR 335-15, paragraph 5--2c(3).

         d. Bulk Propellant and Propellant Charges:

                  (1) These items will be inspected and stability tested IAW SB
         742.1300-94-2, except for special test lots which are exempt from the
         provisions of this subparagraph and are to be treated as specified in f
         below.

                  (2) Propellant reassessment tests will be conducted as
         required by SB 742-1300-94-2 and applicable specifications for bulk
         propellant and component charges. A reassessment is not required for
         separate loading propellant charges or propellant charges assembled to
         complete rounds. The requirement for a propellant lot to be reassessed
         is based upon a time frame specified in the Propellant Acceptance
         Sheet. Propellants which have exceeded the loading authorization date
         will be assigned condition code D; but will not be reassessed until a
         known requirement exists or unless directed by ANCCOM.

                  (3) Stocks of propellant lots: bulk, bulk peck charges and
         increments, and separate loading charges on hand will be reported to
         Commander, AMCCOM, ATTN: AMSMC-QAS, annually, to arrive at HQ, AMCCOM,
         by 15 March. Report data by letter in the following format:

                           (a) DODIC.

                           (b) NSN.

                                       7
<PAGE>

                           (c) Lot number, propellant lot (or propelling charge
                  lot).

                           (d) Lot number, component propellant lot.

                           (e) Condition code.

                           (f) Quantity (pounds, charges, increments, etc.).

                           (g) Owner account.

If machine generated, report may be sent as a letter enclosure. Date submitted
will be used by HQ, AMCCOP4, to determine requirement for stability testing.
RCS: AMC 872, Identification of Special Account Propellant Lots, applies to GOGO
installations. COCO installations will report under Data Item Description
DI-MISC-80193. SB 742-1 applies.

         e. Inspection of Explosive Components: Components for which
specifications require testing or reassessment prior to a specified time of use
(primers, ignition cartridges) and which have exceeded the time frame provided
by the specification will be assigned condition code D. Testing will not be
conducted until a known requirement exists, and as directed by AMCCOM.
Installations performing tests shall report results to AMSMC-QAS on DA Form 984
(Munition Surveillance Report). RCS exempt: AR 335-15, paragraph 5-2c(3).

         f. Items Belonging to Other Agencies: Ammunition or other explosive
items stored for other Government agencies or private contractors are subject,
as a minimum, to a receipt inspection and safety in-storage inspections.
Additional inspection procedures and their frequencies shall be specified in the
appropriate support agreement or memorandum with the owner. This includes, but
is not necessarily limited to, foreign, experimental, and test ammunition and
materiel stored in sites leased to private concerns of Government agencies, as
authorized by DOD Directives 6050.8. Any deficiencies with an explosive hazard
potential shall be reported immediately to AMSMC-SF and AP4SMC-QAS, in addition
to requirements of the appropriate support agreement. RCS exempt: AR 335-15,
paragraph 5-2c(3).

         g. Items Belonging to ThirdParty Contractors: Ammunition and explosive
items stored and transported by third-party contractors will be inspected to
ensure installation safety. Surveillance will include inspection of shipping
operations for safety IAW AMCR 385-100 and inspection of storage sites for
safety in storage. Discrepancies will be locally reported and corrected.

         h. Inspection of Inert Items: As an exception to interval of 2 years
specified by paragraph 6b, inspection may be limited to visual examination of
the outer pack for evidence of moisture or damage when previous inspection(s)
have not detected any deficiencies. The decision to limit inspection to the
outer package must include evaluation of storage conditions. Complete inspection
must be performed at not less than 4 year intervals, using the following
criteria:

                  (1) Each lot of inert components will be visually inspected
         for:

                           (a) Corrosion or rust.

                           (b) Damaged or insufficient plating.

                           (c) Presence of foreign materials (dirt, grease,
                  etc.).

                                       8
<PAGE>

                           (d) Cracks.

                           (e) Dents end distortion.

                  (2) Packing material will be visually inspected for the
         following defects:

                           (a) Improper, insecure, or damaged closure.

                           (b) Rust or corrosion.

                           (c) Wet or mildewed containers.

                           (d) Damage affecting serviceability.

         i. Magazine and Warehouse Inspection: Magazines and other buildings in
which ammunition and components are stored will be given a formal Inspection at
7-month intervals using inspection standards provided by SB 742-1. Inspection
frequency may be increased at the commander's discretion. Outer packs of stored
materiel will be visually inspected for evidence of moisture or damage. When
outer packs show evidence of questionable serviceability of contents, an item
inspection will be performed. Sampling will be IAW paragraph 6.

         j. Inspection of Transportation Equipment: Installation transportation
officers are responsible for shipment of ammunition and explosives and
inspection of transportation equipment IAW established rules and regulations.
Specific guidance is provided by AR 55-333 and Department of Transportation
regulations. QASAS personnel will provide support to the transportation officer
and perform safety monitoring functions prescribed by AR 702-6, AR 702-12, and
AMCR 385-100. At AAPs for which the HQ, AMCCOM, Transportation and Traffic
Management Directorate performs transportation officer's responsibilities, QASAS
personnel will automatically act in the transportation officer's place,
regarding subject inspections.

         k. Inspection of Special Account Materiel: The surveillance program
will include all stocks of ammunition and related materiel in storage. Materiel
in a special account, such us the demilitarization account or property disposal
account, shall be subjected to safety in storage inspections as defined by SB
742-1. A review of account records of such stocks shall be made annually to
ensure specified inspections are made.

         l. Use of Ammunition Cages and Ammunition Peculiar Equipment (APE):
Ammunition gages and equipment specifically designed for use in acceptance
inspection or manufacturing of ammunition items are authorized for use during
normal surveillance inspections. When such equipment is available at AAPs to
perform all required inspections and tests, standard gages and APE are not
mandatory for use.

8.       Evaluating Contractor Performance.

         a. Evaluation of Contractor Surveillance Performance: Ammunition
Surveillance is defined as a variety of functions relating to ammunition
logistics management. Included in these functions are the inspection, test, and
evaluation of ammunition materiel to determine the current degree of
serviceability and rate of deterioration; safety of ammunition materiel and
explosives during storage, handling, and transportation, including propriety of
storage; blocking, bracing, and suitability of transport equipment; and
assurance that ammunition materiel and explosives supply disciplines are
properly exercised.

                                       9
<PAGE>

         b. The QASAS will provide an evaluation of the contractor's performance
of surveillance inspections and support, using criteria provided to the plant
for overall evaluation of contractor performance (by award fee criteria, as
specified by the appropriate contract). A report shall be provided to the
installation's commander/COR, not less than semiannually. RCS exempt: AR 333-15,
paragraph 5-2e(6). An information copy of all evaluation reports will be
provided to AMSMC-QAS.

         c. Reports of contractor deficiency (00 Form 1715) will be submitted
for signature to the commander/COR prior to forwarding to the contractor for
correction and reponse. Whenever the application or the procedures are
determined inadequate, the contractor will be advised, in writing, and requested
to take corrective action. Follow-through action will be accomplished, as
necessary.

         d. The QASAS will assure the contractor is aware of all checkpoints to
be included in the Government evaluation. The QASAS must assure that the
contractor's procedures include inspections that comply with all pertinent
contractual, regulatory, and technica1 requirements.

         e. Both AMSMC-QAS and the COR will make a determination of compliance
and implementation of the surveillance program using following indicators:

                  (1) Adequacy of contractor's surveillance plan.

                  (2) Administration of the plan.

                  (3) Lot stock status current and available for Government use.

                  (4) Copies of Inspection/work schedules available from the
         contractor prior to commencing work for the following four items:

                           (a) Inert items

                           (b) Building, magazine, and warehouse inspections.

                           (c) Ammunition and component inspections.

                           (d) Rail and carrier vehicle inspections.

                  (5) Inspection results made available to the CUR.

                  (6) Deficiencies corrected in reasonable time after detection.

                  (7) Nonconforming materiel properly controlled.

                  (8) Nonconforming materiel promptly reported.

                  (9) Availability end use of technical data.

                  (10) Use of correct sample size.-

                  (11) Inspection for all appropriate characteristics.

                  (12) Availability and use of proper inspection equipment.

                                       10
<PAGE>

                  (13) Proper application of condition codes.

                  (14) All defects in samples detected and properly recorded.

                  (15) Maintenance of technical history of each lot on DA Form
         3022--R.

                  (16) Defects noted by the COR, not reported by contractor
         during inspection, for the following:

                           (a) Ammunition and component inspection.

                           (b) Railcar and carrier vehicle inspection.

                           (c) Initiation, completion, adequacy, and timeliness
                  of DSR cards.

                           (d) Magazine inspection.

                           (e) Disposal operations.

                  (17) Worldwide Ammunition Reporting System (AR 700--22)
         current and updated as required.

                  (18) Contractor's suspension/restriction procedure and log
         adequate.

         f. Evaluation Instructions.

                  (1) Magazine Inspection: Conduct a verification-type
         Inspection. The basis for the inspection will be detection of defects
         not reported by the contractor. The sample size will be at least 15
         percent of those reported by the contractor to be free of defects and
         15 percent (but not less then one magazine) of those reported with
         defects.

                  (2) Rail Car and Carrier Vehicle Inspections: At installations
         having an assigned transportation officer, the QASAS will monitor
         contractor-performed equipment inspections at a frequency determined by
         the transportation officer. Monitoring by QASAS for factors established
         by AR 702-6, AR 702-12, and AMCR 385-100 will be accomplished at a
         frequency of 15 percent. At installations for which HQ, AMCCOM,
         Transportation and Traffic Management Directorate performs
         transportation officer functions, QASAS personnel will perform all
         monitoring of the contractor's inspections. Frequency will be 15
         percent. Monitoring must determine the adequacy of compliance with AR
         35-355, AMCR 385-100, Department of Transportation regulations, and
         technical data, including blocking and bracing drawings. Deficiencies
         undetected by the contractor will be presented by formal report as
         follows (RCS exempt: AR 335-15, pare 5-2c(3)):

                           (a) For Installations with a COR-assigned
                  transportation officer, discrepancy reports will be routed
                  through the transportation officer to the commander/COR for
                  submittal to the contractor. If there is an immediate need for
                  correction, the transportation officer will be advised of
                  circumstances and is responsible for the final decision.
                  Delegation of decision authority to the QASAS by the
                  transportation officer shall be determined locally.

                           (b) For installations for which HQ, AMCCOM,
                  Transportation and Traffic Management Directorate performs
                  transportation officer functions, deficiencies detected by the
                  QASAS and undetected by the contractor will be presented by
                  formal report to the commander/COR for submittal to the
                  contractor. A copy of the report will be furnished to
                  Commander, AMCCOM, ATTN: AHSMC-TMP. However, if needed
                  immediately, on-the-spot corrections will be made.

                                       11
<PAGE>

                  (3) Inspection of Ammunition and Components: To evaluate the
         contractor's performance of inspections, the QASAS will monitor 15
         percent of the inspections. The checkpoints are;

                           (a) Availability and use of technical data (drawings,
                  specifications, local SOP, and ammunition data cards).

                           (b) Using correct sample size.

                           (c) Contractor detection and recording of all defects
                  in the samples.

                           (d) Availability and use of proper tools, gages,
                  equipment, etc.

                           (e) Compliance with safety and security regulations
                  and procedures.

                           (f) Adequacy of application of condition codes.

                           (g) Other areas as locally determined necessary.

                  (4) Records, Reports, and Administration: Evaluation
         checkpoints are:

                           (a) Preparation of' DSR cards. Cards must be
                  initiated in a timely manner and contain all necessary
                  Information. Check will include review of performance of
                  inspections on schedule.

                           (b) Acting on suspensions and restrictions
                  promulgated by TB 9-1300-385 and from other services. Assure
                  related condition code change information is provided to
                  contractor activities responsible for inventory control and
                  that the DSR cards reflect the information.

                           (c) Assurance that lot number listings furnished to
                  the QASAS to facilitate evaluation of contractor performance
                  are timely and accurate and that all information has been
                  reported.

                           (d) Requests for disposition instructions. Check
                  should include timeliness and adequacy of preparation, whether
                  requests were prepared in all required instances, followup
                  actions, etc.

                           (e) Availability and adequacy of SOP for contractor
                  inspection operations.

                           (f) Electrical continuity and adequacy of lightning
                  protection systems. Records must reveal that inspections
                  required by AMCR 385-100 have been accomplished and that
                  corrective actions have been taken.

                           (g) Other areas, as locally necessary.

                  (5) Sampling - Monitoring and Verification: When contractor
         performance is locally evaluated as being highly satisfactory, sampling
         may be reduced to 10 percent in any or all of the preceding areas, as
         locally determined appropriate. When performance is questionable,
         sampling may be increased to 20 percent or more. The contractor will be
         apprised of tightened inspection requirements. The necessity for
         tightened inspection is normally indicative of a need for better
         inspection effort by the contractor. In these cases, the contractor
         must be apprised of the facts arid directed to improve performance.

                                       12
<PAGE>

         g. QASAS monthly evaluation of Contractor Surveillance Program will be
based on a 100-point rating system. Each of 25 listed indicators is equally
weighted and is worth 4 points. A maximum of 3 points may be granted for
contractor compliance and 1 point for corrective action for an indicator if no
deficiencies are noted, 4 points may be granted for that indicator. Surveillance
inspections by higher headquarters, when performed, will account for a maximum
of 50 points for that period only. COR review and contractor corrective action
maximum points will then be reduced by half. An adjective rating will be
assigned based on total points granted.

Adjective Rating   SUBMARGINAL   MARGINAL    GOOD   VERY GOOD   EXCELLENT
----------------   -----------   --------    ----   ---------   ---------
                      0-60        61-70     71-80     81-90       91-100

9.       Inspection Schedules and Records (GOCO organizations Only).

         a. Before starting any work, the contractor will provide copies of
inspection/work schedules and related activities, performed under the
requirements of this regulation, to the QASAS.

         b. Copies of inspection records will be made available to the QASAS by
the contractor. This includes, but is not limited to, magazine inspection
reports, lightning protection tests, DSR cards, and DD Forms 626 (Motor Vehicle
Inspection).

         c. Stock status of components and finished items (para 4c) will be made
available to the QASAS. Stock status data will include NSN or drawing number, as
applicable, lot number, condition code, date of receipt (for components), date
of manufacture (for locally produced items), and any other data as locally
deemed necessary to effectively evaluate contractor performance. A stock status
report reflecting above data will be furnished, on request, to Commander,
AMCCOM, ATTN: AMSMC-QAS. RCS exempt AR 335-15, paragraph 5-2i.

10.      Surveillance Records and Reports.

         a. OM Form 3022-R, Army Depot Surveillance Record (DSR).

                  (1) Army DSR will be Initiated for each lot or serial number
         of ammunition, components (explosive loaded or inert), and packing
         material in industrial account immediately following initial
         surveillance inspection, or if the item is assigned other than
         condition code A after acceptance. DSR for field service stock will be
         initiated upon acceptance into a field service account. The results of
         all investigations, inspections, and tests and a record of any unusual
         conditions affecting the ammunition will be entered on the card to
         become part of the technical history of the lot/item.

                  (2) The method and scope of posting to DA Form 3022-R will be
         IAW SB 742-1.

                                       13
<PAGE>

         b. Suspension Control

                  (1) Control of suspended stock is a function of the
         organization with responsibility for ammunition surveillance.
         Responsibility includes:

                           (a) Maintaining the installation's master suspension
                  record.

                           (b) Assuring that suspended items which are
                  restricted from handling or movement are not moved, handled or
                  shipped, except as specifically authorized by higher
                  headquarters.

                           (c) Assuring proper reporting of suspended stocks.

                  (2) Suspended stocks in storage should be appropriately
         identified using DD Form 1575 (Suspended Tag - Material) or DD Form
         1575-1 (Suspended Label - Material) or equal, forms provided by
         MIL-STD-l29, to preclude unauthorized handling or issue. In addition to
         applicable Information as requested on the form, the tag will be
         stamped or marked in red letters with one of the following remarks, as
         applicable: "Suspended - issue Prohibited" or "Suspended from Issue,
         Movement, and Use." Lettering should be the largest possible that is
         compatible with the forms. Forms should be securely attached to the
         affected lot in storage and to the magazine data card, to preclude loss
         during magazine storage operations.

         c. Condition Code Change. DA Form 4508 (Ammunition Transfer Record), or
equal, will be used to accomplish location condition code, NSN, nomenclature,
and lot or serial number changes. Changes will be initiated by or processed
through and concurred in by the functional element assigned responsibility for
ammunition surveillance, and reviewed by QASAS.

         d. Unserviceable Materiel. Unserviceable field service and CAWCF
materiel will be reported on DA Form 2415 (Ammunition Condition Report (RCS
CSGLD-1202)). Instructions for use and completion of DA Form 2415 are in DA
Pamphlet 738-750. DA Forms 2415 for industrial stocks do not need a cost
estimate and will be submitted to Commander, AMCCOM, ATTN: AMSMC-PDM. All
required local coordination for recommended disposition should be accomplished
prior to submission. unserviceable locally procured/fabricated materiel will be
reported IAW AMCCOMR 140-1.

11.      Distribution of Depot Surveillance Record Cards and Ammunition Data
         Cards.

Installations will furnish one copy of the DSR card and Ammunition Data Card to
receiving installations for each lot, batch, or group of stocks shipped IAW SB
742-1 (except that if no DSR has yet been established, the fact will be
annotated on the shipping documents).

APPENDIX A
AMMUNITION SURVEILLANCE FUNCTIONAL RESPONSIBILITIES AND STAFFING

1.       Organization: The Ammunition Stockpile Reliability Program includes
         physical inspection and condition classification of all ammunition
         items of issue and related materiel in storage. Administratively, the
         management of this function is an integral part of the Government
         quality element. The supervisor of the quality element may be a QASAS,
         Career Program 20, or a Quality Assurance Specialist, Ammunition,
         Career Program 15.

         (a) The functional supervisor of the quality element will ensure:

                                       14
<PAGE>

                  (1) Adequate QASAS staffing.

                  (2) Planning and scheduling the program on the basis of
         installation policy, available funds, basic objectives, and the like.

                  (3) Determination of project priorities on a managerial and
         policy basis rather than on a detailed understanding of the technical
         phases and operating procedures of the work.

                  (4) Review of QASAS work from a progress, or policy (or other
         similar program) point of view. The question of technical adequacy or
         accuracy of work performed is not of concern in this function.

                  (5) Completion of QASAS performance appraisals by the
         appropriate official.

                  (6) QASAS access to the commander on explosive safety and
         ammunition surveillance matters.

         (b) The senior QASAS assigned shall:

                  (1) Serve as the functional focal point for the Ammunition
         Surveillance program.

                  (2) Provide technical direction of the Ammunition Surveillance
         program.

                  (3) Submit Ammunition Surveillance reports to higher HQ.

                  (4) Evaluate contractor performance of Ammunition Surveillance
         program requirements.

2.       Staffing: The QASAS Career Program is administered on a centralized
         basis by the Ammunition Civilian Career Management Office, U.S. Army
         Defense Ammunition Center and School, Savanna, IL. The Career Program
         functions through a mandatory rotation, directed placement system.
         Additional details, including filling of positions are provided by AR
         69O-9O-2O.

         (a) The hiring installation determines QASAS requirements, supervises,
rates, and appraises assigned QASAS. Technical direction is provided by AR
740-1, AR 702-6, AR 702-12, SB 742-1, and this regulation.

         (b) Personnel spaces for QASAS will be based upon the workload
represented by required surveillance inspections. Workload is computed as
follows:

                  (1) Field Service Stock: Number of lots on hand divided by the
         inspection interval stated in SB 742-1 equals the yearly average
         workload.

                  (2) Industrial Stock: Number of lots on hand divided by the
         inspection Interval (2 years) provided by this regulation equals the
         yearly average workload.

                  (3) Magazine Inspection: Number of magazines multiplied by 1.7
         (7-month inspection interval).

                  (4) Transportation Inspections.

                                       15
<PAGE>

         (a) Outgoing: Number of transportation units multiplied by 2
(inspection required before and after loading).

         (b) Incoming: Number of transportation units (Inspection required prior
to entry to the installation).

                  (5) Area and Demil Inspections: Number of hours required to
         adequately monitor area and demil operations for safety and compliance
         with local SOP. Monitoring of demil will include inspection of residue
         and certification of demil IAW procedures in SB 742-1 and this
         regulation.

         (c) Manhours required for individual activities are best computed from
installation history. A valuable source of manhour data is the Quality Assurance
(Ammunition) Quarterly Management Report, RCS DRCQA 124, prepared IAW DARCOM-R
702-7. Contract Data Requirements List sequence no. 385 applies.

         (d) At GOCO installations, impact of the individual contract on
required manhours must be considered. QASAS review is required on 15 percent of
contractor performed inspections. Total QASAS workload must consider all
elements such as:

                  (1) Temporary duty to other plants served by the home station
         QASAS.

                  (2) Estimated manhours required for inspections performed
         personally by the QASAS, such as Foreign Military Sales (FMS) and
         Prepositioned (PREPO) shipments.

                  (3) Administrative requirements such as evaluation of
         contractor performance.

                  (4) Leave and training hours.

3.       Responsibility of Contractor: At GOCO AAPS specific contract clauses
         shall be included for the Ammunition Surveillance requirements. The
         following matrix charts provide typical responsibilities for various
         phases and elements.

         (a) TASK: INSPECTION OF MATERIEL IN STORAGE.

                                     FIELD SERVICE         INDUSTRIAL SERVICE
      DESCRIPTION OF                 RESPONSIBILITY           RESPONSIBILITY
          FUNCTION                GOVERNMENT CONTRACTOR    GOVERNMENT CONTRACTOR
      ---------------------       ---------------------    ---------------------
(1)   Schedule                        X                                   X
(2)   Select samples                  X                                   X
(3)   Transport samples,                         X                        X
      as required
(4)   Prepare (unpack,etc)                       X                        X
      samples
(5)   Inspect                         X          X                        X
(6)   Prepare report, assign          X                                   X
      condition code

                                       16
<PAGE>

(7)   Prepare samples for                        X                        X
      storage (repack)
(8)   Return samples to                          X                        X
      storage
(9)   Evaluate above
      contract work IAW
      paragraph 8 for:
  (a) Proper criteria                 X                         X
  (b) Proper application of           X                         X
      criteria
  (c) Condition code changes          X                         X

* Contractor will conduct inspection of field service stocks to the extent and
under the direction of the COR staff (QASAS).

         (b) TASK: INSPECTIONS OF MAGAZINE, WAREHOUSES AND AMMUNITION STORAGE
SITES.

                                             FIELD SERVICE AND INDUSTRIAL STOCKS
DESCRIPTION OF FUNCTION                                RESPONSIBILITY
----------------------------------------     -----------------------------------
                                                 GOVERNMENT         CONTRACTOR
                                             -----------------   ---------------
(1)   Schedule                                                          X
(2)   Obtain planograph                                                 X
(3)   Review planograph for:
  (a) Item compatibility X
  (b) Net explosive weight X
(4)   Using check list provided by SB 742-
      1, inspect magazine/warehouse for:
  (a) Compliance with storage drawings                                  X
  (b) Accuracy of planograph                                            X
  (c) Structural deficiencies                                           X
  (d) Unsafe storage practices and procedures                           X
(5)   Inspect and test lightning protection                             X
      system
(6)   Prepare and distribute report of                                  X
      discrepancies
(7)   Ensure adequate corrective action                                 X

                                       17
<PAGE>

(8)   Evaluate above work IAw paragraph 8
      for:
  (a) Proper criteria                                X
  (b) Proper application of criteria                 X
  (c) Adequate corrective action                     X

(c) TASK: INSPECTION OF OUTGOING AMMUNITION SHIPMENTS.

                                         FIELD SERVICE      INDUSTRIAL SERVICE
     DESCRIPTION OF                     RESPONSIBILITY        RESPONSIBILITY
       FUNCTION                     GOVERNMENT CONTRACTOR  GOVERNMENT CONTRACTOR
-----------------------------       ---------------------  ---------------------

(1)   Review shipping
      documents for:
  (a) Suitability of                     X                                 X
      selected lot
  (b) Correct item identity              X                                 X
  (c) Correct Department of              X                                 X
      Transportation
      nonemclature
(2)   Determine                                                            X
      requirements for
      functional clearance
      (FMS, PREPO,
      Overhead Fire),
(3)   Obtain functional                  X                      X
      clearance
(4)   Inspect conveyance                 X                      X
      (DD Form 626)
(5)   Report unacceptable                          X                       X
      conveyance
(6)   Inspect loading
      operation for:
  (a) Correct material                             X                       X
  (b) Proper loading techniques                    X                       X
  (c) Safety in handling                           X                       X
  (d) Compliance                                   X                       X
      w/outloading dwg
      requirements
(7)   Perform final                                X                       X
      inspection of
      shipment/properly
      secure conveyance
      (DD Form 626)

                                       18
<PAGE>

(8)   Report operational                           X                       X
      deficiencies
(9)   Evaluate above
      contractor work IAS
      paragraph 8 for
  (a) Proper criteria                    X                      X
  (b) Proper application of              X                      X
      criteria
  (c) Proper reporting of                X                      X
      deficiencies
  (d) Adequate corrective                X                      X
      action on deficiencies

(d) TASK: INSPECTION OF INCOMING AMMUNITION SHIPMENTS.

DESCRIPTION OF FUNCTION                                  RESPONSIBILITY
---------------------------------------       ----------------------------------
                                                 GOVERNMENT         CONTRACTOR
                                              ----------------    --------------
(1)   Inspect incoming conveyance for:
  (a) Safety aspects of equipment
      (DD Form 626)                                                      X
  (b) Evidence of tampering or sabotage                                  X
  (c) Evidence of damage in transit                                      X
  (d) Improper blocking and bracing                                      X
(2)   Inspect receiving operations for:
  (a) Unsafe operating practices                                         X
  (b) Compatibility and explosive safety                                 X
(3)   Prepare reports of deficiencies                                    X
(4)   Submit reports of deficiencies                  X
(5)   Monitor above contractor work IAW
      paragraph 8 for:
  (a) Proper criteria                                 X
  (b) Proper application of criteria                  X
  (c) Adequate corrective action on
      deficiencies                                    X

                                       19
<PAGE>

(e) TASK ADMINISTRATION.

DESCRIPTION OF                                FIELD SERVICE AND INDUSTRIAL STOCK
   FUNCTION                                              RESPONSIBILITY
----------------------------------------      ----------------------------------
                                                  GOVERNMENT        CONTRACTOR
                                              -----------------   --------------
(1)   Maintain lot listing of stocks in storage                          X
(2)   Prepare and maintain ammunition data                               X
cards
(3)   Prepare reports                                                    X
(4)   Submit reports                                    X
(5)   Prepare and maintain DSR, DA Form                                  X
      3022-R
(6)   Prepare SOP                                                        X
(7)   Review/approve contractor operational             X
      SOP
(8)   Receive/ensure receipt of all suspensions,        X                X
      restrictions, and releases, and Ammo
      Information Notices
(9)   Maintain master suspension file                   X                X
(10)  Check stock records for suspended/
      restricted lots                                   X*               X
(11)  Place/remove suspended tags on/from                                X
      stock
(12)  Prevent shipment/issue of suspended/              X*               X
      restricted stocks
(13)  Evaluate above contractor work IAW
      paragraph 8 for:
  (a) Proper procedure                                  X
  (b) Proper application of procedure                   X
  (c) Adequate corrective action                        X
      on deficiencies

* Field Service Stocks Only.

                                       20
<PAGE>

(f) TASK: INSPECTION OF MAINTENANCE, DEM1L AND AREA OPERATIONS.

                 DESCRIPTION OF FUNCTION                    RESPONSIBILITY
-------------------------------------------------    ---------------------------
                                                      GOVERNMENT    CONTRACTOR
                                                     ------------  -------------
(1)   Ensure all operations are conducted IAW                            X
      approved SOP
(2)   Enforce quantity distance requirements                             X
      and explosive limits in all area operations
(3)   Inspect memo maintenance operations for                            X
      quality and safety requirement
(4)   Inspect storage and demil operations for                           X
      safety requirements
(5)   Prepare reports of deficiencies and                                X
      submit to operating element
(6)   Follow up reports to ensure appropriate                            X
      corrective action
(7)   Evaluate above work IAW paragraph 8                  X
      for adequacy

APPENDIX B
GEOGRAPHICAL GROUPING OF AMMUNITION PLANTS

                       Home Station                    Supported Installation
                       ------------                    ----------------------
Group A                Lone Star
Group B                Redford                         Volunteer
                                                       Holston
Group C                Lake City                       Sunflower
                                                       Kansas
Group D                Indiana                         Revenna
Group E                Iowa                            Joliet
                                                       Badger
                                                       Twin Cities*
Group F                Milan
Group G                Louisiana                       Mississippi
Group H                Longhorn

* Support to be provided when ammunition is stored.

                                       21
<PAGE>

                           The proponent of this publication is the HQ, AMCCOM,
                           Product Assurance Directorate. Users are invited to
                           send comments to Commander, AMCCOM, ATTN:
                           AMSMC-QAS-C, Rock Island, IL 61299--6000

FOR THE COMMANDER:

OFFICIAL:                                            MURRAY C. SWINDLER
                                                      Colonel, GS
                                                     Chief of Staff

/s/ Paulette J. Mionor
PAULETTA J. MINOR
CPT, CS
Adjutant

DISTRIBUTION:
A, B-1, B-2, B-3, B-5, B-6
Crane AM (SMCCN--RMA) (5)
AMSMC-QAS-C (5)

                                       22
<PAGE>

BASIC AGREEMENT NO. 04T002
IONATRON

                                    EXHIBIT D

                                    ORDER 001

<PAGE>

BASIC ORDER AGREEMENT                                                  ORDER 001

1.       Order 001 (hereafter referred to as "Order" or "subcontract") is issued
         pursuant to Basic Agreement 04T002 (the "Agreement") and incorporates
         all the terms and conditions of the Agreement between MASON
         TECHNOLOGIES INC. (hereafter referred to as "MTI" or "Contractor") and
         IONATRON INC. (hereafter referred to as "SUBCONTRACTOR") in such a
         manner as if set forth in full text.

2.       This Order grants to SUBCONTRACTOR the right to use approximately
         50,148 square feet of space in Building #9101, as shown on Exhibit A
         (the "Facility"), including parking and ingress/egress and the right,
         in common with others, to the use of supporting facilities and
         roadways. This right is granted for a period of five (5) years, to
         commence on the Commencement Date (as defined herein in Paragraph 3.D)
         and to expire on the last day of the month in which occurs the fifth
         (5th) anniversary of the Commencement Date (the "Expiration Date"),
         subject to two (2) five (5) year extension options as more particularly
         set forth in the Agreement. The negotiated monthly Fixed Service Fee
         for this right is shown on Exhibit C. Maintenance obligations of the
         parties are described on Exhibit D.

3.       A.       The parties anticipate that with and to the extent of funding
                  provided by the Army, the Contractor shall make certain
                  initial modifications to the Facilities, as shall be mutually
                  agreed to by the parties (the "ARMS Facility Modifications").
                  The Army shall be responsible for the inspection and
                  acceptance of such work. These modifications are described in
                  the Conceptual Statement of Work (the "Charette") annexed
                  hereto as Exhibit E. The Charette embodies the current design
                  requirements which shall be superseded and replaced with a 60%
                  Design/Build Engineering Package (the "Plans") as agreed to by
                  the parties.

         B.       Not later than the date which is 30 calendar days after the
                  Initial Funding Approval Date (as hereinafter defined in
                  paragraph E below), Contractor shall prepare the Plans for all
                  work to be performed by Contractor at the Facilities, which
                  Plans shall be prepared by Contractor (i) in compliance with
                  all applicable laws and (ii) substantially in accordance with
                  the Charette. SUBCONTRACTOR shall attend and actively
                  participate in Design Reviews as scheduled by the Contractor.
                  SUBCONTRACTOR's design review comments shall be incorporated
                  into the Plans during the Design Review process to the extent
                  feasible and to the extent such comments do not constitute a
                  Change (as defined in Paragraph C below) to the Charette, or
                  cause Contractor to incur costs in excess of the funding or
                  delays beyond the Completion Date for the project schedule as
                  set forth in the Charette, which date has been established as
                  March 30, 2005, and which date has established the
                  Contractor's performance period approved by the Army for
                  completion of the ARMS Facility modifications. SUBCONTRACTOR
                  must respond either with approval or with reasonable reasons
                  for disapproval within five (5) business days after receipt of
                  the Plans.

                                   Page 1 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002                                           ORDER 001

                  Contractor shall, within five (5) business days following
                  receipt of SUBCONTRACTOR's reasons for disapproval, seek to
                  amend the Plans to remedy such reasonable objections and shall
                  re-submit them to SUBCONTRACTOR for approval, but such
                  re-submittal is subject to the Army's approved schedule and
                  funding limitations. This process shall continue, each party
                  responding within five (5) business days, except to the extent
                  the Army may make changes that affect this approval cycle,
                  until the Plans are approved by SUBCONTRACTOR. The work
                  described in the Plans is referred to herein as "Contractor's
                  Work". However, once SUBCONTRACTOR has partially or wholly
                  approved any of the Plans during the Design Review process,
                  SUBCONTRACTOR cannot "unapprove" such partial or wholly
                  approved Plans. Any attempt to do so shall constitute a Change
                  to Contractor's Work as defined in Paragraph C below.
                  Notwithstanding anything to the contrary in this Order 001, if
                  SUBCONTRACTOR's comments have a de minimis effect on cost or
                  schedule, they will not constitute a Change, for purposes of
                  all references to the term "Change" throughout this Order 001.

         C.       Any adjustments, changes or revisions made by the
                  SUBCONTRACTOR or any party for which SUBCONTRACTOR is
                  responsible, and any changes due to force majeure conditions
                  or any other conditions beyond the control of the Contractor
                  which affect the Contractor's cost or schedule for the design
                  and/or construction of the ARMS Facility Modifications, shall
                  constitute a Change to this Order and a Change Order shall be
                  executed by the SUBCONTRACTOR and Contractor with approval by
                  the Army. A Change Order is a written order signed by the
                  SUBCONTRACTOR and Contractor, authorized by the Army, issued
                  after execution of this Order, authorizing a Change in the
                  Work or adjustment in the Contract Price or schedule. Change
                  Orders as defined herein shall either be in the form of (i)
                  ENG-43, SUBCONTRACTOR Work Request Form, for changes affecting
                  the price of the design and/or construction of the ARMS
                  Facility Modifications for which SUBCONTRACTOR is responsible
                  for funding, and/or (ii) a modification to this Order for
                  changes affecting Contractor's completion schedule of the ARMS
                  Facility Modifications.

         D.       Contractor shall perform its design and construction services
                  in accordance with generally accepted principles and practices
                  used by licensed professional contractors performing similar
                  services. During the performance of such work and for up to
                  one (1) year following the completion of such work, Contractor
                  shall re-perform, at its own expense, design and construction
                  defects and/or the design or construction work that fail to
                  conform to the foregoing standard of care, provided that
                  Contractor is notified of the failure in writing by
                  SUBCONTRACTOR within fifteen (15) days after discovery of such
                  nonconformity. the warranties and remedies set forth in this
                  SUBarticle 3D are the exclusive warranties and remedies made
                  by contractor FOR SUCH WORK and are in lieu of any

                                   Page 2 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002                                           ORDER 001

                  and all other warranties and remedies, express or implied. The
                  foregoing warranties and remedies shall apply whether arising
                  or alleged to arise in contract, tort (including negligence),
                  strict liability, or otherwise. Contractor's design and
                  construction work shall be substantially completed on or
                  before March 30, 2005 (the "Completion Date"). For purposes of
                  this Order, "Substantial Completion" shall mean that
                  Contractor's design and construction work is sufficiently
                  complete in accordance with the Plans so that SUBCONTRACTOR
                  can occupy and utilize the Facilities for the Permitted Use,
                  provided that incomplete punch list items shall be completed
                  within ninety (90) days of the Commencement Date (as
                  hereinafter defined). If Substantial Completion occurs after
                  the Completion Date, but before 3 months from such date,
                  SUBCONTRACTOR agrees to wait to occupy the Facilities until
                  such time the work is completed even if such delay is due to
                  the fault of Contractor, except Contractor agrees to make
                  diligent reasonable steps to minimize such delay, but has no
                  obligation to incur additional overtime expenses for overtime
                  labor or premium costs for materials or equipment. The
                  foregoing represents SUBCONTRACTOR's exclusive remedy for
                  delays that in the aggregate are less than 3 months. However,
                  subject to the terms of the following sentence, if Substantial
                  Completion does not occur within three (3) months after the
                  scheduled Completion Date (the "Outside Date"), the
                  SUBCONTRACTOR shall have the right to terminate this Order and
                  the Agreement without any liability of any kind to the
                  Contractor. If Contractor's Work is not Substantially Complete
                  by the scheduled Completion Date as a result of any act or
                  omission of SUBCONTRACTOR, or as a result of a force majeure
                  event as defined in Article XXIX H of the Agreement to which
                  this Order is attached, the Completion Date (and, accordingly,
                  the Outside Date) shall be extended one day for each day that
                  Contractor's Work was not completed by reason of such act or
                  omission or force majeure in accordance with the Change
                  provisions in 3.C above. Contractor shall have no liability
                  whatsoever for any delay in the work, whether such delay falls
                  within such 3 month period or beyond. Such right to
                  termination shall be SUBCONTRACTOR's exclusive remedy for such
                  delay and SUBCONTRACTOR agrees that such exclusive right
                  applies even IF CAUSED BY Contractor's fault or negligeNce. In
                  the event that the SUBCONTRACTOR terminates this Order and the
                  Agreement under this provision, the SUBCONTRACTOR agrees that
                  termination as described herein shall be the SUBCONTRACTOR's
                  exclusive remedy and shall be in lieu of all other remedies,
                  whether in equity or law. The date Contractor delivers the
                  Facilities to SUBCONTRACTOR with Contractor's Work
                  substantially completed for SUBCONTRACTOR's occupancy shall be
                  deemed to be the "Commencement Date" for all purposes of this
                  Order and the Agreement.

                                   Page 3 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002                                           ORDER 001

         E.       If (a) Contractor does not receive the ARMS funding from the
                  Army for the purpose of preparing the Plans by July 19, 2004
                  (the "Initial Funding Approval Date"), (b) Plans are not
                  submitted to the Army by October 14, 2004, or (c) the
                  Contractor does not receive the ARMS funding from the Army for
                  the purpose of performing the Contractor's Work by November 10
                  2004 (the "Second Funding Approval Date"), in any of these
                  such cases, CONTRACTOR or SUBCONTRACTOR shall have the right
                  to terminate without liability of any kind to the other party
                  this Order and the Agreement upon three (3) days' written
                  notice to the other, in which event this Order and the
                  Agreement shall be deemed to be terminated and of no further
                  force or effect and the parties shall be relieved of all
                  obligations hereunder. Notwithstanding the foregoing, neither
                  party shall have the right to terminate this Agreement if the
                  reason the foregoing dates are not met arises out of such
                  party's fault or negligence.

 4.      A.       SUBCONTRACTOR shall pay a deposit of $44,448.82, 1/2 of which
                  shall be due and payable at the time of execution of this
                  Order with the balance due at occupancy or Substantial
                  Completion, whichever occurs first. This deposit shall be held
                  by the Contractor as security for the satisfactory performance
                  of all of the terms and conditions provided herein. For each
                  year that the Facilities are maintained by the SUBCONTRACTOR
                  in accordance with the Agreement and this Order, a $500.00
                  deduction shall be applied to the December invoice for the
                  monthly Fixed Service Fee. Upon termination or expiration of
                  this Order, the Contractor shall return said deposit provided
                  that SUBCONTRACTOR shall not be in default of the terms and
                  conditions of this Order and the Agreement.

         B.       Payment of the Fixed Service Fee must be received by the
                  Contractor within the first ten (10) working days of each
                  month with the first payment being due on the Commencement
                  Date (as defined in the Agreement).

         C.       The cost of all utility demand services described in the
                  Agreement, as well as air-conditioning the Facilities, to be
                  provided by Contractor to the Facilities shall be invoiced
                  monthly via Form GA-25. Cost of utility demand services
                  described in the Agreement are further detailed in Exhibit C.
                  Cost of other demand services provided by Contractor will be
                  invoiced monthly via Form GA-25 at the mutually agreed upon
                  price. Payment for the amounts billed via Forms GA-25 are due
                  and must be received by the Contractor within thirty (30)
                  calendar days of the invoice date. SUBCONTRACTOR's failure to
                  make timely payments for such services will result in
                  Contractor's discontinuance of said services to SUBCONTRACTOR
                  upon ten (10) days written notice from Contractor to
                  SUBCONTRACTOR provided that if SUBCONTRACTOR shall make such
                  payment with such ten day period, Contractor shall not
                  discontinue service. A $500.00 reconnection fee will be
                  assessed to SUBCONTRACTOR for reinstatement of demand services
                  by the Contractor discontinued pursuant to this provision.

                                   Page 4 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002                                           ORDER 001

         D.       Unless specifically waived by MTI's General Manager, a late
                  payment charge of 5% of any overdue amount shall automatically
                  be imposed. The overdue amount shall bear interest at the rate
                  of 4% per annum over the "base rate" announced by Citibank,
                  N.A. (or its successor) as of the date of default, or the
                  maximum legal rate, whichever is the lowest, until the date of
                  payment. Notwithstanding the foregoing, if SUBCONTRACTOR shall
                  fail to make timely payments of any amount due under the
                  Agreement for more than three (3) times in any twelve (12)
                  month period, a late payment charge of 6% of any overdue
                  amount shall be imposed, and such overdue amount shall bear
                  interest at the rate of 1.5% per month, compounded monthly, or
                  the maximum legal rate, whichever is the lowest, until
                  repayment. In the event Contractor places any overdue amount
                  in the hands of an attorney for collection or is collected
                  through any court, including bankruptcy court, SUBCONTRACTOR
                  agrees to reimburse Contractor's actual out-of-pocket
                  reasonable attorneys' fees incurred in collecting said
                  amounts.

5.       Right of First Refusal

         SUBCONTRACTOR shall have a right of first refusal pursuant to Army
         approval to occupy (a) all or any portion of the space within the MSAAP
         known as the Forge Room Mezzanine (up to 231,843 square feet) and (b)
         all or any portion of the space within the MSAAP known as the East End
         (up to 125,709 square feet), each as depicted on Exhibit A attached
         hereto, which become available for occupancy (the "Right of First
         Refusal Space") on the terms set forth herein. If at any time during
         the Term, Contractor desires to enter into a use agreement for any
         Right of First Refusal Space and Contractor thereafter obtains a
         written bona-fide offer with respect to any Right of First Refusal
         Space upon terms and conditions that are agreeable to Contractor, then
         Contractor shall first offer such Right of First Refusal Space to
         SUBCONTRACTOR upon the identical terms set forth in such offer
         ("Contractor's Offer"), which Contractor's Offer shall contain the
         material terms of the proposed agreement, including, without
         limitation, the fixed service fee, the term, renewal options and
         service fee concessions (if any). Upon the giving of Contractor's
         Offer, SUBCONTRACTOR shall have the right, exercisable by written
         notice to Contractor given within thirty (30) days thereafter (the
         "Acceptance Period"), to elect to occupy the Right of First Refusal
         Space upon the terms and conditions set forth in Contractor's Offer,
         subject to the provisions of this Paragraph 5. If SUBCONTRACTOR fails
         to exercise such right of first refusal within such Acceptance Period,
         Contractor shall have the right to enter into a use agreement for the
         Right of First Refusal Space to such third party offeror on the same
         terms as those set forth in Contractor's Offer; provided, however, if
         Contractor fails to execute an agreement with such third party offeror
         within one hundred twenty (120) days following the expiration of the
         Acceptance Period on the same terms and conditions as those set forth
         in Contractor's Offer, Contractor shall be required to repeat the
         procedure set forth in this Paragraph 5. If SUBCONTRACTOR timely
         accepts such right of first refusal, a subsequent Order shall be issued
         by the Contractor to (i) add the Right of First Refusal Space to the
         Facilities at the fixed service fee set forth in Contractor's Offer and
         (ii)

                                   Page 5 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002                                           ORDER 001

         include all other terms with respect to the Right of First Refusal
         Space as set forth in Contractor's Offer not covered by the Agreement
         (it being understood that the term for the Right of First Refusal Space
         shall be coterminous with the term for the remainder of the Facilities,
         as same may be renewed in accordance with the provisions of the
         Agreement). Contractor acknowledges and agrees that it shall have no
         right to lease any Right of First Refusal Space during the Term without
         fully complying with this Paragraph 5.

6.       The billing address for SUBCONTRACTOR is:

                  Ionatron Inc.
                  Attn:  Thomas C. Dearmin
                  Building 9101
                  MSAAP Industrial Complex
                  Stennis Space Center, MS  39529

7.       The physical address for SUBCONTRACTOR is:

                  Ionatron Inc.
                  Building 9101
                  MSAAP Industrial Complex
                  Stennis Space Center, MS  39529

                                   Page 6 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002                                           ORDER 001

         IN WITNESS WHEREOF, the undersigned have executed this order by their
duly authorized officers on this 14th day of July, 2004.

CONTRACTOR:                                 SUBCONTRACTOR:

MASON TECHNOLOGIES INC.                     IONATRON INC.

By:                                     By:
    --------------------------------        -----------------------------------
    Kim R. Spiers                           Thomas C. Dearmin
    Vice-President & General Manager        President & Chief Executive Officer

Date:                                       Date:
    --------------------------------            -------------------------------

                                   Page 7 of 7

<PAGE>

BASIC ORDER AGREEMENT 04T002
ORDER 001
EXHIBIT A

                           PROPOSED IONATRON FACILITY
                MISSISSIPPI ARMY AMMUNITION PLANT - BUILDING 9101

                                GRAPHICS OMITTED
<PAGE>

BASIC ORDER AGREEMENT 04T002
ORDER 001
EXHIBIT B

                                    RESERVED

         There is no Army and/or Contractor owned property applicable to this
Order 001.

                                   Page 1 of 1

<PAGE>

BASIC AGREEMENT 04T002
ORDER 001
EXHIBIT C

FIXED SERVICE FEES: Price for Fixed Services as described in Article XIII of the
Agreement is set forth below:

<TABLE>
<CAPTION>
                                                                                        YEAR ONE (1)
                                                                      -------------------------------------------------
                                                                                           Monthly           Annual
                                                                                        --------------    -------------
Space Type                                              Sq. Ft             Rate              Cost             Cost
                                                    ------------      ------------      --------------    -------------
<S>                                                        <C>               <C>             <C>             <C>
Office/Admin-Air Conditioned                               5,364             $7.36           $3,289.92       $39,479.04
Manufacturing/Assembly-Air Conditioned                    23,051             $6.16          $11,871.27      $142,455.18
Assembly/Warehouse-Not Air-Conditioned                    21,733             $3.90           $7,063.23       $84,758.70
                                                          50,148                            $22,224.41      $266,692.92

                                                                                        YEAR TWO (2)
                                                                      -------------------------------------------------
                                                                                           Monthly           Annual
                                                                                        --------------    -------------
Space Type                                              Sq. Ft             Rate              Cost             Cost
                                                    ------------      ------------      --------------    -------------
Office/Admin-Air Conditioned                               5,364             $7.45           $3,330.15       $39,961.80
Manufacturing/Assembly-Air Conditioned                    23,051             $6.25          $12,005.73      $144,068.75
Assembly/Warehouse-Not Air-Conditioned                    21,733             $3.94           $7,135.67       $85,628.02
                                                          50,148                            $22,471.55      $269,658.57

                                                                                       YEAR THREE (3)
                                                                      -------------------------------------------------
                                                                                           Monthly           Annual
                                                                                        --------------    -------------
Space Type                                              Sq. Ft             Rate              Cost             Cost
                                                    ------------      ------------      --------------    -------------
Office/Admin-Air Conditioned                               5,364             $7.56           $3,374.85       $40,498.20
Manufacturing/Assembly-Air Conditioned                    23,051             $6.33          $12,159.40      $145,912.83
Assembly/Warehouse-Not Air-Conditioned                    21,733             $3.99           $7,226.22       $86,714.67
                                                          50,148                            $22,760.48      $273,125.70

                                                                                       YEAR FOUR (4)
                                                                      -------------------------------------------------
                                                                                           Monthly           Annual
                                                                                        --------------    -------------
Space Type                                              Sq. Ft             Rate              Cost             Cost
                                                    ------------      ------------      --------------    -------------
Office/Admin-Air Conditioned                               5,364             $7.64           $3,415.06       $40,980.96
Manufacturing/Assembly-Air Conditioned                    23,051             $6.41          $12,313.06      $147,756.91
Assembly/Warehouse-Not Air-Conditioned                    21,733             $4.04           $7,316.78       $87,801.32
                                                          50,148                            $23,044.93      $276,539.19

                                                                                       YEAR FIVE (5)
                                                                      -------------------------------------------------
                                                                                           Monthly           Annual
                                                                                        --------------    -------------
Space Type                                              Sq. Ft             Rate              Cost             Cost
                                                    ------------      ------------      --------------    -------------
Office/Admin-Air Conditioned                               5,364             $7.75           $3,464.25       $41,571.00
Manufacturing/Assembly-Air Conditioned                    23,051             $6.50          $12,485.96      $149,831.50
Assembly/Warehouse-Not Air-Conditioned                    21,733             $4.10           $7,425.44       $89,105.30
                                                          50,148                            $23,375.65      $280,507.80
</TABLE>

*        Square footage is estimated based on present design; this figure may
         increase or decrease based on design changes.

                                   Page 1 of 2

<PAGE>

BASIC AGREEMENT 04T002
ORDER 001
EXHIBIT C

DEMAND SERVICES -UTILITIES: Price definition to provide utilities as described
in Article XIII B.1, B.2, B.3 and B.4 of the Agreement Is set forth below:

         ELECTRICITY. Provide electrical power. Cost of consumption will be
         based on usage as determined by either meters, if available, or
         engineering estimated kilowatt-hours. Pricing will be determined by
         applying the then-current MTI G&A rates to the actual amounts billed by
         Mississippi Power Co. through NASA plus applicable taxes, if any, and
         adding that amount to the actual billed amount and applicable taxes.
         The sum shall be the price each month.

         HEAT. Provide gas for heat. Cost will be based on actual gas billed by
         supplier. Pricing will be determined by applying the then-current MTI
         G&A rates to the actual amounts billed adding that amount to the actual
         billed amount. The sum shall be the price each month.

         WATER AND SEWAGE. Provide potable water and domestic sewage disposal in
         accordance with the existing distribution system. Pricing will be based
         on engineering estimates, if not separately metered, multiplied by the
         periodic commercial rate approved by the Army for use Plant-wide,
         including the application of MTI's then-current G&A rates. A minimum
         monthly charge of $25 per building shall apply in accordance with the
         Army agreement.

         COMMUNICATIONS. Provide communication capabilities to include, but not
         limited to, local and long distance service in accordance with its
         existing communication system. Pricing will be determined by
         multiplying the then-current MTI G&A rates by the actual toll charges
         of the carrier plus applicable taxes, and adding this amount to the
         actual toll charges and applicable taxes. A monthly charge of $5 shall
         apply for each active port.

NOTE:    1. Each of the above unit prices shall include recovery of the
         then-current G&A rates (MSAAP and Home Office) as approved by the Army
         for Plant-wide application.

                                   Page 2 of 2

<PAGE>

BASIC AGREEMENT 04T002
ORDER 001
EXHIBIT D

                             MAINTENANCE OBLIGATIONS
                        Mississippi Army Ammunition Plant

MASON TECHNOLOGIES INC. MAINTENANCE RESPONSIBILITIES
1.       Roads and grounds upkeep
         1.1.     Basic grass maintenance adjacent to building twice per month
                  during growing season excluding maintenance of ornamental
                  plants.
2.       Pest Control
3.       Maintenance of parking lot
4.       Building and building systems corrective and preventative maintenance
         to include:
         4.1.     Roofs
         4.2.     Walls and structural floors
         4.3.     Building structure
         4.4.     Loading dock levelers
         4.5.     Utilities Distribution (point of interface between
                  distribution and equipment is at first isolation device from
                  main distribution line)
                  4.5.1.   Boiler system supply and return piping.
                  4.5.2.   Electrical
                           4.5.2.1. Power feed to building systems (i.e. HVAC,
                                    lighting).
                           4.5.2.2. Process power feed to tenant equipment -
                                    maintenance interface is at first fuse at
                                    motor control center or at buss bar. Fuse
                                    remains the responsibility of tenant.
                           4.5.2.3. General 110/220 power to plug located on
                                    shop floor.
                  4.5.3.   Water Systems: fire and domestic-entire system.
                  4.5.4.   Sanitary Sewage - entire system.
                  4.5.5.   Natural gas from meter to boiler. Natural gas
                           supplier, Centerpoint Energy, is responsible for
                           distribution up to and including meter.
         4.6.     Boiler System
         4.7.     HVAC systems (i.e. assembly and warehouse areas, break rooms,
                  offices and cafeterias).
         4.8.     Building fire systems to include piping and electronic
                  detection systems.
         4.9.     Building lighting (i.e. bathrooms, general production floor
                  lighting, administrative areas) excluding relamping of
                  interior light bulbs.
         4.10.    Door locking devices.
         4.11.    Windows.
         4.12.    Doors to include personnel and overhead.
         4.13.    Bathrooms to include fixtures and mirrors.
         4.14.    Storm drainage systems.
         4.15.    General 110 volt power to include distribution panels and
                  outlets.
         4.16.    General exhaust fans and louvers.
         4.17.    Digital and analog phones and associated lines.
         4.18.    Relamping of exterior lighting to include parking lot
                  lighting.

                                   Page 1 of 2

<PAGE>

BASIC AGREEMENT 04T002
ORDER 001
EXHIBIT D

                             MAINTENANCE OBLIGATIONS
                        Mississippi Army Ammunition Plant

         4.19.    Lightning protection.
         4.20.    Hot water heaters.

IONATRON MAINTENANCE RESPONSIBILITIES
1.       Shop and administrative area housekeeping.
2.       Horticulture services.
3.       Painting for aesthetic purposes to include painting and sealing of
         assembly and warehouse floors.
4.       Corrective and preventive maintenance of the following:
         4.1.     Air compressors, fixed and portable.
         4.2.     Internal Cat 5 wiring.
         4.3.     Personal property to include but not limited to:
                  4.3.1.   Personal computers and other data collection systems.
                  4.3.2.   Furniture.
                  4.3.3.   Material handling and charging equipment.
                  4.3.4.   Inventory control electronic system.
                  4.3.5.   Video teleconferences equipment
         4.4.     Security devices to include cameras, card readers and
                  associated equipment.
         4.5.     Signage and displays provided by tenant to include relamping
                  if necessary.
         4.6.     Relamping of interior lighting.
         4.7.     Satellite communications systems.
         4.8.     Faraday cage and grounding system
         4.9.     Vending machines, microwaves and icemakers.
         4.10.    HVAC systems specific to tenant operations.

                                   Page 2 of 2

<PAGE>

BASIC ORDER AGREEMENT 04T002
ORDER 001
EXHIBIT E

                                ARMS IMPROVEMENTS

SEE ATTACHED CHARETTE REPORT AS PREPARED BY THE MASON & HANGER GROUP DATED JUNE
14, 2004.

PLEASE NOTE THAT THIS EXHIBIT EMBODIES THE CURRENT DESIGN REQUIREMENTS WHICH
SHALL BE SUPERSEDED BY AND REPLACED WITH THE PLANS AS AGREED TO BY THE PARTIES.

                                   Page 1 of 1

<PAGE>

BASIC AGREEMENT NO. 04T002
IONATRON

         EXHIBIT F - DoD 5220.22-M, NATIONAL INDUSTRIAL SECURITY PROGRAM
                      OPERATING MANUAL (NISPOM), APPENDIX C

                  Definition of Foreign Person

BASIC ORDER AGREEMENT 04T002        EXHIBIT FEPCM SERVICES SUPPLY AGREEMENT

<PAGE>

<TABLE>
<CAPTION>
                                    CONTENTS

                                                                                PAGE
                                                                                ----

<S>                                                                              <C>
RECITALS .........................................................................1

ARTICLE 1 DEFINITIONS.............................................................1

ARTICLE 2 TIMELINE................................................................10

ARTICLE 3 ACKNOWLEDGMENTS BY THE EPCM CONTRACTOR..................................12

ARTICLE 4 EPCM CONTRACTOR'S OBLIGATIONS...........................................15

ARTICLE 5 OWNER'S OBLIGATIONS.....................................................36

ARTICLE 6 CHANGES ................................................................38

ARTICLE 7 PAYMENTS................................................................43

ARTICLE 8 CERTIFICATION OF MECHANICAL COMPLETION..................................45

ARTICLE 9 EVENTS OF DEFAULT.......................................................45

ARTICLE 10 TERMINATION............................................................47

ARTICLE 11 CONFIDENTIALITY........................................................48

ARTICLE 12 FORCE MAJEURE..........................................................49

ARTICLE 13 DISPUTES...............................................................50

ARTICLE 14 NOTICES................................................................53

ARTICLE 15 INSURANCE; SURETIES....................................................54

ARTICLE 16 ASSIGNMENT.............................................................55

ARTICLE 17 TITLE; RISK OF LOSS....................................................56

ARTICLE 18 ACCEPTANCE.............................................................56

ARTICLE 19 ADDITIONAL WORK........................................................57

ARTICLE 20 MISCELLANEOUS..........................................................57
</TABLE>

* Certain material marked with an asterisk on pages 3, 19, 23, 34, 35, 38, 40
and 41 of this Agreement has been omitted pursuant to a request for confidential
treatment. This Agreement, with the omitted material included, has been filed
separately with the Commission.

                                      GC-i
<PAGE>

Schedules

         Schedule 1        Scope of Facilities

         Schedule 2        Scope of EPCM Work
                  Appendix 1        Project Design Criteria
                  Appendix 2        Target Price
                  Appendix 3        Target Schedule and Milestones
                  Appendix 4        Initial Performance Test

         Schedule 3        EPCM Contractor's Compensation

         Schedule 4        Protected Rights

         Schedule 5        Particulars

         Schedule 6        Owner Controlled Insurance Program

         Schedule 7        Security

         Schedule 8        Equator Principles

                                      GC-ii
<PAGE>

                         EPCM SERVICES SUPPLY AGREEMENT

      THIS EPCM SERVICES SUPPLY AGREEMENT (this "Agreement") is made effective
as of the 8th day of November, 2004, by and between MINERA SAN CRISTOBAL, S.A.,
a legal entity formed under the laws of the Republic of Bolivia (the "Owner"),
and AKER KVAERNER METALS, INC., a Delaware corporation (the "EPCM Contractor").

                                    RECITALS

      1. The Owner is developing a silver, zinc and lead mine and related
concentrating facilities having a throughput of approximately 40,000 metric tons
of ore per day in Bolivia, known as the San Cristobal Project (the "Project").

      2. The EPCM Contractor has represented to the Owner that it has the
knowledge, experience, competence and personnel, and has or will obtain all
applicable licenses required to perform the EPCM Work (including the Phase I
EPCM Work and the Phase II EPCM Work, as all such capitalized terms are defined
herein) and to properly complete the detail design, manage procurement of the
necessary materials and equipment, and manage the construction, installation,
commissioning and start-up of the Equipment and the Facilities.

      3. The Owner desires to engage the EPCM Contractor to provide and perform
the EPCM Work in order to manage the procurement of the necessary materials and
equipment to the Site, and manage the construction, installation, erection and
start up of the Equipment and the Facilities as further outlined in the Scope of
EPCM Work set forth in Schedule 2, including Project budget and schedule
preparation, detailed engineering, procurement, project management, and managing
delivery of Equipment to the Site, construction, installation, erection and
commissioning and start up of the Equipment and the Facilities to achieve the
design, performance and workmanship standards and specifications set forth in
this Agreement.

      4. The Owner and the EPCM Contractor desire that the Work be undertaken
and performed in such a manner as to adhere to recognized international
standards of safety and professional care, so as to preserve a safe Job Site
during performance of the Work and a safely operating Facility after completion
of the Work.

      5. The EPCM Contractor is willing to provide and perform the EPCM Work on
the terms and conditions set forth in this Agreement.

                                    ARTICLE 1
                                   DEFINITIONS

1.1   Definitions. The following terms, when used herein and in the Schedules,
      shall have the following meanings:

      "Acceptance" means final acceptance by the Owner of the completed
      Facilities or any portion thereof in accordance with Section 18.1.

      "Acceptance Certificate" has the meaning set forth in Section 18.1.

<PAGE>

      "Act" has the meaning set forth in Section 4.24.

      "Additional Work" shall have the meaning set forth in Section 19.1.

      "Affiliate" means any person, partnership, joint venture, corporation or
      other form of enterprise which directly or indirectly controls, is
      controlled by, or is under common control with, a party hereto. For
      purposes of the preceding sentence, "control" means possession, directly
      or indirectly, of the power to direct or cause direction of management and
      policies through ownership of voting securities, contract, voting trust or
      otherwise.

      "Agreement" means this EPCM Services Supply Agreement, together with all
      of the Schedules hereto, as the same may be amended from time to time.

      "Pre-Approved Subcontractors" means Kvaerner Metals, Agencia en Chile de
      Davy McKee Worldwide Corporation and Aker Kvaerner Industrial
      Constructors, Inc.

      "Base Fee" when used with respect to the Phase I EPCM Work, shall mean the
      Phase I Base Fee as defined in paragraph 1.2 of Schedule 3-A, and when
      used with respect to the Phase II EPCM Work, shall mean the Phase II Base
      Fee as defined in paragraph 1.2 of Schedule 3-B.

      "Certificate of Mechanical Completion" shall have the meaning set forth in
      Section 8.1.

      "Change Order" shall have the meaning set forth in Section 6.2.

      "Changes or Extra Work" shall have the meaning set forth in Section 6.2.

      "Commencement Date" means the date set forth in a written notice to
      proceed issued by the Owner to the EPCM Contractor to commence either the
      Phase I EPCM Work or the Phase II EPCM Work, which Commencement Date shall
      be no fewer than five days after the date the notice to proceed is
      delivered in accordance with Article 14.

      "Commissioning and Start-up Period" refers to the period (initially six
      months unless increased pursuant to Appendix 4 to Schedule 2) in which
      Facilities are progressively sequenced until they operate as an
      interacting process block using actual feedstock to substantiate the
      capability of units and systems to function as designed in preparation for
      the Initial Performance Test. The Commissioning and Start-up Period shall
      commence upon a mutually agreeable date as soon as practical but no later
      than thirty (30) days after the Mechanical Completion Milestone has been
      achieved and the care, custody and control of each of the Facilities have
      been transferred to the Owner pursuant to Section 2.6, and shall continue
      until Final Acceptance.

      "Component Performance Tests" shall have the meaning set forth in Appendix
      4 to Schedule 2.

      "Contingency" or "Contingencies" means the estimate of the funds required
      to compensate for the variation that will occur in the costs of elements
      within the Open Book Estimate that is employed by the EPCM Contractor to
      determine the Open Book Estimate.

                                       2
<PAGE>

      "Data" means any and all designs, models, plans, drawings, specifications,
      back-up calculations and other documents prepared or made available by the
      EPCM Contractor for the purposes of this Agreement, whether complete or in
      the course of preparation by the EPCM Contractor.

      "day" means calendar day unless specified as a "business day", which shall
      be a day on which banks in La Paz, Bolivia and New York City, New York,
      U.S.A. are open for business.

      "Defective Work" shall have the meaning set forth in Section 4.7.

      "Dispute" shall have the meaning set forth in Section 13.2.

      "Drawings" means all drawings, plans, sketches, maps, flow sheets, layouts
      and schematics prepared pursuant to this Agreement.

      "Earned Value" means the standard method by which physical progress is
      periodically measured on a progressive basis.

      "EPCM Contractor" means the party identified as such in the Recitals
      hereto that is responsible to perform the EPCM Work in accordance with the
      terms of this Agreement.

      "EPCM Contractor Warranty Period" means the * month period following the
      earlier of the date that the Mechanical Completion Milestone is achieved
      or the date this Agreement is terminated, during which the EPCM Contractor
      is obligated to re-perform Defective Work on behalf of the Owner pursuant
      to this Agreement, as set forth and more particularly described in Section
      4.7 and the Scope of EPCM Work.

      "EPCM Contractor's Representative" means the person identified in Schedule
      5 that is nominated by the EPCM Contractor and accepted by the Owner
      pursuant to Section 4.19 to act on the EPCM Contractor's behalf pursuant
      to this Agreement.

      "EPCM Liability Limit" shall have the meaning set forth in Section
      4.29(a).

      "EPCM Liability Limit for Defective Work" means EPCM Contractor's
      obligation to reperform Defective EPCM Work in accordance with the terms
      of this Agreement in an amount not to exceed * percent (*%) of the total
      consideration paid to the EPCM Contractor under this Agreement pursuant to
      Schedule 3 that is attributable to (a) labor (including employees,
      contract employees of the EPCM Contractor, its Affiliates and
      subcontractors, if any), (b) all direct and indirect labor-related costs
      (including without limitation, employment and other fringe benefits,
      overhead, profit, living and other personal allowances, uplifts, travel
      and other expenses), and (c) any safety incentive bonus, any monthly
      discretionary award paid to the EPCM Contractor and any Incentive Pool
      Awards, each as paid in accordance with the requirements set forth in
      Schedule 3.

                                       3
<PAGE>

      "EPCM Work," consisting of the Phase I EPCM Work and the Phase II EPCM
      Work, means all activities to be undertaken in connection with the Project
      for which the EPCM Contractor bears the primary responsibility to oversee
      or perform, as applicable, in accordance with the Scope of EPCM Work set
      forth in Schedule 2.

      "Equator Principles" means the Equator Principles in effect as of the date
      hereof that are applicable to the Project, consisting of the standards
      promulgated by the World Bank as of 1998 and the IFC guidelines in effect
      as of the date hereof, copies of which are attached hereto as Schedule 8.

      "Equipment" means the materials, equipment, systems, structures and other
      improvements and items to be designed and procured, and delivered to the
      Site under the management of the EPCM Contractor pursuant to this
      Agreement.

      "Escalation" means the change in the cost of the Project due to normal
      inflationary pressures, based upon the US CPI and calculated from a base
      date that shall be the date that the Owner accepts the Target Price and
      the Target Schedule.

      "Escrow Agent" shall have the meaning set forth in Section 4.26.

      "Escrow Agreement" shall have the meaning set forth in Section 4.26.

      "Escrowed Funds" shall have the meaning set forth in Section 4.26.

      "Events" shall have the meaning set forth in Section 6.5(b).

      "Facilities" or "Facility" means the facilities or any one of them to be
      designed, purchased, manufactured, and constructed or erected on a site or
      sites approved by the Owner, comprising, subject to possible modification
      from time-to-time, the following components:

      o     Primary crushing

      o     Overland conveying

      o     Coarse ore stockpile storage and reclaim

      o     Primary and secondary grinding

      o     Flash flotation

      o     Differential froth flotation and concentrate regrinding

      o     Concentrate cleaning by froth flotation

      o     Concentrate thickening and filtration

      o     Bulk concentrate circuit

      o     Final tailing thickening and disposal

      o     Concentrate storage and rail loading

      o     Water supply and distribution systems

      o     Fire protection distribution

      o     Water storage reservoir

      o     Power substation and distribution

      o     Support buildings and infrastructure

      o     In plant roads

      o     Access Roads within the Scope of Work

                                       4
<PAGE>

      all as more particularly described in Schedule 1.

      "Fee Adjusting Events" shall have the meaning set forth in Section 6.5(b).

      "Final Acceptance" shall have the meaning set forth in Section 18.1.

      "Final Completion Date" means the date on which all Facilities
      contemplated by this Agreement have been completed and accepted by the
      Owner in accordance with Section 18.1.

      "Final Payment" shall have the meaning set forth in Section 7.6.

      "Fourteen Day Throughput Test" shall have the meaning set forth in
      Appendix 4 to Schedule 2.

      "Goods" shall have the meaning set forth in Section 17.1.

      "GD-1 Document" shall have the meaning set forth in Section 3.2.
      "Incentive Pool" shall have the meaning set forth in Schedule 3.

      "Incentive Pool Award" shall have the meaning set forth in Schedule 3.

      "Incentive Pool Escrow" shall have the meaning set forth in Schedule 3.

      "Incentive Pool Escrow Agent" shall have the meaning set forth in Schedule
      3.

      "Incentive Pool Shares" shall have the meaning set forth in Schedule 3.

      "including", when used in any of the documents comprising this Agreement,
      shall be construed as illustrative and not exclusive, and shall mean
      "including but not limited to".

      "Initial Performance Test" shall have the meaning set forth in Appendix 4
      to Schedule 2, shall commence upon a mutually agreeable date during the
      Commissioning and Start-up Period when the plant has reached a production
      steady state, and shall be performed in accordance with the provisions of
      Appendix 4 to Schedule 2.

      "Insurable Claim" shall have the meaning set forth in Section 4.29(a).

      "Key Employees" shall mean EPCM Contractor's five key employees assigned
      to the Project, as identified in Schedule 5.

      "Letter of Credit" shall have the meaning set forth in Section 5.6.

      "Mechanical Completion" is the point at which a system or combination of
      systems has been erected and/or installed in accordance with the project
      Drawings, Project Specifications, codes and applicable laws and
      regulations for which all of the major work, construction, inspections and
      testing outlined below has been completed.

                                       5
<PAGE>

      The completion of all major work, construction, inspection and testing
      required to attain Mechanical Completion for the Facilities, or any
      portion thereof, includes: (1) purging, flushing, and drying of process
      systems; (2) running in of pumps, compressors, motors, seals and other
      mechanical equipment, mechanical seal systems and lube oil systems
      including adjustments to packing of pumps and valves; (3) removal and/or
      cleaning of strainers; (4) setting and calibration of instruments, relief
      devices, and alarms; (5) computer systems testing via simulated field
      signals; (6) drying of lines, vessels and equipment; (7) hot alignment
      checks; (8) charging the plant with lubricants, utilities, chemicals, and
      other operation materials; (9) Precommissioning/Pre-Operational Testing
      activities; and (10) identification of mutually agreed upon Punch List
      Items, which may remain to be completed and may continue to be performed.

      Achievement of the Mechanical Completion Milestone set forth in Appendix 3
      to Schedule 2 shall occur when all of the components and systems
      contemplated by the Scope of Facilities set forth in Schedule 1 meet the
      foregoing criteria and are Ready for Test.

      "Milestones" refer to the Project completion Milestones identified on
      Appendix 3 to Schedule 2.

      "month" means a calendar month. -----

      "OCIP" shall have the meaning set forth in Schedule 6.

      "Open Book Estimate" shall mean EPCM Contractor's estimate of the cost
      required to complete the Work on the Project from the completion of the
      Phase I EPCM Work through to the Final Completion Date, together with a
      clear and comprehensive explanation of all elements, factors, assumptions,
      and data necessary to understand how the estimate was derived, that will
      become the basis for the Target Price upon review and approval by the
      Owner upon completion of the Phase I EPCM Work.

      "Owner" means the party identified as such in this Agreement and its
      successors and assigns as to the Project.

      "Owner's Re-performance Costs" shall have the meaning set forth in Section
      3.4.

      "Owner's Representative" means the person identified in Schedule 5 that is
      nominated from time to time by the Owner pursuant to Section 5.1 to act on
      the Owner's behalf as provided in this Agreement.

      "Owner Throughput Test" shall have the meaning set forth in Appendix 4 to
      Schedule 2.

      "Parent" shall mean Aker Kvaerner ASA, a Norwegian corporation, or any
      other entity acceptable to the Owner that provides the Parent Guaranty in
      favor of the Owner to secure EPCM Contractor's obligations under this
      Agreement.

                                       6
<PAGE>

      "Parent Guaranty" shall have the meaning set forth in Section 4.27.

      "Phase I EPCM Work" means all activities to be undertaken in connection
      with the Project for which the EPCM Contractor bears the primary
      responsibility as contemplated by the section of Schedule 2 entitled
      "Scope of EPCM Work for Phase I".

      "Phase II EPCM Work" means all activities to be undertaken in connection
      with the Project for which the EPCM Contractor bears the primary
      responsibility as contemplated by the section of Schedule 2 entitled
      "Scope of EPCM Work for Phase II".

      "Precommissioning/Pre-Operational Testing" is a series of activities, the
      completion of which is a pre-condition to Mechanical Completion. These
      activities comprise running individual process systems, using air and/or
      water, without introducing feedstock into the plant. All testing shall be
      performed through the DCS and/or PLC's to assure that all interlocks and
      safety devices are functional.

      "Price Adjusting Events" shall have the meaning set forth in Section
      6.4(b).

      "Prior Detail Engineering" shall have the meaning set forth in Section
      3.2.

      "Project" means the San Cristobal mine and related processing facilities,
      ancillary facilities and infrastructure at the Site.

      "Project Contractor" means any party with which the Owner (whether
      contracting in its own capacity or via EPCM Contractor as its duly
      authorized agent) has entered into an agreement for services, construction
      contract, purchase order, design/build contract or other agreement for
      which the EPCM Contractor acts as Owner's agent (each, a "Project
      Contract") in furtherance of performance of Project Work and completion of
      the Facilities pursuant to the Scope of Work.

      "Project Design Criteria" shall have the meaning set forth in Section 3.2.

      "Project Procedures Manual" shall mean a document or series of documents
      developed by the EPCM Contractor in consultation with the Owner as part of
      the EPCM Work, setting forth policies and administrative procedures to be
      followed by the Owner, the EPCM Contractor, Third Party Contractors,
      Project Contractors and others in connection with reports, data retention
      or generation, changes, invoices, payment and all other matters related to
      engineering and construction at the Project.

      "Project Schedule" means the updated schedule delivered with the other
      reports by the EPCM Contractor pursuant to Schedule 2 that compares all
      dates set forth in the Target Schedule against actual completion dates,
      and sets forth the EPCM Contractor's proposed action to recover the
      variance.

      "Project Specifications" means any specification prepared or required to
      be prepared by the EPCM Contractor, any Project Contractor, or any Third
      Party Contractor, or their employees, agents or representatives, as
      required by the Scope of Work for the purposes of this Agreement.

                                       7
<PAGE>

      "Project Work" means all activities to be undertaken in connection with
      the Project, as contemplated by the Scope of Work, for which Project
      Contractors bear the primary responsibility pursuant to the terms of their
      respective Project Contracts, for which Third Party Contractors bear the
      primary responsibility pursuant to the terms of their respective Third
      Party Contracts, or for which the Owner retains primary responsibility.

      "Protected Right" means any patent right, registered design, trademark or
      name, copyright or any other lawfully protected right of any person other
      than the EPCM Contractor or the Owner.

      "Punch List Items" means the itemization of incomplete items which do not
      prevent the safe operation of the Equipment or the Facilities, as
      determined and set by the EPCM Contractor and the Owner at the completion
      of Precommissioining/Pre-Operational Testing, that shall not be required
      to be performed by the EPCM Contractor to attain Mechanical Completion,
      but shall be completed prior to Acceptance by the Owner.

      "Ready for Test" refers to the condition of the Facilities immediately
      after achievement of the Mechanical Completion Milestone and prior to the
      commencement of the Commissioning and Start-up Period activities, where
      the entire integrated plant is ready for the introduction of feedstock.

      "Reimbursable Costs" when used with respect to the Phase I EPCM Work,
      shall mean the Reimbursable Costs set forth in paragraph 1.1 of Schedule
      3-A, and when used with respect to the Phase II EPCM Work, shall mean the
      Reimbursable Costs set forth in paragraph 1.1 of Schedule 3-B.

      "Representative" shall mean either EPCM Contractor's Representative or
      Owner's Representative, and "Representatives" shall mean EPCM Contractor's
      Representative and Owner's Representative collectively.

      "Retention Escrow" shall have the meaning set forth in Section 4.26.

      "Schedule" means any of the schedules attached hereto and incorporated
      herein.

      "Schedule Adjusting Events" shall have the meaning set forth in Section
      6.3(b).

      "Scope of EPCM Work" means the portion of the Scope of Work for which the
      EPCM Contractor shall be responsible in accordance with this Agreement, as
      set forth in Schedule 2.

      "Scope of Facilities" means the scope of Facilities that are contemplated
      by this Agreement for the Project, as set forth in Schedule I.

      "Scope of Work" means the entire scope of work (whether to be performed by
      the EPCM Contractor in accordance with the Scope of EPCM Work, Project
      Contractors or Third Party Contractors) required to be performed for the
      Project.

                                       8
<PAGE>

      "Senior Lender Throughput Test" shall have the meaning set forth in
      Appendix 4 to Schedule 2.

      "Senior Lenders" shall have the meaning set forth in Section 16.1(a).

      "Senior Management" shall have the meaning set forth in Section 13.5.

      "Site", "Job Site" and "Work Site" shall mean the areas upon which the
      Facilities required by the Owner are to be built or installed and such
      land adjacent, or appurtenant, thereto as is reasonably necessary for the
      carrying out of the Work to install the Facilities.

      "Standard Engineering and Construction Management Practices" or "SECMP"
      shall mean the generally accepted practices, methods, techniques and
      standards employed by the first tier firms providing engineering,
      procurement, construction and management services to the international
      mining industry with respect to the design, engineering, procurement and
      construction management, and related technical and administrative services
      in connection with the construction, commissioning and testing of mining
      and related facilities.

      "Target Price" or "Price" means the sum stipulated in Appendix 2 to
      Schedule 2, consisting of the initially accepted Open Book Estimate, plus
      mutually acceptable, normal Contingencies, plus Escalation, or such other
      sum as shall be determined from time to time in accordance with the
      provisions of this Agreement.

      "Target Schedule" means the target completion schedule produced by the
      EPCM Contractor as part of the Phase I EPCM Work and set forth in Appendix
      3 to Schedule 2, as the same may be modified from time to time in
      accordance with this Agreement.

      "Third Party Contract" means any contract entered into by the Owner
      directly with a Third Party Contractor.

      "Third Party Contractor" means any person, firm or company who contracts
      directly with the Owner to design, supply, erect, install or construct any
      part or parts of the Project other than Facilities designed and procured
      as Owner's agent by, and constructed under the management of the EPCM
      Contractor hereunder, or to provide services related to the same and
      includes suppliers, vendors and fabricators of equipment for use in or in
      conjunction with construction of such portion of the Project not included
      in the Facilities; but shall not include the EPCM Contractor or its
      Affiliates, or any Project Contractor. The Owner may also contract
      directly with any person, firm or company as Third Party Contractors to
      inspect or evaluate the EPCM Work or any other Work or its performance.

      "Throughput Performance Test" shall have the meaning set forth in Appendix
      4 to Schedule 2.

      "Work," consisting of the EPCM Work and the Project Work, means all
      activities to be undertaken in connection with the Project, as
      contemplated by the Scope of Work.

                                       9
<PAGE>

      The headings of the parts, sections or paragraphs of this Agreement are
      for ease of reference only and shall not in any way affect the
      construction or interpretation of this Agreement. Unless otherwise
      indicated, cross references to articles, sections, subsections, paragraphs
      or sub-paragraphs shall refer to articles, sections, subsections,
      paragraphs or sub-paragraphs of this Agreement.

                                    ARTICLE 2
                                    TIMELINE

2.1   Effectiveness.

      This Agreement shall be effective as of the date first set forth above;
      provided that any aspect of the EPCM Work provided for herein which has
      been performed by the EPCM Contractor on or after March 22, 2004 and any
      payment made by the Owner for such EPCM Work shall be deemed to be subject
      to and performed and paid under this Agreement. This Agreement shall
      remain in effect until the Final Completion Date or termination of the
      Agreement in accordance with Article 10; provided that all
      representations, warranties, agreements, indemnities and obligations shall
      survive in accordance with the provisions of Section 20.1.

2.2   Phase I EPCM Work.

      The EPCM Contractor hereby agrees to perform the Phase I EPCM Work in
      accordance with the Scope of EPCM Work, all applicable Project
      Specifications and the terms of this Agreement. The EPCM Contractor agrees
      to complete performance of the Phase I EPCM Work pursuant to this
      Agreement on a cost reimbursable basis with a fee based on a set
      percentage, determined pursuant to Schedule 3-A, to produce a Target Price
      and a Target Schedule based upon a mutually acceptable Open Book Estimate
      for Owner's review and acceptance, in a timely manner. In addition to the
      Base Fee for the Phase I EPCM Work, the EPCM Contractor shall be eligible
      for certain incentive bonuses more fully described in Schedule 3-A. The
      Phase I EPCM Work shall not be deemed to have been completed until the
      Owner accepts the Target Price and the Target Schedule, based upon a
      mutually acceptable Open Book Estimate. For the purposes of this
      Agreement, the Target Price shall consist of the Open Book Estimate, plus
      mutually acceptable, normal Contingencies, plus Escalation.

2.3   Phase II EPCM Work.

      Upon completion of the Phase I EPCM Work, the Owner and the EPCM
      Contractor shall confirm in writing the proposed Target Price and the
      proposed Target Schedule pursuant to the mutually acceptable Open Book
      Estimate. Prior to Owner issuing a notice to proceed with the Phase II
      EPCM Work or such later date as the parties may agree, the Owner and the
      EPCM Contractor shall, by formal amendment to this Agreement, amend and/or
      update any of the Schedules to this Agreement that require amending or
      updating as a result of the confirmation of the Target Price and the
      Target Schedule. The parties shall also finalize and confirm the insurance
      provisions and requirements of Schedule 6 at that time. Upon finalizing
      the Schedules and Owner issuing a notice to proceed (which notice shall
      include the projected Commencement Date for the Phase II EPCM Work), the
      EPCM Contractor hereby agrees to perform the Phase II EPCM Work in
      accordance with the Scope of EPCM Work, all applicable Project
      Specifications and the terms of this Agreement. The EPCM Contractor shall
      perform the Phase II EPCM Work pursuant to this Agreement on a cost
      reimbursable basis (payable on an imprest basis with monthly true up in
      accordance with Section 7.2) with a fixed fee, determined pursuant to
      Schedule 3-B, and in accordance with the Target Schedule, as set forth in
      Appendix 3 to Schedule 2, as it may be amended or updated from time to
      time. In addition, the EPCM Contractor shall also be eligible for certain
      incentives, which are based upon EPCM Contractor's productivity and which
      are more fully described in Schedule 3-B.

                                       10
<PAGE>

2.4   Time Schedule; Progress Reports.

      To the extent that the time schedule and completion dates for the various
      portions or divisions of the Work are not set forth in Appendix 3 to
      Schedule 2 at the time this Agreement is executed, they will be mutually
      agreed upon by the Owner and the EPCM Contractor upon the completion of
      the Phase I EPCM Work prior to acceptance by the Owner of the Target Price
      and the Target Schedule, and Appendix 3 to Schedule 2 will be so amended.
      The Owner may delay scheduled Milestones and completion dates pursuant to
      the provisions of Section 4.7(b) and 6.3(b)(iii); provided that Appendix 3
      to Schedule 2 shall be amended accordingly. Damages for delay by the EPCM
      Contractor are limited to those set forth in Schedule 3-B.

      The EPCM Contractor agrees to provide the progress reports described in
      Schedule 2 and as reasonably directed by the Owner. Progress reports shall
      be in Critical Path Method format using PRIMAVERA(R) software. The
      activity descriptions, level of detail and all other progress report
      format issues shall be as reasonably required by the Owner or the Owner's
      Representative from time to time.

2.5   Achievement of Milestones.

      The EPCM Contractor hereby undertakes to achieve the segments of the EPCM
      Work identified by the Milestones set forth in Appendix 3 to Schedule 2 in
      accordance with the Target Schedule. The consequences to the EPCM
      Contractor for achieving or failing to achieve the Milestones is limited
      to those set forth in Schedule 3.

2.6   Transfer of Care, Custody and Control.

      The EPCM Contractor shall, upon commencement of the Phase II EPCM Work,
      assume on behalf of the Owner, the care and custody, and as Owner's agent,
      the control (subject to direction at all times by the Owner) of the Site,
      the Facilities, the Equipment, the Goods, and any other machinery, tools,
      materials or property delivered to the Site to be used to perform the
      Work, and shall retain such care, custody and control until transferred to
      the Owner pursuant to this Section 2.6. During such period, the EPCM
      Contractor shall comply with the duty of care standards and requirements
      set forth in Section 17.2. The EPCM Contractor shall comply, and oversee
      the compliance by any Project Contractor, Third Party Contractor or other
      person at the Site, with the safety and security requirements and
      procedures set forth in this Agreement and as reasonably designated by the
      Owner from time to time.

                                       11
<PAGE>

      The transfer of care, custody and control of the Facilities, or any
      portion thereof, to the Owner by the EPCM Contractor shall occur after
      Mechanical Completion of the Facilities or such portion thereof. Any punch
      list items identified as a precondition to Mechanical Completion shall
      include general and specific instructions to effect the transfer of care,
      custody and control of the Facilities or any portion thereof.

2.7   Commissioning and Start-up Period.

      The Commissioning and Start-up Period shall commence upon a mutually
      agreeable date as soon as practical but no later than thirty (30) days
      after the Mechanical Completion Milestone has been achieved and the care,
      custody and control of each of the Facilities contemplated by this
      Agreement have been effectively transferred in accordance with Section
      2.6.

                                   ARTICLE 3
                     ACKNOWLEDGMENTS BY THE EPCM CONTRACTOR

      The EPCM Contractor hereby acknowledges, represents and warrants that:

3.1   Reliance on Skill and Expertise of the EPCM Contractor.

      The Owner is relying on the skill and expertise of the EPCM Contractor
      with respect to performance of the EPCM Contractor's obligations under
      this Agreement. Any approvals or instructions which the Owner is required
      or entitled to give under this Agreement will in no way alter the Owner's
      reliance on the skill and expertise of the EPCM Contractor or alter the
      obligations of the EPCM Contractor under this Agreement, nor shall the
      giving of any such approval constitute an assumption by the Owner of any
      of the EPCM Contractor's obligations or responsibilities set out in this
      Agreement. Notwithstanding the foregoing, in no event shall the EPCM
      Contractor be liable for any liability or damages arising from compliance
      with any written instructions or approvals issued by the Owner which are
      issued against the written recommendation of the EPCM Contractor made in
      accordance with the standards of SECMP, nor shall the EPCM Contractor's
      continuing performance of its obligations under this Agreement in
      compliance with such instructions or approvals constitute a ratification
      or acceptance of any such instructions or approvals issued by the Owner.

3.2   Prior Completed Work.

      The Owner and the EPCM Contractor confirm and agree that EPCM Contractor's
      obligations with respect to completing the design of the Facilities as set
      forth in the Phase II Scope of EPCM Work is based on revision No. 0 of
      that certain design document entitled the GD 1 document which is
      incorporated herein as Appendix 1 to Schedule 2 (the "GD 1 Document") and
      the detail engineering, materials and specifications produced and
      delivered to the Owner pursuant to the Letter of Intent between the Owner
      and Kvaerner U.S., Inc., dated September 5, 2000 (the "Prior Detail
      Engineering", and together with the GD-1 Document, the "Project Design
      Criteria"). The Project Design Criteria is to be utilized by the EPCM
      Contractor as the basis for the performance of the Work as required by
      this Agreement. The Owner agrees that the EPCM Contractor is entitled to
      rely on the accuracy and sufficiency of the Project Design Criteria except
      to the extent the Project Design Criteria references prior work performed
      by the EPCM Contractor on the Project. The EPCM Contractor hereby confirms
      that it has reviewed all references to prior work performed by the EPCM
      Contractor that are contained in the Project Design Criteria and has
      satisfied itself as to the accuracy, adequacy, and sufficiency of such
      prior work, as incorporated into the Project Design Criteria. The EPCM
      Contractor agrees to notify the Owner in writing of any inadequacy,
      discrepancy, error or other condition which requires a material revision
      of the Project Design Criteria or which will materially affect the
      performance of the Work that it may discover in the course of performing
      the EPCM Work under this Agreement, promptly upon discovery.

                                       12
<PAGE>

      If during the performance of the EPCM Work the EPCM Contractor encounters
      subsurface or concealed conditions which (1) vary materially from those
      indicated in the Project Design Criteria, or (2) vary materially from
      conditions ordinarily encountered and recognized as inherent in work of
      the nature provided for herein, the EPCM Contractor shall immediately
      notify the Owner. Except as provided in Section 5.4 or Article 6 of this
      Agreement, such conditions or problems, whether expected or unexpected,
      shall not affect or modify any of the terms of this Agreement, the EPCM
      Contractor's obligation to perform the EPCM Work, or give rise to any
      claim or liability related thereto against the Owner.

3.3   Owner's Right to Inspect.

      The Owner or its designee shall have the right to inspect and/or test all
      or any part of the Work and/or the Equipment and the EPCM Contractor shall
      provide sufficient access and means for such inspection and/or tests. All
      EPCM Work performed by the EPCM Contractor shall be subject to quality
      surveillance by the Owner or its designee at all times and the EPCM
      Contractor shall maintain, available for the Owner's inspection at all
      times, copies of any of the EPCM Contractor's inspection or testing
      reports. The Owner shall be afforded the opportunity to attend, observe,
      and witness all inspections and tests of the Work and/or the Equipment.

      The EPCM Contractor shall maintain, available for the Owner's inspection
      at all times, in good order at the Site, complete and accurate records of
      all Project materials and equipment received by and/or issued to the EPCM
      Contractor for use in the Project and, throughout the execution of field
      activities, one record copy (or on-line electronic access to such record
      copy) of plans, drawings, specifications, product data, samples, vendor
      drawings, change orders, and other as-built modifications, marked
      currently to record changes made during construction. The Owner may
      request, and the EPCM Contractor shall provide, or undertake to provide if
      in the custody or control of any third party (including any Project
      Contractor) evidence satisfactory to the Owner that materials, supplies or
      equipment being provided for the Work and/or the Facilities conform with
      the Project Specifications.

                                       13
<PAGE>

      In the event that the Owner informs the EPCM Contractor of any variance
      (whether by the EPCM Contractor, or any Project Contractors) from the
      requirements of this Agreement concerning the performance of the Work
      (whether relating to compliance with safety requirements, the applicable
      Project Specifications, the standards of SECMP or the Target Schedule),
      the EPCM Contractor shall immediately take all necessary steps to correct
      such variance and if such variance cannot be corrected immediately, the
      EPCM Contractor shall submit to the Owner a written plan for correcting
      such variance. Unless otherwise requested by the Owner, such plan shall be
      submitted to the Owner within five (5) business days. Execution of any
      such plan shall be subject to the prior approval of the Owner. In the
      Owner's exercise of its rights under this Section 3.3, the Owner shall
      remain responsible for ascertaining and specifying the means, methods or
      techniques by which the EPCM Contractor shall correct any variances. The
      Owner's failure to inform the EPCM Contractor of any variance from the
      requirements of this Agreement (whether relating to compliance with safety
      requirements, the applicable Project Specifications, the standards of
      SECMP or the Target Schedule) shall not be deemed to be approval by the
      Owner of such variance or a waiver of any of the Owner's rights on account
      of such variance and shall not relieve the EPCM Contractor of
      responsibility for the proper and timely performance of the EPCM Work in
      accordance with the terms of this Agreement.

      Notwithstanding the foregoing, the Owner shall have the right to reject
      any variance that rises to the level of Defective Work (as defined in
      Section 4.7) at any time it is discovered in accordance with the
      provisions of Section 4.7. Any quality surveillance by the Owner, and the
      failure of the Owner to reject any Work as defective following any quality
      surveillance, or any failure by the Owner to inspect and/or test any part
      of the Work and/or the Equipment shall not be deemed the approval of such
      Work by the Owner and shall not relieve the EPCM Contractor of
      responsibility for the proper performance of the EPCM Work or
      re-performance of Defective Work in accordance with the terms of this
      Agreement. All of the Project Contracts negotiated, written, administered
      and/or entered into by the EPCM Contractor shall include express
      provisions to incorporate the substance of this Section 3.3.

3.4   Owner's Right to Perform EPCM Work.

      If the EPCM Contractor defaults or neglects to carry out the EPCM Work or
      re-perform Defective Work, or any part thereof, in accordance with the
      terms and conditions of this Agreement, the Owner, without prejudice to
      any other right or remedy under this Agreement, upon providing the EPCM
      Contactor with the notice required by Section 9.1 of this Agreement, may
      perform the EPCM Work or re-perform Defective Work, or any part thereof,
      by whatever methods or means it may deem expedient, and recover from the
      EPCM Contractor the reasonable costs incurred by the Owner ("Owner's
      Re-performance Costs") to perform such EPCM Work or re-perform such
      Defective Work. For purposes of determining Owner's Re-performance Costs
      under this Agreement "reasonable costs incurred by the Owner" shall be
      those costs which an unaffiliated third party would incur to secure
      performance of the relevant work by another unaffiliated third party.
      Averages of third party bids or other evidence available in the relevant
      market should be considered in making such determination.

                                       14
<PAGE>

3.5   Removal of Employees.

      The EPCM Contractor shall, at the request of the Owner, promptly direct
      the removal from the Job Site or participation in any aspect of the Work,
      any of its employees or employees of any Project Contractor that the Owner
      determines are incompetent, dishonest, uncooperative, unable to work
      harmoniously with any of the Owner's employees or are otherwise unfit for
      work (including, but not limited to, because of the use of alcohol or
      drugs). The Owner shall consult with EPCM Contractor's Representative
      prior to requiring the removal of any such employee, but shall retain sole
      discretion to decide whether to remove such employee after consultation
      with EPCM Contractor's Representative. All of the Project Contracts
      negotiated, written, administered and/or entered into by the EPCM
      Contractor shall include express provisions to incorporate the substance
      of this Section 3.5.

3.6   Independent Contractor.

      The EPCM Contractor shall at all times during the performance of the EPCM
      Work be an independent contractor and shall have complete control of its
      personnel engaged in the performance of the EPCM Work and the means and
      methods employed. Neither the EPCM Contractor nor anyone employed or
      subcontracted by the EPCM Contractor shall be deemed for any purpose to be
      the employee, servant, or representative of the Owner, or except as
      otherwise expressly provided in this Agreement, the agent of the Owner.

3.7   Demobilization.

      Subject to the provisions of Section 4.25 of this Agreement, the EPCM
      Contractor shall not demobilize the key personnel committed to the EPCM
      Work described in Schedule 5 (the "Key Employees") without obtaining the
      prior written approval of the Owner.

                                   ARTICLE 4
                          EPCM CONTRACTOR'S OBLIGATIONS

4.1   Scope of EPCM Work.

      The EPCM Contractor shall perform the EPCM Work in accordance with and
      subject to the terms and conditions of this Agreement and as more fully
      described in Schedule 2. The EPCM Contractor agrees to perform the EPCM
      Work in compliance with all applicable Project Specifications in order to
      successfully complete the Initial Performance Test in accordance with the
      provisions of Appendix 4 to Schedule 2. The EPCM Contractor acknowledges
      and agrees that in order to successfully complete the Initial Performance
      Test, the EPCM Contractor may be required to perform tasks that are
      reasonably inferred from the Scope of EPCM Work that are not expressly
      described herein.

4.2   Proper Licensing.

      The EPCM Contractor shall, at its cost, maintain at all times, all
      applicable licenses required to perform all aspects of the EPCM Work. The
      EPCM Contractor shall ensure that its agents, representatives, and Project
      Contractors are properly licensed to perform all applicable portions of
      the EPCM Work or the Project Work, as applicable.

                                       15
<PAGE>

4.3   Drawings, Project Specifications, etc.

      (a)   In this Section 4.3 "Data" means any and all drawings,
            specifications, back up calculations and other instruments of
            service or documents related to or describing the Equipment,
            Facilities or the EPCM Work prepared under this Agreement by the
            EPCM Contractor, or any of its agents, representatives or employees.
            "Data" includes both a hard copy and electronically stored "digital
            format" of all information described in this Section 4.3(a).
            "Originals" means a complete reproducible set of the Data.

            (i)   Except as otherwise designated by the Owner, "digital format"
                  as it is used in this Section 4.3(a) shall mean computer
                  readable disks which contain information formatted as follows:

                  o     all Drawings shall be produced using Intergraph(R)
                        microstation or Intergraph(R) PDS format;

                  o     Project Specifications, manuals, and vendor manuals (if
                        available) shall be produced using Microsoft(R) Word
                        2002;

                  o     schedules shall be produced using WINDOWS(R) based
                        PRIMAVERA(R);

                  o     work progress (in addition to any written progress
                        reports) shall be quantified on S-curves and
                        spreadsheets using Microsoft(R) Excel 2002.

      (b)   The Owner shall be entitled to and become the owner of all Data when
            prepared, whether delivered or not; provided that any Data, the
            payment for which is not made by the Owner or is in dispute, shall
            become the property of the Owner upon tender of the payment or
            resolution of the dispute, as applicable. To the fullest extent
            permitted under applicable law, the EPCM Contractor hereby assigns
            to the Owner all rights and interests in the Data and releases or
            waives any lien rights it may have on the Data, to the extent that
            payment for such Data has been made.

      (c)   Not later than thirty (30) days after the Final Completion Date, the
            EPCM Contractor shall provide the Owner with one set of originals of
            the Data. However, subject to Section 11.1, the EPCM Contractor may
            retain a copy of such Data.

      (d)   Upon any termination of this Agreement prior to the Final Completion
            Date, the EPCM Contractor shall provide the Owner with one set of
            originals of all Data to which the Owner is entitled as of the date
            of termination, which shall be delivered to the Owner not more than
            thirty (30) days after the date of termination. Additionally, the
            EPCM Contractor shall promptly provide to the Owner any additional
            Data to which the Owner may later become entitled. However, subject
            to Section 11.1, the EPCM Contractor may retain a copy of any such
            Data.

                                       16
<PAGE>

      (e)   All of the Project Contracts negotiated, written, administered
            and/or entered into by the EPCM Contractor shall include express
            provisions to incorporate the substance of this Section 4.3.

4.4   Inventions and Improvements.

      The EPCM Contractor shall communicate to the Owner at once, and require
      all employees of Project Contractors assigned to the Work to communicate
      to the Owner all inventions and improvements which any of the employees of
      the EPCM Contractor or any Project Contractors, either alone or in
      conjunction with any of Owner's employees, may conceive, make or discover
      during the course of or as a result of performance of the Work that
      relates to the Facilities, and such inventions and improvements shall
      become the sole, exclusive property of the Owner or its assigns without
      any obligation on Owner's part to make any payment therefor in addition to
      any sums which the Owner may be obligated to pay to the EPCM Contractor as
      compensation under this Agreement. The EPCM Contractor shall require its
      employees, and the relevant employees of any Project Contractor to execute
      patent applications and assignments thereof to the Owner or its nominees,
      and powers of attorney relating thereto for any country that the Owner may
      designate, and shall take all other actions as the Owner may request to
      maintain and protect such inventions and improvements. The Owner shall pay
      all costs or charges incurred in protecting such inventions and
      improvements if the Owner desires to protect them. Before assigning any of
      the employees of the EPCM Contractor or any Project Contractor to work
      under any Project Contract, the EPCM Contractor shall obtain from them
      agreements satisfactory to the Owner incorporating the substance of this
      Section 4.4.

4.5   Intellectual Property Indemnity.

      Except in those instances where the EPCM Contractor was directed by the
      Owner to use a certain process or item of Equipment and the EPCM
      Contractor complied with those directions, the EPCM Contractor shall
      indemnify, defend, save, and hold the Owner harmless from and against any
      and all costs, royalties, damages, and/or expenses of any nature or kind
      whatsoever that may arise out of, result from, or be reasonably incurred
      in contesting any claim that the methods, processes, or acts employed by,
      or any plans, drawings, specifications, other written data or work product
      provided by the EPCM Contractor, or its agents or employees in connection
      with the EPCM Work, or any item of Equipment, infringes or contributes to
      the infringement of any registered patent, or may constitute illegal or
      unauthorized use of copyrighted material, trade secrets, confidential or
      proprietary information or processes, or other Protected Right in whatever
      form it may exist.

      The EPCM Contractor shall have the right, in order to avoid such claims or
      actions and at EPCM Contractor's sole cost, to substitute non-infringing
      processes, designs, or Equipment, or to obtain the necessary licenses to
      use the infringing processes, designs, or Equipment, provided that such
      substituted and modified processes, designs, or Equipment meet all the
      requirements and are subject to all the terms or conditions of this
      Agreement.

                                       17
<PAGE>

      As part of the EPCM Contractor's procurement and contract management work,
      the EPCM Contractor shall secure, for the benefit of the Owner and its
      assigns, indemnities from all Project Contractors substantially similar to
      that set forth above and acceptable to the Owner, running directly to the
      Owner, relating to any apparatus, method, design or processes employed in
      the Facilities or used in the performance of the applicable Project Work.

4.6   Representations and Warranties.

      The EPCM Contractor represents and warrants to and agrees with the Owner
      that:

      (a)   it has substantial experience, knowledge and professional competence
            in the design, engineering, procurement, project management,
            construction management and construction of projects similar in
            nature to the Facilities in locales similar to the Site, and
            specifically including silver, lead and zinc processing facilities
            and related infrastructure;

      (b)   it has the resources and personnel (including, but without
            limitation, the Key Employees listed in Schedule 5) to perform the
            EPCM Work;

      (c)   it is fully experienced, properly qualified and properly licensed,
            equipped and organized to perform the EPCM Work;

      (d)   all Work shall be provided and performed in a good, proper, safe,
            efficient, and professional and workmanlike manner and in accordance
            with the terms and conditions of this Agreement, the Project
            Specifications, the standards of SECMP and the Equator Principles;

      (e)   the EPCM Contractor shall, in the provision of the EPCM Work
            involving design and other functions generally performed by
            professional engineers, exercise the standard of diligence, skill,
            efficiency and care consistent with the standards of SECMP for
            projects of similar scope and in comparable locations, and the
            applicable Equator Principles;

      (f)   with respect to the construction management services and other EPCM
            Work to be performed by the EPCM Contractor pursuant to this
            Agreement, the quality of the EPCM Work shall conform to the
            standards of SECMP and the applicable Equator Principles;

      (g)   except as to Owner-specified material and Equipment, the Facilities,
            and the material and Equipment to be procured by the EPCM Contractor
            for the Facilities and otherwise in connection with the Work, shall
            be of a quality that complies with all applicable Project
            Specifications and the standards of SECMP;

                                       18
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      (h)   it, and Parent are financially solvent, able to pay all debts as
            they mature and possessed of sufficient working capital to complete
            the EPCM Work and perform all obligations under this Agreement with
            respect to the EPCM Contractor and under the Parent Guaranty with
            respect to Parent;

      (i)   it is duly incorporated and validly existing in good standing under
            the laws of the jurisdiction of its incorporation;

      (j)   its execution of this Agreement and its performance thereof is
            within its duly authorized corporate powers;

      (k)   it is authorized to do business in the jurisdictions in which it
            will perform the EPCM Work;

      (l)   prior to Owner entering into Project Contracts with any of the
            Project Contractors, the EPCM Contractor shall have performed a
            reasonable level of due diligence to ensure that, for the portion of
            the Project Work that they are to perform, each of the Project
            Contractors is (i) fully experienced, properly qualified, properly
            licensed, properly equipped and properly organized; (ii) financially
            solvent, able to pay all debts as they mature and possessed of
            sufficient working capital; (iii) authorized to do business in the
            jurisdictions in which they will perform; and (iv) familiar with the
            Equator Principles applicable to its scope of work; and throughout
            the effectiveness of this Agreement the EPCM Contractor will, in
            accordance with the standards of SECMP, monitor each Project
            Contractor for compliance with the requirements of this Agreement;

      (m)   there are no proceedings, investigations, controversies or claims
            now pending or, to its knowledge, threatened before any court or
            arbitrator or before any governmental authority which, individually
            or in the aggregate, if determined adversely to the interests of the
            EPCM Contractor could affect its legal, commercial or financial
            capability to fulfill its obligations under this Agreement; and

      (n)   this Agreement constitutes the valid and legally binding obligation
            of the EPCM Contractor enforceable in accordance with its terms.

      THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT ARE
      THE SOLE AND EXCLUSIVE WARRANTIES OF THE EPCM CONTRACTOR HEREUNDER. THERE
      ARE NO OTHER WARRANTIES EXPRESS OR IMPLIED. THE EPCM CONTRACTOR
      SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY. EXCEPT AS
      EXPRESSLY STATED HEREIN OR IN THIS AGREEMENT, THE EPCM CONTRACTOR MAKES NO
      REPRESENTATIONS, GUARANTEES, OR WARRANTIES.

      4.7   Re-performance of Defective Work.

      Any Equipment, Facilities, or Work (whether EPCM Work or Project Work)
      that fails to meet the standards of SECMP, the standards set forth in
      Section 4.6 (d) - (h), or the standards set forth in any applicable
      Project Contract or Third Party Contract shall constitute "Defective Work"
      for all purposes under this Agreement. To the extent that the Defective
      Work was performed by the EPCM Contractor and the Owner notifies the EPCM
      Contractor in writing of such Defective Work prior to the expiration of
      the * month period following achievement of the Mechanical Completion
      Milestone, or prior to the expiration of the * month period following
      termination of this Agreement, if earlier, then the EPCM Contractor will
      expeditiously perform or re-perform the relevant Defective Work, including
      where applicable initiating and supervising the repair and/or replacement
      of any part of the Equipment or Facilities that constitute Defective Work.
      To the extent Defective Work or any part thereof has been re-performed by
      the EPCM Contractor, or repairs or modifications of Defective Work have
      been supervised by the EPCM Contractor during the performance testing, or
      pursuant to this Section 4.7, the * period to provide such notice shall be
      extended to include the * period immediately following the completion of
      such re-performance, repair or modification, not to exceed * months in
      total from achievement of the Mechanical Completion Milestone.

                                       19
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      (a)   Re-performance due to EPCM Contractor Fault. Re-performance of
            Defective Work that is EPCM Work shall be performed at EPCM
            Contractor's own expense, including EPCM Contractor's labor costs.
            To the extent Defective Work is Project Work that was performed by a
            Project Contractor under the supervision of the EPCM Contractor
            (other than Defective Work performed by a Project Contractor that
            contains a defect that could not have been discovered by the EPCM
            Contractor overseeing or inspecting such work in accordance with the
            standards of SECMP), initiation and supervision of the
            re-performance of the Defective Work shall be performed at EPCM
            Contractor's own expense, including EPCM Contractor's labor costs.
            Notwithstanding anything in this Section 4.7, the EPCM Contractor
            shall not be required to perform any work, the value of which
            exceeds the EPCM Liability Limit for Defective Work. Project
            Contractors shall be required to re-perform Defective Work to the
            extent they are obligated under their respective Project Contracts
            and no application of the EPCM Liability Limit for Defective Work to
            EPCM Contractor's obligations shall affect or otherwise limit the
            obligations or liability of any Project Contractor. The Owner shall
            order and pay for any Equipment required to accomplish the
            re-performance of Defective Work in accordance with the terms of
            this Agreement. The Owner shall decide, in its discretion, whether
            to pay for any Project Contractor expense required to accomplish the
            re-performance of Defective Work, to the extent the event or
            condition requiring the re-performance was not the fault of such
            Project Contractor, or the Owner otherwise determines in its
            discretion that such payment is necessary for timely completion of
            the relevant portion of the Work; provided that the EPCM Contractor
            shall not in any event be required to pay any Project Contractor
            expenses incurred to re-perform Defective Work. Notwithstanding the
            provisions of this Section 4.7(a), in no event, shall any
            re-performance of Defective Work pursuant to this Section 4.7(a)
            result in an upward adjustment to the Target Price, the Target
            Schedule or the Phase II Base Fee, unless (i) EPCM Contractor's
            obligation to oversee re-performance of Defective Work performed by
            a Project Contractor requires a Change Order in accordance with the
            materiality provisions set forth in Article 6, (ii) the EPCM
            Liability Limit for Defective Work has been reached, as confirmed in
            accordance with Section 4.7(e) and the Owner desires to retain EPCM
            Contractor's services to remedy or supervise the remediation of
            Defective Work, in accordance with the terms of this Agreement, or
            (iii) the Owner otherwise agrees.

                                       20
<PAGE>

      (b)   Re-performance due to Third Party Contractor Fault. Except to the
            extent that the EPCM Contractor may be at fault for the condition
            requiring the re-performance of any Defective Work that is Project
            Work that was performed by a Third Party Contractor, the EPCM
            Contractor's only obligation for such Third Party Contractor
            re-performance is to monitor and coordinate any re-performance
            required as if it were part of the original EPCM Work. The Owner
            shall reimburse the EPCM Contractor for any additional time spent
            monitoring and coordinating such Third Party Contractor
            re-performance pursuant to paragraph 1.1 of Schedule 3-B; provided
            that no changes shall be made to the Target Price, the Target
            Schedule or the Base Fee unless the additional work required of the
            EPCM Contractor meets the relevant materiality standards set forth
            in Article 6.

      (c)   Re-performance by the Owner. Subject to the EPCM Liability Limit for
            Defective Work and notwithstanding the provisions of Section 3.4, if
            the EPCM Contractor does not promptly re-perform Defective Work (in
            the case of defective EPCM Work), or promptly initiate and supervise
            re-performance of Defective Work (in the case of defective Project
            Work), in each case as instructed by the Owner, or in an emergency
            where delay would cause serious risk of loss or damages, the Owner
            may correct or replace the Defective Work itself or engage another
            party to do so, without regard to whether the cost of correction by
            or on behalf of the Owner is greater or less than the cost for the
            EPCM Contractor to correct or replace the Defective Work. In such
            case the Owner's Re-performance Costs, as determined pursuant to
            Section 3.4, shall be paid by the EPCM Contractor and the Owner may
            deduct the amount of Owner's Re-performance Costs from any amount
            payable (other than amounts constituting the Base Fee) then or in
            the future by the Owner to the EPCM Contractor under this Agreement.

      (d)   Acceptance of Defective Work. If the EPCM Contractor is unable or
            unwilling to re-perform or cause the re-performance of Defective
            Work, or if the Owner otherwise decides not to require
            re-performance, repair or replacement, the Owner may accept the
            Defective Work. In such event, the EPCM Contractor shall, subject to
            the EPCM Liability Limit for Defective Work, bear all direct costs
            attributable to Owner's evaluation of and determination to accept
            such Defective Work (to include but not be limited to fees and
            charges of engineers and other professionals). If any such
            acceptance occurs after the Final Completion Date, an appropriate
            amount reflecting the cost EPCM Contractor would have incurred to
            re-perform (or supervise re-performance of, as the case may be) the
            Defective Work, plus the additional costs incurred by the Owner as a
            ---- result of such Defective Work shall be paid by the EPCM
            Contractor, subject to the EPCM Liability Limit for Defective Work.
            If any such acceptance occurs prior to the Final Completion Date, a
            Change Order will be issued incorporating the necessary revisions
            with respect to the Defective Work, and the Target Price shall be
            adjusted downward by the amount reflecting the diminished value
            received, plus all direct costs attributable to Owner's
            evaluation of and determination to accept such Defective Work.

                                       21
<PAGE>

      (e)   EPCM Liability Limit for Defective Work. The EPCM Liability Limit
            for Defective Work relates to the obligations and liability of the
            EPCM Contractor only and shall not in any way effect or limit the
            obligations and liability of Project Contractors. The EPCM
            Contractor shall give written notice to the Owner when EPCM
            Contractor has incurred costs to re-perform Defective Work equal to
            the EPCM Liability Limit for Defective Work, regardless of when such
            event takes place. Such notice shall set forth EPCM Contractor's
            calculations of the value of its re-performance and/or oversight of
            Defective Work, together with any other calculations or information
            necessary for the Owner to verify EPCM Contractor's assertions
            regarding the EPCM Liability Limit for Defective Work. The Owner
            shall have fifteen (15) days after receipt of EPCM Contractor's
            notice in which to provide the EPCM Contractor with a detailed
            statement setting forth any disagreement the Owner may have with
            EPCM Contractor's calculations or other assertions. Any disputes
            that are not resolved within five (5) days after delivery, if any,
            of Owner's detailed statement shall be resolved in accordance with
            the dispute resolution provisions of Article 13. In the event that
            the EPCM Liability Limit for Defective Work is reached prior to
            Final Acceptance pursuant to Section 18.1, the Owner may, by Change
            Order, retain EPCM Contractor's services to re-perform, supervise or
            monitor and coordinate, or continue re-performing, supervising or
            monitoring and coordinating Defective Work, thereby incorporating
            the additional work into the Scope of EPCM Work. In the event that
            the EPCM Liability Limit for Defective Work is reached after Final
            Acceptance pursuant to Section 18.1, any additional work (whether
            new work or re-performance of Defective Work) that the Owner desires
            the EPCM Contractor to undertake, shall constitute Additional Work
            under Section 19.1. The parties acknowledge that the dollar value
            associated with the EPCM Liability Limit for Defective Work will
            change with every payment made by the Owner to the EPCM Contractor
            pursuant to Schedule 3 and that once the EPCM Liability Limit for
            Defective Work is reached, it may be subsequently increased and
            reached again as a result of the EPCM Contractor receiving
            additional compensation under the Agreement. Therefore, any
            calculation of the EPCM Liability Limit for Defective Work shall
            take into consideration the most recent payments made by the Owner.

4.8   EPCM Contractor Duties as Agent.

      Acting in its capacity as Owner's agent with respect to the Project
      Contracts and the Project Contractors, the EPCM Contractor shall:

      (a)   perform a commercially reasonable level of due diligence in
            accordance with the standards of SECMP to identify and procure the
            services of financially sound and capable Project Contractors,
            including obtaining references and performing any necessary
            interviews and submitting background and other pertinent information
            to the Owner for its review in connection with requesting Owner's
            pre-approval of each Project Contractor;

                                       22
<PAGE>

      (b)   use all commercially reasonable efforts to negotiate Project
            Contracts on Owner's behalf that are fixed price contracts secured
            by bank guarantees and retention provisions, that include provisions
            for appointment of an agent by the Owner from time to time,
            assignment of the contract at the Owner's election, termination of
            the contract upon an event of termination under this Agreement,
            termination of the contract with or without cause by the Owner,
            unencumbered inspection rights of the Owner, discretionary rights of
            the Owner to dismiss employees of the Project Contractor, agreement
            to comply with the Equator Principles, vesting of ownership in any
            Data to the Owner upon creation, agreement to be joined in any
            arbitration proceeding brought pursuant to this Agreement, release
            of all liens, bonus incentives, and liquidated damages;

      (c)   produce and submit to the Owner, written recommendations regarding
            equipment, materials and services to be purchased and preferred
            vendors. The EPCM Contractor shall not proceed beyond preparing a
            written recommendation unless and until the Owner has authorized
            EPCM Contractor to produce and issue a purchase order for a
            particular vendor for a particular piece of equipment, type and
            amount of material or service by signing EPCM Contractor's written
            recommendation regarding such equipment, material or service. The
            EPCM Contractor shall then be authorized to issue the purchase order
            for and coordinate the purchase of the specified equipment, material
            or service on Owner's behalf as Owner's agent. The EPCM Contractor
            shall not be authorized to issue any purchase orders in any other
            manner. The EPCM Contractor shall only use approved purchase order
            forms and shall not use or accept any other form of purchase order,
            or modify the approved form of purchase order in any material
            respect that will affect Owner's rights or obligations as to the
            vendor, including without limitation, the warranties obtained from
            the vendor for the benefit of the Owner, without the Owner's prior
            written approval;

      (d)   obtain from vendors, contractors, subcontractors, manufacturers, and
            suppliers such undertakings with respect to their performance, and
            guaranties, indemnities or warranties against defects in
            workmanship, material and equipment which are standard within the
            industry and acceptable to the Owner; provided that the EPCM
            Contractor shall use all commercially reasonable efforts to obtain
            mechanical completion warranties on all equipment and performance
            guarantees of at least * percent (*%) of the delivered cost of all
            equipment, each to be effective for the earlier of * months after
            start-up or * months after shipping. Such undertakings and
            warranties shall be for the benefit of the Owner and fully
            assignable to any of Owner's assigns;

      (e)   obtain from vendors, contractors, subcontractors, manufacturers, and
            suppliers Spanish translations of all instruction, procedures and
            training manuals or other written materials that are required to
            allow the work force at the Site to perform their duties;

                                       23
<PAGE>

      (f)   coordinate, manage and oversee the care, custody and control of the
            Facilities as entrusted to the EPCM Contractor as Owner's agent in
            accordance with Section 2.6 and as entrusted to the various Project
            Contractors in accordance with their respective Project Contracts;
            and

      (g)   assist the Owner in the enforcement of the undertakings and
            warranties of the Project Contractors and otherwise oversee, manage
            and enforce the terms of the Project Contracts.

4.9   Records.

      The EPCM Contractor shall keep and maintain, on a recognized and
      consistent accounting basis, in accordance with accounting practices and
      principles generally accepted in the United States ("US GAAP"), and as
      approved by the Owner, the following records and books relating
      specifically to the performance of the EPCM Work:

      (a)   EPCM Work performed;

      (b)   Project Work performed;

      (c)   moneys expended by the EPCM Contractor in respect of EPCM
            Contractor's costs;

      (d)   liability incurred for costs or expenses;

      (e)   time charges (in respect of hours worked);

      (f)   taxes, levies, duties and assessments; and

      (g)   all other matters requiring proper records under this Agreement.

      The EPCM Contractor shall keep full and detailed accounts and exercise
      such controls as may be necessary for proper financial management under
      this Agreement. The accounting and control systems shall be approved as
      satisfactory to the Owner. The Owner's accountants and/or internal
      auditors shall be afforded access to the EPCM Contractor's records, books,
      correspondence, instructions, drawings, receipts, subcontracts, purchase
      orders, vouchers and other data relating to this Agreement in original
      form during usual business hours for all purposes related to progress of
      the Work, costs of changes or any other proper purposes under this
      Agreement. The Owner's accountants and/or internal auditors shall also be
      provided access to EPCM Contractor's computer systems with respect to such
      data and information. The Owner shall give the EPCM Contractor reasonable
      notice of such intended examinations. The EPCM Contractor shall maintain
      such books, records, and other documents for a period of five (5) years
      after the Final Completion Date.

                                       24
<PAGE>

4.10  Compliance with Law.

      The EPCM Contractor and its employees, agents and representatives shall
      comply with, and the EPCM Contractor shall manage and oversee compliance
      by the Project Contractors with the requirements of all applicable laws,
      regulations, orders and other requirements, including but not limited to
      those of all applicable foreign jurisdictions, provincial, district, U.S.
      federal and state laws, regulations, codes and standards made thereunder
      and to the lawful requirements of public, municipal and other authorities
      in any way affecting or applicable to the Work, the safety of the
      Facilities or the safety of persons on or in the vicinity of the Site.
      Without limiting the foregoing, the EPCM Contractor and its employees,
      agents and representatives shall also comply with, and the EPCM Contractor
      shall manage and oversee compliance by Project Contractors with all
      environmental laws, regulations, codes, permit requirements, or directives
      (including the Equator Principles) from any lawful authority possessing
      jurisdiction, applicable to or affecting the Work, the Facilities, or the
      Site and specifically including laws aimed at reclamation or restoration
      of the lands included within the Project, abatement of pollution,
      protection of the environment, protection of wildlife, ensuring public
      safety from environmental hazards, protection of cultural or historic
      resources (including laws governing the protection of the culture of the
      indigenous people), and management, storage or control of hazardous
      materials and substances as well as the release or potential release
      thereof. All of the Project Contracts negotiated, written, administered
      and/or entered into by the EPCM Contractor shall include express
      provisions to incorporate the substance of this Section 4.10.

4.11  Undertakings.

      The EPCM Contractor shall endeavor to obtain all inspections and furnish
      any bonds, undertakings or security deposits required under the terms of
      this Agreement or to obtain security to replace the Retention Escrow if
      the EPCM Contractor so elects, of a type and in an amount satisfactory to
      the Owner. Additionally, the EPCM Contractor shall require and coordinate
      with all Project Contractors to obtain all necessary and appropriate
      bonds, undertakings, and security deposits as required by the terms of
      this Agreement or as directed by the Owner. The EPCM Contractor shall be
      reimbursed for the cost of all inspections, bonds, undertakings, or
      security deposits that are incurred by it that are required under the
      terms of this Agreement, except those fees and costs required for the EPCM
      Contractor to comply with its obligations under Section 4.2, and fees and
      costs otherwise expressly assumed by the EPCM Contractor under this
      Agreement.

4.12  Safety.

      (a)   The Owner and the EPCM Contractor shall take all reasonable steps to
            ensure the safety of all persons employed by the EPCM Contractor,
            any Project Contractor, and invitees thereof and any other person
            who enters the Site for any purpose relating to EPCM Contractor's
            carrying out its obligations hereunder, while upon the Site or in
            the Owner's provided accommodation and shall take no actions which
            endanger others in the performance of the Work. The EPCM Contractor
            shall, during the performance of the Work, comply and manage
            compliance by such parties with Site safety regulations, campsite
            rules, directives from the Owner and all applicable laws, ordinances
            or regulations relating to health and/or safety, including the
            Equator Principles. The EPCM Contractor shall develop and implement
            its own safety program at the Site which shall be coordinated and
            consistent with Owner's safety program and the EPCM Contractor shall
            cause each Project Contractor performing work at the Site to
            implement a comparable safety program.

                                       25
<PAGE>

      (b)   Accident, injuries and illnesses which require medical attention
            greater than minor first aid and damage to Owner's property and
            fires shall be reported verbally to Owner's Representative at the
            time of the incident. The EPCM Contractor shall submit a written
            report in form and content satisfactory to the Owner detailing the
            incident within twenty-four (24) hours after each occurrence.

      (c)   The EPCM Contractor shall maintain in form and content approved by
            the Owner, injury and illness statistics which shall be available
            for inspection by, and submitted to, the Owner upon its written
            request.

      (d)   Each Project Contractor shall be required to provide its own first
            aid, emergency medical treatment and similar services for injuries,
            illnesses or accidents involving its respective employees, agents or
            representatives that occurs at the Job Site or in connection with
            the Work performed at the Site. The Owner shall furnish first aid,
            emergency medical treatment, medical evacuation and similar services
            for the employees of the EPCM Contractor (and medical evacuation
            services for employees of Project Contractors) for injuries,
            illnesses or accidents occurring at the Job Site or in connection
            with the EPCM Work or the Project Work, as applicable. In
            consideration of such treatment or services, the EPCM Contractor
            acknowledges that it assumes full and complete responsibility for
            all injuries and damages to any of its employees attributable in any
            way to such services provided by the Owner. Each Project Contract
            that is negotiated, written, administered and/or entered into by the
            EPCM Contractor shall incorporate the requirements set forth in the
            first sentence of this Section 4.12(d) and shall incorporate the
            substance of the foregoing sentence in the event that the Owner
            provides medical evacuation or other medical services on a "Good
            Samaritan" basis to any employee, agent or representative of a
            Project Contractor.

      (e)   The EPCM Contractor shall notify the Owner, in writing, of the
            existence of any hazardous conditions, property or equipment at the
            Work Site which are not under EPCM Contractor's control and which
            become known to the EPCM Contractor; however, it shall be EPCM
            Contractor's responsibility to take all necessary precautions
            against injury to employees of the EPCM Contractor and Project
            Contractors or damage to the property of the EPCM Contractor or
            Project Contractors from such hazards until corrected by the
            responsible party.

      (f)   The EPCM Contractor shall confine all persons employed by the EPCM
            Contractor and the Project Contractors and the agents and invitees
            thereof and any other person who enters the Site for any purpose
            relating to EPCM Contractor's carrying out its obligations hereunder
            to that portion of the Site where the Work is to be performed, to
            the routes to be designated by the Owner for ingress and egress
            thereto and to any other areas the Owner may expressly permit the
            EPCM Contractor to use. Within such areas, except those routes for
            ingress and egress over which the EPCM Contractor has no right of
            control, the EPCM Contractor shall provide safe means of access to
            all places in which such persons may at any time have occasion to be
            present.

                                       26
<PAGE>

      (g)   The Owner reserves the right to direct that the Work be stopped at
            any time the Owner observes or becomes aware of any unsafe condition
            or unsafe practice involving any activity at the Site. All of the
            Project Contracts negotiated, written, administered and/or entered
            into by the EPCM Contractor shall include express provisions to
            incorporate the substance of this Section 4.12(g).

4.13  Rebates, Commissions, etc.

      The EPCM Contractor must remit to the Owner any commissions, rebates or
      other direct or indirect payment received by the EPCM Contractor from any
      third party in connection with the Work or this Agreement, including
      without limitation, purchase of Equipment and other materials, if the cost
      or fee on which the rebate or commission is being paid was a cost passed
      through to or reimbursable by the Owner.

4.14  Liens.

      The EPCM Contractor will promptly pay its employees and its vendors all
      amounts that are due and payable for which the Owner has made advances or
      reimbursements, except that the EPCM Contractor may, in good faith,
      contest any such claim. The EPCM Contractor will indemnify the Owner and
      hold it harmless against any liens which result from EPCM Contractor's
      failure to pay such amounts. In addition, should a lien be filed against
      the Work, the Facilities or any part thereof, as a result of EPCM
      Contractor's non-payment of any claim (including any claim contested in
      good faith), the EPCM Contractor shall immediately take all actions
      necessary to release the Work, the Facilities or any part thereof from
      such liens, including but not limited to posting a bond or paying funds
      into an appropriate court depository.

      The EPCM Contractor shall provide the Owner with a release of liens with
      respect to all Work Accepted by the Owner pursuant to Section 18.1 below.
      The EPCM Contractor shall also provide to the Owner a certified statement
      that all Project Contractors (including their respective materialmen) have
      been fully paid together with releases of all liens arising as a result of
      work performed or materials supplied from each Project Contractor, other
      than as contemplated by Section 18.1.

      In connection with any partial or progress payment made pursuant to this
      Agreement, the EPCM Contractor shall provide lien releases as to all Work
      to which such payment is applicable, to the extent of the payment.

                                       27
<PAGE>

4.15  Taxes.

      The EPCM Contractor and the Owner shall cooperate and work together so as
      to lawfully minimize tax liabilities accruing to each of them as a result
      of entering into or performing this Agreement. The EPCM Contractor shall
      not revise or alter any agreement with Project Contractors, suppliers or
      service providers or its method of performance of this Agreement in any
      manner that would adversely affect Owner's tax liability without Owner's
      prior written consent and Owner agrees to indemnify and hold the EPCM
      Contractor harmless with respect to any loss, cost, claim or expense
      related to any tax liability of the Owner.

      All payroll taxes, remittances and deductions for EPCM Contractor's
      employees or representatives shall be borne by the EPCM Contractor as part
      of its overhead. The EPCM Contractor shall not be responsible for any
      other taxes, value added taxes, levies, Bolivian withholding taxes,
      expatriate tax equalization, charges, duties or assessments in connection
      with the Work performed under this Agreement; provided that it shall be
      EPCM Contractor's obligation to identify and coordinate the payment of all
      such taxes, value added taxes, levies, charges, duties or assessments on
      behalf of the Owner.

      The EPCM Contractor hereby indemnifies and holds the Owner harmless from
      any liability arising from EPCM Contractor's failure to make or pay any
      payroll taxes, remittances or deductions for its employees or
      representatives.

      Without liability to the EPCM Contractor, the Owner shall have the right
      to withhold and remit to appropriate tax authorities all local or other
      taxes applicable to payments the Owner tenders to the EPCM Contractor
      pursuant to this Agreement, to the extent that such tax withholding is
      required by the government or political subdivision of any other state or
      country having jurisdiction over this Agreement.

4.16  Indemnity to Owner.

      Subject to the EPCM Liability Limit set forth in Section 4.29, the EPCM
      Contractor shall indemnify, defend and hold harmless the Owner, the
      Owner's affiliates and assignees, agents, officers, directors, independent
      consultants and employees from and against any and all claims, causes of
      action, liability, penalties, demands, liens, costs, damages, losses and
      expenses (including attorneys' fees and related legal expenses) (for
      purposes of this Section 4.16 and Section 5.4, collectively, "Liability")
      to the extent arising out of or in any way connected with EPCM
      Contractor's negligence, gross negligence or willful misconduct in
      performance of the EPCM Work hereunder, including (i) Liability imposed or
      claimed to be imposed by law or otherwise upon the Owner because of bodily
      injuries or illness, including death at any time resulting therefrom or
      damage to property (including any kind of damages to the environment from
      contamination or pollution or otherwise), which is sustained by any person
      or persons as a result of the negligence of the EPCM Contractor, or its
      employees or agents, or (ii) Liability for any fine, penalty, assessment
      or charge of any kind or nature for EPCM Contractor's violation of any
      applicable statute, regulation or lawful directive, except in those
      instances where the EPCM Contractor was directed by the Owner to take the
      action that resulted in the violation; provided, that (i) the EPCM
      Contractor shall have no liability for loss of profits, loss of interest,
      loss of production, costs of financing, consequential, special or
      incidental damages, whether claimed by the Owner or a third party, and
      (ii) the EPCM Contractor shall only be liable for environmental damage,
      contamination or pollution at the Work Site to the extent of any fine or
      penalty assessed against the EPCM Contractor as a result of the EPCM
      Contractor's negligent acts or omissions and shall not (other than for
      EPCM Contractor's obligation to re-perform Defective Work in accordance
      with Section 4.7) be liable for any clean up or remediation or associated
      costs for any such environmental damage, contamination or pollution. This
      indemnity shall apply as to any Liability arising, in whole or in part,
      out of the negligence or violation of any duty imposed, or claimed to be
      imposed, by a statute, ordinance, rules, regulation, or otherwise by law
      or this Agreement, on the part of the EPCM Contractor, or its employees or
      agents, but shall not apply as to any Liability to the extent caused by
      the negligence, gross negligence or willful misconduct of the Owner, its
      agents and employees. The EPCM Contractor hereby agrees to assist the
      Owner in any manner reasonably requested by the Owner with any matter for
      which indemnification is provided by this Section 4.16.

                                       28
<PAGE>

4.17  Subcontracting.

      The EPCM Contractor shall not subcontract any of its obligations under
      this Agreement except as provided in this Section 4.17. The EPCM
      Contractor may, upon prior written consent of the Owner which shall not be
      unreasonably withheld, have portions of the EPCM Work performed by its
      affiliated entities or their employees or contract employees.
      Notwithstanding the foregoing, EPCM Contractor may, without any additional
      formal written consent of Owner, have portions of the EPCM Work performed
      by the Pre-Approved Subcontractors. In appropriate circumstances, the EPCM
      Contractor may, upon prior written consent of the Owner which may be
      withheld in Owner's sole discretion, subcontract specified portions of the
      EPCM Work to non-affiliated subcontractors. In either such event the EPCM
      Contractor shall be responsible for all such EPCM Work and all actions
      taken by such affiliated entities or subcontractors, and the Owner shall
      have the right to look solely to the EPCM Contractor as if the EPCM Work
      was performed or the actions were taken by the EPCM Contractor for all
      purposes under this Agreement.

4.18  Suspension of Work.

      (a)   The Owner may suspend the Work or any part of the Work for such time
            or times and in such manner and for such reason as the Owner in its
            absolute discretion may consider necessary and suspension shall be
            effected by written order to the EPCM Contractor; provided, that in
            an urgent situation the suspension order may be communicated to the
            EPCM Contractor's Representative orally with the delivery of the
            written order within 24 hours thereafter;

      (b)   Should the EPCM Contractor wish to suspend the progress of the whole
            or any part of the Work it shall notify the Owner in accordance with
            this Section 4.18 and explain the reasons for the proposed
            suspension. The Owner shall thereupon, if it thinks it necessary or
            reasonable so to do, grant permission for a suspension of the whole
            or any part of the Work for such time or times as it may think fit;
            provided that the EPCM Contractor shall be authorized immediately to
            suspend any activity at the Site which in its reasonable judgment
            does not comply with the applicable safety requirements, so long as
            Owner's Representative is notified as soon as possible to assess and
            resolve the problem. The EPCM Contractor shall continue to perform
            any EPCM Work which is not suspended. The EPCM Contractor shall also
            take such steps as will protect and preserve the Work completed and
            as will permit recommencement of the Work when the period of
            suspension ends.

                                       29
<PAGE>

      (c)   The Owner, as soon as it becomes aware that the reason for any
            suspension no longer exists, may direct the EPCM Contractor to
            recommence or cause Project Contractors to recommence the whole or
            the relevant part of the Work and the EPCM Contractor shall comply
            promptly with the direction. The EPCM Contractor shall advise the
            Owner promptly when the EPCM Contractor becomes aware of any
            subsequent change in the circumstances which originally led to a
            suspension so as to allow the Owner to evaluate whether the Work
            should recommence.

      (d)   If the suspension is requested by the EPCM Contractor, or ordered by
            the Owner because of a material breach, default or negligent act or
            omission of the EPCM Contractor or any of its employees or agents
            that, based upon the standards of SECMP, justifies the suspension of
            the Work or any portion thereof, then:

            (i)   any cost or expense incurred by the EPCM Contractor by reason
                  of the suspension shall be borne and paid for by the EPCM
                  Contractor (and shall not be reimbursable by the Owner);

            (ii)  any cost or expense incurred by the Owner (including but not
                  limited to the Owner's work force stand-down) by reason of the
                  suspension shall be borne and paid for by the EPCM Contractor
                  and the Owner may deduct the amount of such cost or expense
                  from any amount payable (other than amounts constituting the
                  Base Fee) then or in the future by the Owner to the EPCM
                  Contractor under this Agreement; and

            (iii) any cost or expense incurred by the EPCM Contractor as a
                  result of the suspension that would otherwise be Reimbursable
                  Costs, shall not be reimbursed by the Owner.

      (e)   If the suspension is due to a breach, default or negligent act or
            omission of the Owner or a Third Party Contractor, or an employee or
            agent thereof, or ordered by the Owner for economic reasons or
            factors within its control or for its convenience as per paragraph
            (a) above, then any cost or expense reasonably incurred by the EPCM
            Contractor as a result of the suspension shall be reimbursed by the
            Owner.

      (f)   Both parties shall use their best efforts to mitigate the effects of
            suspension.

                                       30
<PAGE>

      When a suspension initiated by the Owner, other than at the request of the
      EPCM Contractor, equals or exceeds six (6) months, the EPCM Contractor may
      elect to treat such suspension as a termination by the Owner pursuant to
      Section 10.2 hereof, unless such suspension is due to a material breach,
      default or negligent act or omission of the EPCM Contractor or any of its
      employees or agents.

4.19  EPCM Contractor's Representative.

      (a)   The EPCM Contractor shall appoint and thereafter maintain in an
            office designated by the Owner until the Final Completion Date, a
            representative (the "EPCM Contractor's Representative") being a
            person acceptable to the Owner and having authority to act on behalf
            of the EPCM Contractor and whose decisions shall be binding upon the
            EPCM Contractor in all matters pertaining to this Agreement. The
            EPCM Contractor shall notify the Owner of the proposed appointment
            and the exact scope of his authority. Within five (5) business days
            of receiving notice of the appointment, the Owner may object to the
            appointment and require the EPCM Contractor to appoint a different
            person. If the Owner fails to object within that five (5) business
            day period the EPCM Contractor's appointee shall be deemed accepted.

      (b)   The EPCM Contractor's Representative shall have power to appoint
            deputies to exercise all or any of his functions and to terminate
            such appointments; provided that he shall notify the Owner in
            writing of any appointments or terminations and of any functions so
            delegated.

      (c)   The EPCM Contractor's Representative shall coordinate with the
            Owner's Representative on all matters related to this Agreement.

4.20  Defense of Actions.

      Except where the issue is between the EPCM Contractor and the Owner, the
      EPCM Contractor shall, at the request of the Owner, assist in the defense
      of any action where any interest of the Owner is involved, provided that
      the Owner shall indemnify the EPCM Contractor for any necessary and proper
      costs or expenses incurred by the EPCM Contractor with the Owner's
      approval in so doing. Notwithstanding anything contained in this Section
      4.20 the EPCM Contractor shall not allow any consent order, consent
      judgment or consent verdict to be entered against the Owner without the
      approval of the Owner.

4.21  Compliance with Procedures.

      The EPCM Contractor and its employees, agents and representatives shall
      comply, and the EPCM Contractor shall manage and oversee compliance by the
      Project Contractors, with all requirements of the most current version of
      the Project Procedures Manuals which will include:

      o     Project Personnel Administration Procedures

      o     Project Safety and Environmental Management Policies

      o     Project Assignment and Relocation Procedures

      o     All applicable standards from the Project Design Criteria

                                       31
<PAGE>

      The Owner shall have the right to review, approve and monitor EPCM
      Contractor's implementation procedures and practices to assure compliance
      with the Project Procedures Manual. The EPCM Contractor acknowledges that
      procedures, design standards, documentation and other like matters will be
      developed or established during the performance of the EPCM Work and the
      EPCM Contractor agrees that all such procedures, design standards,
      documentation and other like matters are subject to approval by the Owner
      before implementation or use.

4.22  Environmental and Cultural Compliance and Protection.

      The EPCM Contractor shall conduct all operations at the Site in strict
      compliance with all applicable environmental laws, including laws related
      to the use, transport, storage or discharge of toxic or hazardous
      materials or waste, and the Equator Principles. The EPCM Contractor shall
      not be liable for any preexisting contamination, except to the extent such
      liability arises from the negligence or misconduct of the EPCM Contractor
      or its agents, employees or representatives, with respect to such
      preexisting contamination. Preexisting contamination is any hazardous or
      toxic substance or condition, which exists on Owner's property prior to
      the effective date of this Agreement or was or continues to be generated
      by the Owner by its operation of the Facilities or otherwise.

      If the EPCM Contractor encounters toxic or hazardous substances, the EPCM
      Contractor shall immediately stop Work in the vicinity thereof and report
      the matter to the Owner's Representative in order that the Owner can
      determine if there is a hazardous or toxic substance, and the party
      responsible therefor can take appropriate action, in consultation with the
      other, to minimize damage and remediate the condition.

      The EPCM Contractor understands that the Project is within the
      jurisdiction of certain governmental regulatory agencies and is subject to
      the conditions and restrictions set forth in the permits and
      authorizations governing such Work. Under no circumstances shall the EPCM
      Contractor, any employee, agent or representative of the EPCM Contractor,
      violate any laws, rules, regulations or conditions of the Project
      environmental action plan as required by the Bolivian Ministry of the
      Environment, and the Equator Principles, as applicable. The EPCM
      Contractor shall be strictly liable for any such violation. Specifically,
      the EPCM Contractor and its employees, agents and representatives shall
      not: (i) hunt or discharge firearms within the boundaries of the Site or
      on any other lands under Owner's possession or control or on which the
      EPCM Contractor is performing EPCM Work; (ii) harass, injure or destroy
      wildlife; (iii) unnecessarily damage trees, native shrubbery and
      vegetation; (iv) damage or remove without prior authorization of Owner's
      environmental manager objects or sites of archeological or possible
      archeological interest; or (v) interact with indigenous people in the
      vicinity of the Project in a manner which could adversely affect the
      Project. Any such violation shall result in the dismissal of the offending
      individual or individuals and other responsible parties. All of the
      Project Contracts negotiated, written, administered and/or entered into by
      the EPCM Contractor shall incorporate the substance of this Section 4.22.

                                       32
<PAGE>

4.23  Coordination of Work.

      The EPCM Contractor shall afford the Owner, Project Contractors and Third
      Party Contractors opportunity for the introduction and storage of their
      materials and the execution of their work, and shall properly coordinate
      all such work. If any part of the Work depends for proper execution or
      results upon the Project Work of the Owner or of a Third Party Contractor,
      the EPCM Contractor shall inspect such Project Work in accordance with the
      standards of SECMP and promptly report to the Owner any defects in such
      Project Work that render it unsuitable for such proper execution and
      result. To the extent that any defect that could not reasonably have been
      discovered by inspecting such Project Work in accordance with the
      standards of SECMP is subsequently discovered, the EPCM Contractor shall
      not be liable for costs arising from re-performance of any Project Work
      that has become Defective Work as the result of the undiscovered defect in
      the Project Work performed by the Owner or a Third Party Contractor, and
      the EPCM Contractor shall be reimbursed for any costs it incurs to
      re-perform, supervise or monitor and coordinate the re-performance of such
      Defective Work in accordance with Section 4.7(b). If the subsequent defect
      is one that should have been discovered by an inspection conducted in
      accordance with the standards of SECMP, re-performance of any Project Work
      that has become Defective Work as the result of the undiscovered defect in
      the work performed by the Owner or a Third Party Contractor, shall be
      governed by the provisions of Section 4.7(a).

4.24  Bribes and Kickbacks Prohibited.

      The EPCM Contractor agrees that it shall not pay or give anything of value
      either directly or indirectly to an official of any government for the
      purpose of influencing an act or decision in his official capacity, or
      inducing him to use his influence with the government to assist the EPCM
      Contractor in obtaining or retaining business for or with, or directing
      business to, any person. The EPCM Contractor further agrees that it will
      not pay or give anything of value to an employee of the Owner for the
      purpose of influencing any act or decision in his capacity to assist the
      EPCM Contractor in obtaining business with the Owner. The Owner covenants
      and represents that it does not desire and will not request any service or
      action by the EPCM Contractor which would or might constitute a request to
      influence any government official. The parties further recognize that the
      United States Foreign Corrupt Practices Act of 1977 (the "Act") may apply
      to the EPCM Work rendered under this Agreement. The Owner further
      covenants and represents that it does not desire and will not request any
      service or action by the EPCM Contractor which would or might constitute a
      violation of the Act or any other law of the United States or any other
      applicable jurisdiction.

                                       33
<PAGE>

      The EPCM Contractor agrees that it shall not include in the scope of work
      under any purchase order or subcontract, any work or services for which
      the EPCM Contractor is to receive payments from a supplier or
      subcontractor.

4.25  Key Employee Retention.

      The EPCM Contractor shall pay the Owner the amount of $250,000 as
      liquidated damages for loss of the service and expertise for each of the
      five named Key Employees set forth in Schedule 5, that are removed from
      the Project without the Owner's prior written consent. The EPCM Contractor
      shall not be obligated to make any such payment in the event that the
      removal is the result of (i) the death, incapacity, resignation from
      employment by the EPCM Contractor or its Affiliates, or retirement of the
      employee; (ii) a good faith request by the employee for a humanitarian
      transfer; (iii) EPCM Contractor's exercise of its obligations under any
      applicable state or federal law, or EPCM Contractor's written internal
      personnel disciplinary procedures to terminate the employee; or (iv)
      otherwise outside of EPCM Contractor's control; provided that nothing
      herein shall prevent the EPCM Contractor from offering superior candidates
      for the Owner's consideration. The EPCM Contractor recognizes that Owner's
      damages as a result of the removal of any of the Key Employees from the
      Project in violation of the terms of this provision are difficult or
      impossible to ascertain as of the date hereof and therefore agrees to the
      foregoing as a reasonable measure of Owner's damages. The Owner and the
      EPCM Contractor agree that the foregoing shall be Owner's sole remedy upon
      the removal of any of the Key Employees from the Project. The EPCM
      Contractor shall employ reasonable methods to retain the Key Employees and
      its other employees on the Project, including maintaining competitive
      compensation and benefits, and subject to Owner's prior approval of any
      reasonable change in EPCM Contractor's compensation structure for the
      purposes stated herein, the Owner and the EPCM Contractor shall cause, by
      Change Order, such change to be reflected in Schedule 3. The foregoing
      obligation shall apply only if the Key Employees are continuously employed
      on the Project, and the EPCM Contractor is compensated for their services
      in accordance with Schedule 3.

4.26  Retention Escrow.

      To secure against default in its performance under this Agreement, the
      EPCM Contractor has agreed to the retention of * percent (*%) of each
      payment made to the EPCM Contractor during performance of the Phase II
      EPCM Work, which amounts shall be paid by the Owner into an escrow account
      (the "Retention Escrow") maintained with an escrow agent that is a U.S.
      entity and that is mutually acceptable to the Owner and the EPCM
      Contractor (the "Escrow Agent"), pursuant to an escrow agreement (the
      "Escrow Agreement") in substantially the form of Schedule 7A-1. Interest
      on the funds so escrowed (at any given time, the "Escrowed Funds") shall
      become part of the Escrowed Funds for all purposes under this Agreement.

      The Escrowed Funds shall secure against abandonment of the Project by the
      EPCM Contractor, against the EPCM Contractor ceasing the EPCM Work for any
      reason other than a suspension or event of force majeure, and against any
      liability of EPCM Contractor under Section 4.29, each as contemplated by
      this Agreement. Upon achieving the Mechanical Completion Milestone, the
      EPCM Contractor shall become entitled to one-half of the Escrowed Funds.
      Upon the Final Completion Date, the EPCM Contractor shall become entitled
      to the remaining Escrowed Funds. In each case, the Owner shall promptly
      cause the Escrow Agent to distribute to the EPCM Contractor by wire
      transfer, the amount of funds to which the EPCM Contractor has become
      entitled, less the amount of Owner's reasonable estimate of any
      outstanding claim(s) for damages arising from abandonment of the Project
      by the EPCM Contractor, cessation of the EPCM Work other than as provided
      in this Agreement, and any outstanding claim(s) for damages arising from
      EPCM Contractor's liability under Section 4.29, which, as of such date,
      have not been fully and finally resolved.

                                       34
<PAGE>

4.27  Parent Company Guaranty.

      Within twenty-one (21) days after execution of this Agreement by the EPCM
      Contractor, the EPCM Contractor shall put in place the parent guaranty of
      EPCM Contractor's parent company, Aker Kvaerner ASA, in substantially the
      form of Schedule 7A-2 (the "Parent Guaranty"), to guarantee EPCM
      Contractor's performance and obligations under this Agreement. The Parent
      Guaranty shall be assignable to the project lenders as part of the
      security package for Project financing. Any re-structuring or other
      transaction or condition affecting Parent which results in a material
      decrease in the net worth of the Parent shall constitute a default under
      this Agreement, unless EPCM Contractor provides within ten (10) days
      thereafter, a substitute guarantor under the Parent Guaranty with net
      worth comparable to that of Parent as of the date hereof, that is
      reasonably acceptable to the Owner and the Senior Lenders. Additionally,
      the Parent Guaranty shall provide that Parent agrees to be joined in any
      arbitration proceeding brought under this Agreement pursuant to the
      provisions of Article 13.

4.28  Limitation of Liability for Defective Work.

      Notwithstanding any other provision of this Agreement, the EPCM Contractor
      shall not be required to make any expenditures in excess of the EPCM
      Liability Limit for Defective Work for its obligations to re-perform
      Defective Work pursuant to Section 4.7.

4.29  EPCM Liability Limit.

      (a)   Excluding the EPCM Liability Limit for Defective Work and EPCM
            Contractor's liability for gross negligence or willful misconduct
            (whether in connection with indemnification obligations or
            otherwise), the EPCM Contractor's total aggregate liability to Owner
            under this Agreement or under any cause of action related to the
            subject matter of this Agreement, whether in contract, warranty,
            tort (including negligence), strict liability, products liability,
            professional liability, indemnity, contribution or any other cause
            of action, shall in no event exceed the EPCM Liability Limit. The
            "EPCM Liability Limit" shall be the sum of: *

                                       35
<PAGE>

      (b)   The Owner agrees that all claims brought under the Agreement (other
            than claims for Defective Work and EPCM Contractor's liability for
            gross negligence or willful misconduct) not satisfied by the
            proceeds of the insurance policies that are furnished by or on
            behalf of EPCM Contractor pursuant to Schedule 6 shall be brought
            against Parent under the Parent Guaranty. The Owner shall bring each
            such claim by delivering written notice to the EPCM Contractor and
            Parent in accordance with Article 14, setting forth the nature and
            amount of the claim. If within thirty (30) days after delivery of
            such written notice, Parent has not satisfied such claim or entered
            into good faith negotiations to resolve the claim in accordance with
            Article 13, the Owner shall have an affirmative right to withdraw
            the amount of such claim from the Retention Escrow first, and then
            from the Incentive Pool. Notwithstanding the exhaustion of all
            amounts in the Retention Escrow or the amounts in the Retention
            Escrow and the Incentive Pool for any given claim that is not
            satisfied by Parent, Owner shall continue to have recourse against
            amounts subsequently retained in the Retention Escrow or accumulated
            in the Incentive Pool for the outstanding amount of such claim or
            future claims.

      (c)   The parties acknowledge and agree that the provisions of this
            Section 4.29 are meant to limit Owner's recovery only and shall not
            in any manner limit the amount of any claim brought by the Owner.
            The parties further acknowledge and agree that for any given claim,
            Owner's actual damages may exceed the EPCM Liability Limit and this
            Section 4.29 shall in no event be deemed to be a liquidated damages
            provision.

                                    ARTICLE 5
                               OWNER'S OBLIGATIONS

5.1   Owner's Representative.

      (a)   On or prior to execution of this Agreement the Owner shall appoint
            and thereafter maintain at all times until the Final Completion
            Date, a representative (the "Owner's Representative") having
            authority to act on behalf of the Owner and whose decisions shall be
            binding upon the Owner in all matters pertaining to this Agreement.

      (b)   The Owner's Representative shall have power to appoint deputies to
            exercise all or any of his functions and to terminate such
            appointments, provided that he shall notify the EPCM Contractor of
            any appointments or terminations and of any functions so delegated.

5.2   Permits.

      All permits that are required to be in the Owner's name for the
      commencement of the Work shall be obtained by the Owner. The Owner shall
      provide the EPCM Contractor with copies of such permits promptly after
      they are obtained.

                                       36
<PAGE>

5.3   Operations.

      Beginning with Precommissioning/Pre-Operational Testing and continuing
      through the Final Completion Date, the Owner shall be required to provide
      sufficient qualified operations staff to support EPCM Contractor's testing
      and commissioning obligation.

5.4   Indemnity to EPCM Contractor.

      The Owner shall indemnify, defend and hold harmless the EPCM Contractor,
      the EPCM Contractor's affiliates and assignees, agents, officers,
      directors, independent consultants and employees from and against any and
      all Liability to the extent arising out of or in any way connected with
      Owner's negligence, gross negligence or willful misconduct in performance
      of its obligations hereunder, including (i) Liability for any fine,
      penalty, assessment or charge of any kind or nature for EPCM Contractor's
      violation of any applicable statute, regulation or lawful directive in
      those instances where the EPCM Contractor was directed by the Owner to
      take the action that resulted in the violation, (ii) Liability for third
      party claims against the EPCM Contractor for loss of profits, loss of
      interest, loss of production, costs of financing, or consequential damages
      claimed by a third party, (iii) Liability for clean up or remediation of
      any environmental damage, contamination or pollution at the Work Site as a
      result of preexisting contamination, including but not limited to persons
      or property, except to the extent such liability arises from the
      negligence, misconduct or breach of a legal or contractual duty of the
      EPCM Contractor, its employees, agents or representatives; (iv) Liability
      arising from any use of the Data, Drawings, Project Specifications,
      documents, or other data by the Owner or any third party authorized by the
      Owner for any purpose other than in connection with the performance of the
      EPCM Work; and (v) Liability arising from compliance with any written
      instructions or approvals issued by the Owner which are issued against the
      written recommendation of the EPCM Contractor made in accordance with the
      standards of SECMP. This indemnity shall apply as to any Liability
      arising, in whole or in part, out of the negligence or violation of any
      duty imposed, or claimed to be imposed, by a statute, ordinance, rules,
      regulation, or otherwise by law or this Agreement, on the part of the
      Owner, or its employees or agents, but shall not apply as to any Liability
      to the extent caused by the negligence, gross negligence or willful
      misconduct of the EPCM Contractor, its employees or agents. The Owner
      hereby agrees to assist the EPCM Contractor in any manner reasonably
      requested by the EPCM Contractor with any matter for which indemnification
      is provided by this Section 5.4.

5.5   Payment.

      The Owner shall, in accordance with Article 7, timely pay the Base Fee and
      the other costs and expenses required to be paid by it to the EPCM
      Contractor that are not the subject of a good faith dispute pursuant to
      the terms of this Agreement. Failure to do so shall, subject to
      satisfaction of the notice requirements of Section 9.2, constitute an
      event of default in accordance with Section 9.2.

                                       37
<PAGE>

5.6   Letter of Credit.

      (a)   On or prior to the Commencement Date of the Phase II EPCM Work, the
            Owner shall provide the EPCM Contractor with an irrevocable standby
            letter of credit (the "Letter of Credit") in form and substance
            reasonably acceptable to the EPCM Contractor. The Letter of Credit
            shall be from a first class United States bank acceptable to the
            EPCM Contractor and shall be in the principal amount of * dollars
            ($*). The Letter of Credit shall remain in full force and effect
            until thirty (30) days after achievement of the Mechanical
            Completion Milestone, regardless of the actual date the Mechanical
            Completion Milestone is achieved. Notwithstanding that the Letter of
            Credit will contain a date of final expiration, if thirty (30) days
            prior to such date, the Mechanical Completion Milestone has not been
            achieved, the Owner shall procure an extension of the validity of
            the Letter of Credit as required by this Section 5.6.

      (b)   If the Owner has failed to make payment of any amounts due to the
            EPCM Contractor under this Agreement sixty (60) days after receipt
            of notice of failure to pay made in accordance with Section 9.2, and
            such amount is not the subject of a good faith dispute in accordance
            with Article 13, the EPCM Contractor shall be entitled to draw down
            such amounts from the Letter of Credit. Five business days prior to
            any such draw down, the EPCM Contractor shall deliver to the Owner a
            written notice of EPCM Contractor's intent to exercise its right to
            draw down amounts from the Letter of Credit, setting forth the
            amount that the EPCM Contractor has not been paid, supported by
            evidence of the amount due, and copies of prior invoices and/or
            notices given to the Owner regarding the amount due.

      (c)   All costs related to the issuance and maintenance of the Letter of
            Credit shall be for the account of and borne by the Owner; provided
            that to the extent that any extension required by Section 5.6(a) is
            due to reasons for which the EPCM Contractor is solely responsible,
            the cost of the extension of the validity of the Letter of Credit
            shall be borne by the EPCM Contractor.

                                    ARTICLE 6
                                     CHANGES

6.1   Material Changes.

      Changes (whether as the result of a Change Order or otherwise) will not
      effect an adjustment to the Target Price, the Target Schedule or the Base
      Fee, unless such changes are material (as defined below) and satisfy the
      other conditions set forth in this Article 6.

      (a)   For purposes of this Article 6, no change (whether as the result of
            a Change Order or otherwise) shall be deemed to be "material",
            unless such change involves an aggregate net increase or decrease of
            $* in expenditures, * billable man hours or a * day change to the
            Target Schedule as a result of such change.

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<PAGE>

      (b)   In the event that a change (whether as the result of a Change Order
            or otherwise) meets the materiality threshold set forth in Section
            6.1(a) and satisfies the other conditions set forth in this Article
            6, such change shall be deemed a change in the Scope of EPCM Work,
            and the Target Price, Target Schedule and/or the Base Fee, as
            applicable, shall be modified accordingly.

      (c)   In the event that a change (whether as the result of a Change Order
            or otherwise) does not meet the materiality threshold set forth in
            Section 6.1(a) or fails to satisfy the other conditions set forth in
            this Article 6, the EPCM Contractor shall be responsible to
            implement any such changes and the related Change Order(s) within
            the then current Target Price and the then current Target Schedule,
            and no adjustment shall be made to the Base Fee.

      (d)   No changes whether material or not, will effect the rates of EPCM
            Contractor's Reimbursable Costs, as set forth in Schedule 3.

6.2   Changes to EPCM Work.

      The expressly-stated Scope of EPCM Work in this Agreement is descriptive
      and not necessarily definitive. The EPCM Contractor acknowledges that
      flowsheets, design criteria and other information provided by the Owner
      are not furnished as final specific requirements or recommendations and
      that the Owner is relying upon the EPCM Contractor to design the
      Facilities and perform the EPCM Work so as to produce reliable,
      functioning and cost-effective units, systems, and Facilities for the
      Project. Revisions and alterations in Facilities resulting from value
      engineering and other studies or from EPCM Contractor's recommendations in
      the course of performing the EPCM Work and changes requested by the Owner
      shall not be deemed a change in the Scope of EPCM Work unless they result
      in material changes in the disciplines involved, the manpower required of
      the EPCM Contractor or the Target Schedule. The following subsections of
      this Section 6.2 shall apply to matters which constitute a change in the
      Scope of EPCM Work:

      (a)   The Owner may, by written order (each a "Change Order"), make or
            require changes of a major or minor scope in the Drawings or Project
            Specifications and any other matters relating to the Work and may
            require additional Work or the omission of portions of the Work
            ("Changes or Extra Work"). If the Owner proposes such changes, the
            EPCM Contractor shall, within seven (7) days, prepare and forward to
            the Owner a proposed cost estimate of the change prepared in
            accordance with Schedule 3-B, which shall also include the impact,
            if any, on the Target Schedule. The Owner may then elect to approve
            the Changes or Extra Work, in which case the EPCM Contractor shall
            perform the EPCM Work as so changed, the Owner may elect to perform
            such Changes or Extra Work itself or by a third party, or the Owner
            may elect not to make the change. The Owner shall advise the EPCM
            Contractor of its election within seven (7) days after receipt of
            EPCM Contractor's proposed cost estimate, and if the Owner elects to
            have the EPCM Contractor implement the change, the parties shall
            execute a Change Order documenting the Changes or Extra Work. The
            EPCM Contractor may propose changes by advising the Owner in writing
            that in the EPCM Contractor's opinion a change is necessary. If the
            Owner agrees, it shall so advise the EPCM Contractor and,
            thereafter, the change shall be handled as if initiated by the
            Owner.

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      (b)   If so directed in writing by the Owner, the EPCM Contractor shall
            promptly proceed with any change requested by the Owner prior to
            determining any adjustments to schedule or cost.

      (c)   All reimbursement based upon cost pursuant to Schedule 3-B shall be
            supported by design office daily time sheets with the time charged
            for the Changes or Extra Work being separately and specifically
            identified, certified copies of pertinent payrolls, and invoices for
            outside services, equipment or materials.

      (d)   The EPCM Contractor will report any changes to the Project or the
            Scope of Work as soon as they are known and will keep the Owner
            informed of the progress of any Change or Extra Work.

6.3   Target Schedule Adjustments.

      (a)   The EPCM Contractor shall at all times take all necessary steps to
            ensure that the Work is performed in accordance with the Target
            Schedule and the provisions of this Agreement and that defined
            Milestones and completion dates are met.

      (b)   The Target Schedule shall be adjusted upon the occurrence of any of
            the following changes to the EPCM Work that meet the materiality
            threshold of a * day change to the Target Schedule as set forth in
            Section 6.1(a) ("Schedule Adjusting Events"):

            (i)   any Owner-approved Changes or Extra Work pursuant to Section
                  6.2;

            (ii)  any re-performance of Defective Work performed by a Project
                  Contractor containing defects that could not have been
                  discovered by the EPCM Contractor overseeing and inspecting
                  the Work in accordance with the standards of SECMP;

            (iii) any re-performance of Defective Work performed by a Third
                  Party Contractor pursuant to Section 4.7(b);

            (iv)  any breach of the provisions of this Agreement by the Owner or
                  by any other act or omission on the part of the Owner;

            (v)   suspension by the Owner of the Work or any part thereof or
                  order by the Owner causing or directing any material
                  alteration, amendment, omission, addition or other variation
                  to or of the Facilities (except where such suspension or order
                  is in consequence of the Work being Defective Work as defined
                  in Section 4.7); or

            (vi)  occurrence of an event of force majeure pursuant to Section
                  12.3.

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6.4   Target Price Adjustments.

      (a)   The EPCM Contractor shall at all times take all necessary steps to
            ensure that the Work is performed within the Target Price.

      (b)   The Target Price shall be adjusted upon the occurrence of any of the
            following changes to the EPCM Work that meet the materiality
            threshold of a $* expenditure or savings as set forth in Section
            6.1(a) ("Price Adjusting Events"):

            (i)   any Owner-approved Changes or Extra Work pursuant to Section
                  6.2;

            (ii)  any re-performance of Defective Work performed by a Project
                  Contractor containing defects that could not have been
                  discovered by the EPCM Contractor overseeing and inspecting
                  the Work in accordance with the standards of SECMP;

            (iii) any re-performance of Defective Work performed by a Third
                  Party Contractor pursuant to Section 4.7(b);

            (iv)  any breach of the provisions of this Agreement by the Owner or
                  by any other act or omission on the part of the Owner;

            (v)   suspension by the Owner of the Work or any part thereof or
                  order by the Owner causing or directing any material
                  alteration, amendment, omission, addition or other variation
                  to or of the Facilities (except where such suspension or order
                  is in consequence of the Work being Defective Work as defined
                  in Section 4.7); or

            (vi)  occurrence of an event of force majeure pursuant to Section
                  12.3.

6.5   Base Fee Adjustments.

      (a)   Changes to the Scope of EPCM Work as a result of value engineering
            proposed by the EPCM Contractor and approved by the Owner shall in
            no event result in a downward adjustment of the Base Fee.

      (b)   The Base Fee shall be adjusted upwards or downwards upon the
            occurrence of any of the following changes to the EPCM Work that
            meet the materiality threshold of * billable man hours by EPCM
            Contractor's employees as set forth in Section 6.1(a) ("Fee
            Adjusting Events" and together with Schedule Adjusting Events and
            Price Adjusting Events, "Events"):

            (i)   any Owner-approved Changes or Extra Work pursuant to Section
                  6.2;

            (ii)  any re-performance of Defective Work performed by a Project
                  Contractor containing defects that could not have been
                  discovered by the EPCM Contractor overseeing and inspecting
                  the Work in accordance with the standards of SECMP;

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<PAGE>

            (iii) any re-performance of Defective Work performed by a Third
                  Party Contractor pursuant to Section 4.7(b);

            (iv)  any breach of the provisions of this Agreement by the Owner or
                  by any other act or omission on the part of the Owner;

            (v)   suspension by the Owner of the Work or any part thereof or
                  order by the Owner causing or directing any material
                  alteration, amendment, omission, addition or other variation
                  to or of the Facilities (except where such suspension or order
                  is in consequence of the Work being Defective Work as defined
                  in Section 4.7); or

            (vi)  occurrence of an event of force majeure pursuant to Section
                  12.3.

6.6   Adjustments Claims.

      (a)   The EPCM Contractor shall make requests for adjustments to the
            Target Schedule, the Target Price or the Base Fee as follows:

            (i)   as soon as possible but not more than fifteen (15) days after
                  becoming aware of the occurrence of an Event, the EPCM
                  Contractor shall give notice to Owner's Representative of the
                  occurrence and nature of the Event, the anticipated
                  ramifications of such Event and the steps taken by the EPCM
                  Contractor to minimize the negative effects of the Event;

            (ii)  within fifteen (15) days of giving notice of the Event, if the
                  EPCM Contractor is of the opinion that a claim for an
                  adjustment of the Target Schedule, the Target Price or the
                  Base Fee is justified because of the Event, it shall make such
                  a claim in writing to the Owner giving details of the proposed
                  adjustment, all other facts on which the claim is based and
                  the direct effect of the Event on the Target Schedule, the
                  Target Price and/or the Base Fee, as applicable;

            (iii) the Owner shall consider the claim as soon as possible in
                  accordance with the requirements of this Article 6 and may
                  require the EPCM Contractor to supply further evidence to it
                  as it may in its discretion require to confirm the details of
                  the claim;

            (iv)  within ten (10) days after the receipt of all the information
                  that is reasonably necessary, the Owner shall notify the EPCM
                  Contractor of any adjustment it agrees to be appropriate under
                  the provisions of this Article 6 to the Target Schedule, the
                  Target Price and/or the Base Fee, as applicable, as each may
                  have previously been adjusted. In determining the appropriate
                  extension, the Owner is authorized to take into consideration
                  any reasonable alterations in the method or manner of
                  performance of the Work, which could obviate in whole or in
                  part any negative effects on the EPCM Work notwithstanding the
                  Event alleged; and

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<PAGE>

            (v)   Unless the EPCM Contractor has applied for an adjustment
                  within the period and in the aforesaid manner and unless and
                  until the Owner has adjusted the Target Schedule, the Target
                  Price and/or the Base Fee, as applicable, the EPCM Contractor
                  shall not by reason of any delay or additional cost arising
                  from any Events be relieved in any way or to any extent from
                  its obligations set out in this Article 6 above.

      (b)   The EPCM Contractor shall make requests for downward adjustments to
            the Target Schedule or the Target Price by providing Owner's
            Representative notice of the occurrence of an Event that requires a
            downward adjustment, together with any evidence supporting such
            claim; provided, that the EPCM Contractor shall be obligated
            promptly to bring such Event to the attention of the Owner and to
            provide the Owner with any pertinent information regarding the
            Event.

                                    ARTICLE 7
                                    PAYMENTS

7.1   Payment Obligation.

      The Owner shall pay the EPCM Contractor the Base Fee, the Reimbursable
      Costs, discretionary incentive awards, safety bonuses and Incentive Pool
      Awards in accordance with Schedule 3-A for the Phase I EPCM Work and in
      accordance with Schedule 3-B for the Phase II EPCM Work.

7.2   Invoices.

      During performance of the Phase I EPCM Work, no later than fourteen (14)
      days after the end of each month, the EPCM Contractor shall submit to the
      Owner an invoice for payment, supported by evidence of the amount due to
      the Contractor for the prior month. During performance of the Phase II
      EPCM Work, no later than the fifteenth (15th) day of each month, the EPCM
      Contractor shall submit for the Owner's approval, an invoice including:

      (a)   An estimate of the Reimbursable Costs under Schedule 3 to be
            incurred by the EPCM Contractor during the next month, together with
            a detailed calculation of the estimated wages/salaries of personnel,
            with position, rate and estimated manhours;

      (b)   A complete statement of actual Reimbursable Costs incurred during
            the previous month, including a reconciliation of the estimated
            Reimbursable Costs paid for the previous month versus actual
            Reimbursable Costs incurred during the previous month, prepared in a
            form reasonably acceptable to the Owner and supported by records
            evidencing the actual Reimbursable Costs incurred.

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<PAGE>

      (c)   Any base fee, discretionary award, safety incentive bonus, incentive
            pool awards or other fees under Schedule 3 earned by EPCM
            Contractor, with supporting documentation as appropriate to support
            entitlement to such fees.

7.3   Payments on Invoices.

      (a)   Subject to the Owner's right of withholding retention pursuant to
            Section 4.26, amounts properly billed in each invoice and owing
            under the Agreement shall be payable by the Owner to the EPCM
            Contractor no later than fifteen (15) days after the Owner has
            received such invoice and all documentation required under this
            Agreement.

      (b)   Where there is a good faith dispute on the amount of any invoice,
            that portion of the amount which is not in dispute shall be
            certified by the Owner's Representative and paid in accordance with
            Section 7.3(a). The Owner's Representative shall provide the EPCM
            Contractor with a detailed statement explaining the amount and basis
            for the payment dispute within fifteen (15) days after the Owner has
            received the invoice. That portion which is under dispute shall be
            paid within fifteen (15) days after resolution of the dispute.

7.4   Interest on Late Payments.

      Payments properly due to either the Owner or the EPCM Contractor overdue
      for more than fourteen (14) days shall begin to bear interest at a rate of
      1.5% above LIBOR on the date such payment becomes overdue and shall
      continue to bear such interest until paid.

7.5   Currency Exchange.

      Invoices that reflect billing in US dollars will be paid in US dollars.
      Invoices that reflect billing in any other foreign currency will be paid
      in such currency; provided that if the EPCM Contractor requests that a
      particular invoice or class of invoices be paid in US dollar equivalents,
      the Owner shall pay the EPCM Contractor the US dollar equivalent of such
      invoiced amount, calculated as of the date of the invoice.

      Specifically, US dollar equivalents for Chilean Peso costs will be
      calculated using the official "Dolar Observado" exchange rate, published
      daily by the Central Bank of Chile.

7.6   Final Payment.

      After the Final Completion Date, the resolution of outstanding Disputes
      between the Owner and the EPCM Contractor, if any, and the delivery of all
      documentation, as-built Drawings, lien releases, warranty assignments and
      other matters required by this Agreement, the Owner shall pay to the EPCM
      Contractor the balance due under this Agreement ("Final Payment"). The
      EPCM Contractor's acceptance of Final Payment shall constitute a waiver of
      any and all claims for payment against the Owner. Final Payment and
      acceptance thereof does not waive EPCM Contractor's warranties, obligation
      to re-perform Defective Work, or the various indemnity obligations of the
      parties provided for herein.

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                                   ARTICLE 8
                     CERTIFICATION OF MECHANICAL COMPLETION

8.1   Certificate of Mechanical Completion.

      The EPCM Contractor shall give the Owner's Representative reasonable
      notice from time to time that Mechanical Completion is anticipated for a
      system or combination of systems. The EPCM Contractor shall give the
      Owner's Representative fourteen (14) days notice of the date upon which
      the EPCM Contractor anticipates that the Mechanical Completion Miletsone
      will be achieved.

      When the EPCM Contractor is of the opinion that Mechanical Completion has
      been achieved for the Facilities or any portion thereof, the EPCM
      Contractor shall in writing request the Owner's Representative to issue a
      certificate of Mechanical Completion (each, a "Certificate of Mechanical
      Completion"). Within fourteen (14) days of the receipt of the request, the
      Owner's Representative shall give to the EPCM Contractor and to the Owner
      a Certificate of Mechanical Completion stating the date of Mechanical
      Completion and describing the portion of the Facilities to which the
      certificate relates, or give the EPCM Contractor in writing the reasons
      for not issuing the certificate. The Mechanical Completion Milestone shall
      be deemed to have been met upon issuance of a final Certificate of
      Mechanical Completion relating to the final portion of the Facilities to
      have achieved Mechanical Completion. Issuance of a Certificate of
      Mechanical Completion shall constitute Owner's acknowledgement of and
      agreement with the Punch List Items relating to the Facilities, or any
      portion thereof, that is the subject of the Certificate.

8.2   Effect of Certificate.

      The issuance of a Certificate of Mechanical Completion shall not
      constitute approval of any work or other matter, nor shall it prejudice
      any claim by the Owner, nor shall it be binding upon the Senior Lenders
      for purposes of determining compliance with the performance test imposed
      by the Senior Lenders, which test shall be conducted within one year after
      Final Acceptance under Section 18.1.

                                   ARTICLE 9
                                EVENTS OF DEFAULT

9.1   As to the EPCM Contractor, any of the following shall constitute an event
      of default under this Agreement:

      (a)   failure to perform or observe any of the material terms, conditions,
            covenants, conditions or provisions of this Agreement continuing
            beyond fifteen (15) days (or such longer period as is reasonably
            necessary to cure a curable default, provided that the EPCM
            Contractor commences to cure the default within the fifteen (15) day
            period and continues diligently until such default is cured) after
            receipt of notice of such failure to perform under the terms of this
            Agreement;

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<PAGE>

      (b)   after being given notice and an opportunity to cure as provided in
            Section 9.1(a) above, the EPCM Contractor (i) shall fail to make
            progress in the completion of the EPCM Work adequate to conform with
            the Target Schedule, (ii) shall fail to materially comply with the
            Project Specifications, (iii) shall abandon the Site or cease
            performing the EPCM Work for any reason other than a suspension or
            event of force majeure as contemplated by the terms of this
            Agreement, or (iv) shall fail to make prompt payments to its
            subcontractors or contract employees for materials or labor that are
            not subject to a good faith dispute;

      (c)   any order is made or resolution is passed placing the EPCM
            Contractor in liquidation (provisional or otherwise) or a receiver
            and manager is appointed or takes possession of any assets of the
            EPCM Contractor or Parent or a resolution is passed having the
            effect of placing the EPCM Contractor under official management; or
            the EPCM Contractor or Parent files a petition in bankruptcy or is
            adjudicated insolvent or bankrupt; or admits in writing its
            inability to pay its debts as they mature; or petitions or applies
            to any tribunal for the appointment of a receiver or trustee or
            similar officer for the EPCM Contractor or Parent or any assets of
            the EPCM Contractor or Parent; or commences any proceeding under any
            bankruptcy, reorganization, arrangement, readjustment of debt,
            dissolution or liquidation law or statute of any jurisdiction,
            whether now or hereafter in effect; or if there is filed any such
            petition or application, or any such proceeding is commenced,
            against the EPCM Contractor or Parent that remains undismissed for a
            period of thirty (30) days or more; or the EPCM Contractor or Parent
            by any act or omission indicates its consent to, approval of or
            acquiescence in any such petition, application or proceeding, or the
            appointment of a receiver or trustee or similar officer for the EPCM
            Contractor or Parent or any assets of the EPCM Contractor or Parent;
            or any judgment, writ, warrant of attachment or execution or similar
            process shall be issued or levied against any assets of the EPCM
            Contractor or Parent and such judgment, writ or similar process
            shall not be released or vacated within thirty (30) days after its
            issue or levy;

      (d)   the EPCM Contractor or Parent makes a general assignment for the
            benefit of its creditors or enters into any scheme or arrangement
            for such purpose or seeks to effect any compromise with its
            creditors other than a compromise in the ordinary course of its
            business;

      (e)   the termination or repudiation of, the failure to maintain, or the
            occurrence of any default under the Parent Guaranty; or

      (f)   the EPCM Contractor fails to maintain the required insurance set
            forth in Schedule 6.

9.2   As to the Owner, failure to perform or observe any of the material terms,
      conditions, covenants, conditions or provisions of this Agreement
      continuing beyond fifteen (15) days (or such longer period as is
      reasonably necessary to cure a curable default, provided that the Owner
      commences to cure the default within the fifteen (15) day period and
      continues diligently until such default is cured) after receipt of notice
      of such failure to perform under the terms of this Agreement, shall
      constitute an event of default under this Agreement.

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<PAGE>

                                   ARTICLE 10
                                   TERMINATION

10.1  The Owner shall have the right in its absolute discretion to terminate
      this Agreement with or without cause, in whole or in part, by giving
      written notice to the EPCM Contractor to that effect. Termination of this
      Agreement pursuant to this Section 10.1 shall become effective immediately
      after the written notice has been served on the EPCM Contractor.

10.2  If an event of force majeure prevents either party from materially
      performing its obligations or any part of its obligations under this
      Agreement for a continuous period of at least one hundred eighty (180)
      days after commencement of such force majeure, either party may terminate
      this Agreement or the relevant portions thereof; provided that any
      portions of this Agreement and the obligations thereunder that are not
      prevented by the event of force majeure shall remain in full force and
      effect as to both parties.

10.3  Upon receipt by the EPCM Contractor of a notice from the Owner terminating
      this Agreement or any part thereof, the EPCM Contractor shall immediately
      do all things reasonably possible to reduce expenses or costs to the Owner
      resulting from or related to such termination.

10.4  Upon termination pursuant to this Article 10, the EPCM Contractor shall be
      entitled to (i) reimbursement for all Reimbursable Costs incurred by the
      EPCM Contractor as of the date of termination, (ii) the amount of the Base
      Fee which has been earned as of the date of termination, as determined on
      an Earned Value basis, (iii) any safety incentive bonus that has been
      earned as of the date of termination and not previously paid, and (iv) the
      EPCM Contractor's reasonable out-of-pocket demobilization costs and
      expenses; provided that EPCM Contractor's demobilization costs shall be
      offset by the additional incremental costs incurred by the Owner in
      replacing the EPCM Contractor if at the time the Owner terminates this
      Agreement the EPCM Contractor is in material default of this Agreement in
      accordance with Section 9.1. In the event of a termination of this
      Agreement, the EPCM Contractor shall not be entitled to any sum
      accumulated in the Incentive Pool, unless the Mechanical Completion
      Milestone has been achieved prior to the termination of this Agreement, in
      which case awards from the Incentive Pool shall be paid out in accordance
      with Schedule 3-B.

10.5  In the event of termination pursuant to this Article 10, the Owner or any
      contractor subsequently appointed by the Owner may, without prejudice to
      any other right or remedy under this Agreement, take possession of all
      aspects of the EPCM Work, the Facilities and any equipment, material,
      tools and appliances thereon and finish the EPCM Work, or any part of it,
      by whatever method the Owner may deem expedient and all associated
      drawings, studies, specifications, and digital and other files and
      documents related to the Project and the Work shall be delivered to the
      Owner or its designee promptly upon receipt of the termination notice.

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<PAGE>

10.6  The Owner will not be liable to the EPCM Contractor for any claims by the
      EPCM Contractor for loss of anticipated profits or damages for, or on
      account of, or arising from, any termination of this Agreement effected in
      accordance with the provisions of this Agreement.

10.7  Notwithstanding anything contained in this Article 10, the EPCM Contractor
      shall, in accordance with this Agreement, complete any part of this
      Agreement not terminated and any EPCM Work required thereby, if any.

10.8  Termination under Section 10.1 or 10.2 shall not constitute an election of
      remedies, nor shall it otherwise limit the Owner's right to pursue any
      action against the EPCM Contractor in accordance with the terms of this
      Agreement to recover any damages or pursue any other remedy available to
      the Owner as a result of any default by the EPCM Contractor. Any retention
      or payment of moneys due to the EPCM Contractor by the Owner will not
      release the EPCM Contractor from liability for default.

10.9  Notwithstanding termination of the EPCM Work under the provisions of
      Section 10.1 or 10.2, there shall survive and remain in effect all of EPCM
      Contractor's continuing obligations, warranties and indemnities with
      respect to portions of the EPCM Work previously undertaken and/or
      completed hereunder, including without limitation, re-performance of
      Defective Work that is EPCM Work in accordance with Section 4.7.

                                   ARTICLE 11
                                 CONFIDENTIALITY

11.1  All materials, data, specifications, drawings, inventions, documents, or
      other information in any written or electronic form furnished by the Owner
      to the EPCM Contractor and all materials or information which become the
      property of the Owner pursuant to Section 4.3(b) hereof, are proprietary
      to the Owner and confidential. The EPCM Contractor shall take all
      reasonable measures to ensure the confidentiality of such information. The
      EPCM Contractor agrees that it will not divulge to any third party any
      written or electronic information described above in this Section 11.1, or
      any information obtained by any other means, which relates to the
      technical or business activities of the Owner or Owner's affiliates, the
      Site or the Work, except as provided below:

      (a)   The Owner or its Affiliates publish such information through general
            nonproprietary sources;

      (b)   The EPCM Contractor held such information in its rightful possession
            prior to the commencement of any EPCM Work under this Agreement, and
            no restrictions exist on the dissemination of such information; or

      (c)   The EPCM Contractor has received express written authorization from
            the Owner to divulge such information to fulfill its obligations
            under this Agreement.

      Should the EPCM Contractor receive approval from the Owner to divulge
      information to its agents, representatives, or other third parties
      pursuant to Section 11.1(c) hereof, then the EPCM Contractor agrees to
      ensure the confidentiality of such information while in their possession
      and obtain a confidentiality agreement signed by the party receiving the
      information which is similar in substance to this Section 11.1 and
      acceptable to the Owner, prior to the release of the information to that
      party.

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11.2  The EPCM Contractor acknowledges that all information made available to it
      by the Owner is an important asset of the Owner and that the Owner shall
      be entitled to the remedies of injunction and/or specific performance in
      addition to all other remedies available at law or equity in the event of
      actual or threatened unauthorized disclosure of such information by the
      EPCM Contractor in violation of the terms of this Agreement.

11.3  The EPCM Contractor shall not make any public announcements or issue any
      press releases regarding this Agreement, its terms or EPCM Contractor's
      involvement in the Project without obtaining Owner's prior written
      consent, which shall not be unreasonably withheld.

                                   ARTICLE 12
                                  FORCE MAJEURE

12.1  If either party is or will be rendered unable by force majeure, as defined
      in Section 12.2 below, to perform wholly or in part any obligation under
      this Agreement, it shall give to the other party, as soon as possible, but
      in any event within five (5) days after becoming aware of such force
      majeure, written notice of such force majeure with full particulars
      thereof and the probable extent to which it will be unable to perform or
      be delayed in performing such obligation whereupon, except for the
      obligation to pay monies due under this Agreement, such obligation of the
      party giving notice shall be suspended so far and so long as it is
      affected by such force majeure. The party giving the notice shall use its
      best endeavors to mitigate the effects of such force majeure and shall
      keep the other party informed of all developments in relation thereto and,
      in particular, give immediate notice of the cessation of the event of
      force majeure.

12.2  The term "force majeure" shall mean an act of God, unforeseeably adverse
      weather conditions including cyclones, tornadoes, storms, earthquakes,
      floods, volcanic activity, fire, explosion, expropriation, act of a public
      enemy or terrorist, war, revolution, riot, insurrection, governmental
      restraint, physical or man-made roadblocks continuing beyond three (3)
      days, labor disputes (including without limitation, strikes,
      interruptions, lock outs or other similar actions) not within EPCM
      Contractor's reasonable control, and any other cause or event which is not
      within the reasonable control of the party claiming force majeure;
      provided, however, that any failure by a Project Contractor to perform its
      obligations under its Project Contract or purchase order with the EPCM
      Contractor that is not as a result of a force majeure event under such
      Project Contract, shall be deemed to be within the control of the EPCM
      Contractor. Financial difficulty shall not be considered a cause beyond a
      party's control.

12.3  Where a force majeure event impacts the Target Schedule, the Target
      Schedule shall be adjusted to the minimum extent necessary pursuant to
      Section 6.3 to account for any force majeure delay, the Owner shall,
      subject to the materiality provisions of Section 6.1, reimburse the EPCM
      Contractor its reasonable costs, calculated pursuant to Schedule 3,
      necessarily and unavoidably incurred during the force majeure event or
      incurred in the exercise of reasonable diligence to avoid or mitigate a
      force majeure event. Additional costs shall be subject to the Owner's
      prior approval in writing.

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<PAGE>

12.4  A party in default may not invoke an event of force majeure commencing
      subsequent to such default as an excuse therefor. In the event of a
      default, however, as to which the EPCM Contractor has received notice and
      commenced a cure, the period during which such cure is to be effected
      shall be extended to the extent performance is delayed by an event of
      force majeure.

12.5  All of the Project Contracts negotiated, written, administered and/or
      entered into by the EPCM Contractor shall incorporate the substance of
      this Article 12, including without limitation, the definition of "force
      majeure" as set forth in Section 12.2.

                                   ARTICLE 13
                                    DISPUTES

13.1  Scope of Liability.

      The EPCM Contractor and the Owner shall not be entitled to claim against
      each other, and the EPCM Contractor and the Owner shall not be liable to
      each other in tort or contract, except as specifically provided in this
      Agreement.

13.2  Matters Affected.

      Any claim arising out of or attributable to the interpretation or
      performance of this Agreement which cannot be resolved by negotiation
      shall be considered a dispute within the meaning of this Article 13 (each,
      a "Dispute").

13.3  Notice of Dispute.

      A party to this Agreement claiming that a Dispute has arisen under this
      Agreement must give written notice to the other party's Representative
      nominated under this Agreement within twenty-one (21) days of becoming
      aware of the event or condition giving rise to the Dispute.

13.4  Investigation and Negotiation.

      The Representatives must seek to resolve the Dispute within ten (10) days
      after notice is given pursuant to Section 13.3, following whatever
      investigation each deems appropriate.

13.5  Dispute Resolution Process.

      (a)   If the Dispute is not resolved by the Representatives within the
            allotted ten (10) days, then the parties shall promptly prepare and
            exchange memoranda stating the issues in dispute and their
            respective positions, summarizing negotiations that have taken place
            and attaching relevant documents.

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<PAGE>

      (b)   Such memoranda shall promptly be submitted to the Senior Management
            of each party who, in turn, shall promptly but in no event more than
            fifteen (15) days after the period in which the Representatives
            failed to resolve the Dispute under Section 13.5(a), meet for
            negotiations at a mutually agreed time and place. "Senior
            Management" shall mean one or more executives of the party having a
            position at least equal to a vice-president or corporate sponsor of
            the party with respect to the Project. Project Managers or persons
            whose primary responsibility relates to the Project or the Work
            hereunder shall not be deemed Senior Management for purposes of this
            Section 13.5.

      (c)   If the Dispute has not been resolved within ten (10) calendar days
            of the commencement of the negotiations between Senior Management of
            the parties, either party shall thereafter be free to seek redress
            via the arbitration procedures outlined in this Article 13 by filing
            a notice of demand for arbitration with the American Arbitration
            Association in Denver, Colorado and with the other party.

      (d)   Any Dispute arising out of or relating to this Agreement shall be
            settled by arbitration in accordance with the Construction Industry
            Arbitration Rules of the American Arbitration Association, as in
            force at the time of the Dispute, subject to the express provisions
            herein.

            (i)   For all Disputes involving a good faith claim exceeding
                  $1,000,000, the number of arbitrators shall be three. Each
                  party shall appoint one arbitrator within fifteen (15) days of
                  receiving notice of the arbitration proceeding, and the two
                  arbitrators selected by the parties shall appoint the third
                  arbitrator. Absent agreement by the arbitrators appointed by
                  the parties within fifteen (15) days after their appointment,
                  the third arbitrator shall be appointed by the American
                  Arbitration Association.

            (ii)  For all Disputes involving a good faith claim for less than
                  $1,000,000, the number of arbitrators shall be one, and the
                  sole arbitrator shall be an arbitrator that is independent of
                  both parties and appointed by the American Arbitration
                  Association in accordance with the provisions of this Section
                  13.5.

            (iii) Each arbitrator selected (whether by the parties or the
                  American Arbitration Association) shall be qualified,
                  knowledgeable and experienced as to the subject matter of the
                  issue or issues to be arbitrated and shall have at least 5
                  years of relevant industry experience.

            (iv)  Disputes arising under this Agreement shall be resolved solely
                  by arbitration pursuant to this Article 13. The place of
                  arbitration, if not otherwise agreed by the parties, shall be
                  Denver, Colorado, U.S.A. The language to be used in the
                  arbitral proceedings shall be English.

                                       51
<PAGE>

            (v)   Each party shall bear its own costs and expenses incurred in
                  connection with a Dispute and the arbitral tribunal shall not
                  have any power to award attorneys or other fees or costs to
                  the prevailing party.

            (vi)  The award and all decisions of an arbitral tribunal shall be
                  final and binding upon the parties and reviewable only in
                  accordance with the provisions of the Uniform Arbitration Act,
                  as adopted by the State of Colorado. Judgment upon the award
                  rendered by the arbitrators may be entered in any court having
                  jurisdiction thereof.

13.6  Joinder of Other Parties.

      Any arbitration proceeding arising out of or relating to this Agreement,
      the Project, the Work, or the breach thereof may include by consolidation,
      joinder or in any other manner, at the option of either the Owner or the
      EPCM Contractor, any other entities or persons whom it believes to be
      substantially involved in a common question of fact or law, including but
      not limited to Project Contractors, Third Party Contractors and the
      Parent. All of the Project Contracts negotiated, written, administered
      and/or entered into by the EPCM Contractor and all Third Party Contracts
      entered into by the Owner with Third Party Contractors shall include
      express provisions to incorporate the substance of this Section 13.6.

13.7  Continuation of Performance.

      Unless otherwise agreed in writing, and notwithstanding any other rights
      or obligations of either of the parties under this Agreement, the EPCM
      Contractor shall continue to perform the EPCM Work in accordance with this
      Agreement during the pendency of any Dispute or arbitration proceeding to
      resolve any Dispute and the Owner shall continue to make payments to the
      EPCM Contractor in accordance with this Agreement. The Owner shall be
      under no obligation, however, to make payments to the EPCM Contractor on
      or against the subject matter of such Disputes during the pendency of any
      arbitration or other proceeding to resolve such Dispute.

13.8  Arbitrations under Other Contracts.

      The EPCM Contractor may be joined, and hereby consents to any such
      joinder, as a party to any arbitration commenced under Project Contracts
      or any contract between the Owner and any Third Party Contractor
      performing work in connection with the Project.

13.9  Equitable Relief.

      Nothing herein shall prevent either party from seeking injunctive or other
      interim or provisional relief from a court of competent jurisdiction on
      the grounds that relief would not otherwise be available via the dispute
      resolution procedures of this Article 13; provided that the parties hereby
      agree that any arbitral tribunal convened pursuant to this Article 13
      shall be authorized to consider and address the continuance, modification
      or termination of such relief and such an order of any properly convened
      arbitral tribunal shall be binding on the parties.

                                       52
<PAGE>

                                   ARTICLE 14
                                     NOTICES

14.1  All notices, instructions, approvals, consents and requests from one party
      to the other required or permitted under this Agreement shall be in
      writing and delivered personally or sent by overnight express mail or
      courier (excluding ordinary mail) or sent by facsimile, as follows:

                           To the Owner:

                           Minera San Cristobal S.A.
                           c/o Apex Silver Mines Corporation
                           1700 Lincoln Street
                           Suite 3050
                           Denver, Colorado USA 80203
                           Attn:  Michael F. Shaw
                           Facsimile: (303) 839-5907       Phone: (303) 839-5060

                           cc:  Owner's Representative (in accordance with
                                Schedule 5)

                           To the EPCM Contractor:

                           Aker Kvaerner Metals, Inc.
                           7909 Parkwood Circle Drive
                           Houston, Texas USA 77036
                           Attn:  Jim McGrath
                           Facsimile: (713) 270-2361       Phone: (713) 270-2374

                           cc:  EPCM Contractor's Representative (in
                                accordance with Schedule 5)

      or to such other address as either of the parties shall specify by notice
      as provided in this Section 14.1 from time to time.

14.2  All such notices and communications shall be deemed received:

      (a)   if delivered personally, upon delivery,

      (b)   if by overnight express mail or courier, upon receipt,

      (c)   if sent by facsimile, when transmitted to the specified facsimile
            number and confirmation of receipt is obtained.

                                       53
<PAGE>

14.3  Without prejudice to any other authority, any notice, instruction,
      approval, consent or request given over the hand of the Owner's
      Representative or over the hand of the EPCM Contractor's Representative or
      a person to whom either of them has delegated the authority in writing
      shall be deemed to be properly authorized.

                                   ARTICLE 15
                               INSURANCE; SURETIES

15.1  The insurance and the related obligations required of the Owner and the
      EPCM Contractor are set forth in Schedule 6.

15.2  The Owner shall furnish the EPCM Contractor and the EPCM Contractor shall
      furnish the Owner with certificates of insurance from acceptable insurers
      confirming the existence and renewal of each policy of insurance required
      by Schedule 6. Such certificates shall provide that written notice shall
      be given to the EPCM Contractor and the Owner thirty (30) calendar days
      prior to cancellation. Furthermore, the EPCM Contractor shall promptly
      notify the Owner upon becoming aware of any material change to any policy
      and upon becoming aware that any policy is in jeopardy of not being, or
      has not been, renewed upon substantially the terms in place as of the
      immediately preceding insurance period.

      (a)   Subject to the provisions of Section 4.29 and 4.30, obtaining the
            insurance required by Schedule 6 shall not in any way limit, alter
            or affect the liability and obligations of the EPCM Contractor under
            this Agreement.

      (b)   The examination by either party of any insurance effected under the
            terms of this Agreement is without prejudice to their rights under
            this Agreement, and shall not be construed as a waiver by either
            party of the obligations imposed by this Agreement to obtain
            insurance or an admission that either party has fulfilled its
            obligation to insure under this Agreement.

      (c)   If the EPCM Contractor fails to maintain the insurance as set forth
            herein, the Owner shall have the right, but not the obligation, to
            purchase said insurance at the EPCM Contractor's expense.

      (d)   The EPCM Contractor agrees to cooperate with the Owner as to any
            changes in or additions to the foregoing insurance provisions made
            necessary by requirements imposed by the Senior Lenders, provided
            that any resulting costs of increased coverage shall be reimbursable
            by the Owner and provided further that no such requirements shall
            materially adversely affect EPCM Contractor's risk exposure, such
            determination to be made in EPCM Contractor's reasonable discretion.

                                       54
<PAGE>

15.3  The sureties and other security required of the EPCM Contractor are set
      forth in Schedule 7.

                                   ARTICLE 16
                                   ASSIGNMENT

16.1  (a) The Owner may grant, assign or transfer all or any of its rights and
      obligations under this Agreement to an assignee or transferee of all or an
      equivalent portion of its interest in the Project contemporaneously with
      such grant, assignment or transfer; provided, however, no such grant,
      assignment or transfer shall adversely affect, diminish or impair EPCM
      Contractor's rights nor its financial interests under this Agreement.
      Notwithstanding the foregoing, the Owner shall be entitled to grant,
      transfer and assign to the Senior Lenders, as defined below, and any other
      secured parties under the Project financing documents (or the trustee
      acting on behalf of such Senior Lenders and secured parties), by way of
      security, all right, title and interest that the Owner now has or which
      shall hereafter arise in and to this Agreement and all amounts due and to
      become due to the Owner hereunder or in respect hereof and all claims
      resulting from any failure of performance or compliance with any of the
      provisions of this Agreement, together with full power and authority, in
      their own name or in the name of the Owner or otherwise, to enforce this
      Agreement against the EPCM Contractor and to collect, receive and give
      receipts and releases of such amounts. The EPCM Contractor irrevocably
      consents to and hereby acknowledges such grant, transfer and assignment.
      "Senior Lenders" shall mean lenders providing secured financing to the
      Owner for the purpose of developing the Project, and any extensions,
      renewals, rollovers or replacements of such financing. In the event of any
      such collateral assignment for the benefit of any lender, the EPCM
      Contractor agrees to execute such acknowledgments of the assignment and
      estoppel certificates and other instruments confirming this Agreement as
      the lenders request.

      (b)   The EPCM Contractor may, upon receipt of Owner's prior written
            consent, grant, assign or transfer its rights and obligations under
            this Agreement to a successor in interest, by merger, consolidation,
            sale, transfer or otherwise, in which a successor in interest
            acquires all or substantially all of the assets and business
            (including the assets and business necessary to perform this
            Agreement) of the EPCM Contractor, and in the case of such a merger,
            consolidation, sale and transfer, this Agreement shall be
            transferred and assigned to such successor in interest. The Owner's
            consent to an assignment pursuant to this Section 16.1 shall not be
            unreasonably withheld so long as the successor in interest is
            capable of and expressly assumes the performance of the EPCM Work
            and EPCM Contractor's other obligations (including the Parent
            Guaranty) arising under and in the manner required by the terms of
            this Agreement.

                                       55
<PAGE>

                                   ARTICLE 17
                               TITLE; RISK OF LOSS

17.1  Ownership of Goods.

      Title of all equipment, materials and supplies ("Goods") for incorporation
      into the Work, shall vest in the Owner. All of the Project Contracts
      negotiated, written, entered into and/or administered by the EPCM
      Contractor shall incorporate the substance of this Section 17.1.

17.2  EPCM Contractor's Duty of Care.

      In accordance with the standards of SECMP, the EPCM Contractor shall take
      all commercially reasonable precautions against loss of or damage to the
      Facilities, the Equipment, the Goods and any other machinery, tools,
      materials or property used to perform the Work or to be incorporated into
      the Facilities under its control. EPCM Contractor's duty of care under
      this Section 17.2 shall continue until the date that care, custody and
      control of the Facilities or any portion thereof has been effectively
      transferred to, or control effectively assumed by, the Owner in accordance
      with Section 2.6; provided that the duty of care provided by this Section
      17.2 shall revert to the EPCM Contractor during any periods in which the
      EPCM Contractor re-performs Defective Work.

                                   ARTICLE 18
                                   ACCEPTANCE

18.1  When the EPCM Contractor has completed the EPCM Work, or any separable
      portion thereof, including all performance tests required by and in the
      manner set forth in Appendix 4 to Schedule 2, the EPCM Contractor shall
      notify the Owner in writing within forty-eight (48) hours. The Owner will
      then promptly schedule a final inspection with the EPCM Contractor and
      will promptly thereafter notify the EPCM Contractor in writing of all
      particulars in which this inspection reveals that the Work is incomplete
      or defective. The EPCM Contractor shall promptly take such measures as are
      necessary to remedy such deficiencies and place the Work in full
      compliance with this Agreement, including completing Punch List Items. In
      addition to completion of the required performance tests, completion and
      final inspection of all corrections and Punch List Items to the reasonable
      satisfaction of the Owner, Owner's Acceptance of the completed Facilities
      shall be expressly conditioned upon the release of all liens against the
      completed Facilities, other than liens which the Owner and the EPCM
      Contractor have mutually agreed are subject to dispute. Promptly after
      satisfaction of the conditions set forth in this Section 18.1, the
      completed Work or any separable portion thereof, shall be accepted by the
      Owner in writing (each such written acceptance, an "Acceptance
      Certificate"). "Final Acceptance" shall be deemed to have occurred upon
      acceptance of all of the Facilities by the Owner. Neither Acceptance nor
      taking possession of the completed Facilities by the Owner shall
      constitute a waiver of the EPCM Contractor's warranties, obligation to
      re-perform Defective Work under Section 4.7 above or the various indemnity
      provisions herein.

                                       56
<PAGE>

                                   ARTICLE 19
                                 ADDITIONAL WORK

19.1  Nothing in this Agreement shall prevent the Owner from identifying other
      punch list items or additional work ("Additional Work") that is, absent a
      Change Order incorporating such Additional Work, outside the Scope of EPCM
      Work contemplated by this Agreement. The Owner may, in its sole
      discretion, contract with the EPCM Contractor or any Third Party
      Contractor to perform the Additional Work. Except to the extent
      incorporated into the Scope of EPCM Work via Change Order, completion of
      Additional Work shall not be a pre-condition to the achievement of any of
      the Milestones or the granting by the Owner of any acceptance or approval
      required by the terms of this Agreement.

                                   ARTICLE 20
                                  MISCELLANEOUS

20.1  Survival.

      Except as expressly limited herein, all representations, warranties,
      agreements, indemnities and obligations of the parties under this
      Agreement shall survive completion of the Facilities or termination of
      this Agreement.

20.2  Severability.

      If any provision of this Agreement or any portion of a provision of this
      Agreement is declared by any tribunal or court of competent jurisdiction
      to be invalid for any reason, such invalidity shall not affect the
      remaining provisions or the remaining portions thereof. On the contrary,
      such remaining provisions or portions thereof shall be fully severable,
      and this Agreement shall be construed and enforced as if such invalid
      provisions or portions thereof never had been inserted in this Agreement.

20.3  Exclusion of Consequential Damages.

      Notwithstanding any other provisions in this Agreement to the contrary,
      the Owner and the EPCM Contractor shall not be liable in contract, tort,
      strict liability, warranty or otherwise, for any special, incidental or
      consequential damages, such as, but not limited to, delay, disruption,
      loss of product, loss of anticipated profits or revenue, loss of use of
      equipment or systems, non-operation or increased expense of operation of
      other equipment or systems, cost of capital, cost of purchased or
      replacement equipment, systems or power and cost of real estate. EPCM
      Contractor's liability for Defective Work shall be limited to
      re-performance at its own cost in accordance with and subject to the
      limits stated in this Agreement. The EPCM Contractor shall not be liable
      for any other re-work, including but not limited to re-construction,
      equipment replacement or material re-supply, other than as provided in
      paragraph 4.1 of Schedule 3-B. These limitations shall survive the
      termination or conclusion of this Agreement. Claims resulting from
      personal injury or death, or from damage to property, shall not be deemed
      consequential damages for purposes of the disclaimer of liability set
      forth in this Section 20.3, except to the extent such claims may include
      claims for consequential damages.

                                       57
<PAGE>

20.4  Exclusive Remedies.

      The remedies expressed in this Agreement shall be the exclusive remedies
      with respect to any and all liabilities or claims arising under or in any
      manner related to this Agreement.

20.5  Governing Law; Jurisdiction.

      The Agreement shall be governed, interpreted, and enforced in accordance
      with the laws of the State of Colorado, U.S.A. The parties hereby submit
      to the jurisdiction of the federal and state courts of the State of
      Colorado and agree that the courts of the State of Colorado shall be a
      proper forum for actions for temporary or injunctive relief under Section
      13.9 and for entry of judgment enforcing or confirming an arbitration
      award under this Agreement. All of the Project Contracts which are
      negotiated, written, entered into and/or administered by the EPCM
      Contractor shall incorporate the substance of this Section 20.5.

20.6  Waiver.

      None of the terms or conditions of this Agreement shall be considered
      waived by the Owner unless such waiver is given in writing by the Owner.
      No such waiver shall be a waiver of any past or future default, breach, or
      modification of any of the conditions of this Agreement unless expressly
      stipulated in such waiver.

20.7  Relationship.

      The Owner and the EPCM Contractor each acknowledge and agree, that while
      this Agreement anticipates that the EPCM Contractor will act in the
      capacity as Owner's agent for the purpose of overseeing and managing the
      Project Contracts and the Project Contractors, it is not the purpose or
      intention of this Agreement to create a joint venture, partnership, mining
      partnership or employment relationship between the Owner and the EPCM
      Contractor.

20.8  Status of Third Parties.

      Except as to benefits accruing or intended to accrue to lenders of the
      Owner pursuant to collateral assignments, pledges or grants of security
      interests herein, nothing contained in this Agreement shall create a
      contractual relationship with, or a cause of action against the Owner in
      favor of a third party, and this Agreement is not intended to benefit any
      third party, including any Third Party Contractors or Project Contractors.

20.9  Headings.

      Section and sub-section headings used in this Agreement and paragraph and
      sub-paragraph headings used in the Schedules have been inserted for
      convenience of reference only and do not constitute a part of either this
      Agreement or the Schedules and shall be disregarded for purposes of
      construing the language in this Agreement and the Schedules.

                                       58
<PAGE>

20.10 Prior Agreements.

      This Agreement supercedes all prior negotiations, representations or
      agreements between the parties regarding the subject matter of this
      Agreement. This Agreement shall not be superceded by any provisions of the
      documents or agreements for construction or provision of on-site services
      and may be amended only by written instrument signed by both the Owner and
      the EPCM Contractor; provided that changes in the EPCM Work shall be
      accomplished by Change Order pursuant to Article 6.

                            [Signature Page Follows]

                                       59
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as set forth above.

                                    MINERA SAN CRISTOBAL, S.A.

                                    By: /s/ Carlos H. Fernandez
                                       ---------------------------------------
                                    Name: Carlos H. Fernandez
                                         -------------------------------------
                                    Title: President and Chief Executive Officer
                                          ------------------------------------

                                    AKER KVAERNER METALS, INC.

                                    By: /s/ James J. McGrath
                                       ---------------------------------------
                                    Name: James J. McGrath
                                         -------------------------------------
                                    Title: President
                                          ------------------------------------

                                       60

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