Document:

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                                                                   Exhibit 10.20

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

LOCKHEED MARTIN                                    Post-Proposal Letter Contract

Subcontractor: Ocean Power Technologies (OPT)                      Date: 9/17/04
               1590 Reed Rd.
               Pennington, NJ 08534             Prime or Customer Contract
                                                No.: N00039-04-C-0035

Subject: LOCKHEED MARTIN CORPORATION- Maritime Systems & Sensors (MS2)

Letter Contract No. DM259735:

Reference:   a)   MS2 Request for Proposal (RFP)No. 29-RA-042904 dated April 8,
                  2004 and All Amendments

             b)   OPT Proposal dated April 29, 2004 (with pricing
                  update/correction provided 30-Apr-04 and 05-May-04) and
                  Revision dated August 4, 2004

1.   Authorization is hereby given to proceed with the Work against the subject
     contract, as follows:

     Tactical Interface System Buoy in Support of the Advanced Deployable System
     (ADS) Technology Development (TD) CLIN's 0001 and 0002 ("The Program").

2.   Delivery schedules shall be as follows: Period of Performance 9/14/04 -
     10/31/05

3.   Fact-finding of your proposal submitted in response to Lockheed Martin's
     Request for Proposal No. 29-RA-042904 is anticipated to begin on 9/22/04.
     Negotiations are anticipated to begin on 9/23/04. The target definitization
     date for the contract is 9/24/04, or before expenditure of [**]% of the
     total estimated cost.

4.   The total Not-to-Exceed (NTE) price of this contract is: $[**].

5.   This contract is incrementally funded. Lockheed Martin's limitation of
     obligation to pay under this authorization is $[**]. The funds are expected
     to be adequate for performance of the Work until 2/16/05.

6.   Payment Terms are: Net 30 Days.

7.   Lockheed Martin anticipates executing a cost plus fixed fee (CPFF) type
     contract. Contractual provisions applicable to this authorization are
     incorporated by reference, as follows:

     A.   General Provisions:

          i.   Lockheed Martin CORPDOC No.4, dated 10/03, pages 1 through 11,
               including Addendum No. 4A, dated 10/03, pages 1 through 3. Final
               terms and conditions to be mutually agreed to prior to contract
               definitization.

          ii.  Terminations. If this authorization is terminated for any reason
               before executing the definitive contract, the termination will be
               accomplished according lo the 'Termination' clause of the CORPDOC
               incorporated above. A definitive contract will be issued for the
               work accomplished up to the point of termination.

     B.   Special Provisions:

          i.   Quality Assurance clauses: Per MS2 RFP #29-RA-042904 - and as
               included in definitized contract.

          ii.  Government Prime Contract Flowdowns: Per MS2 RFP #29-RA-042904 -
               to be further refined prior to contract definitization.

     C.   Statement of Work No. Attachment G to RFP #29-RA-042904, entitled
          Advanced Deployable System (ADS) System Development and Demonstration
          (SDD) Phase, dated 07 June 2004, pages 1 through 26.

     D.   System Performance Specification No. Rev 8.4, and Interface
          Requirements Document Rev 3.2b.

8.   The CONTRACTOR is claiming the following Rights in Technical Data: [**]

S 860 (03/04)                                              TAB - LETTER CONTRACT

                                   PAGE 1 OF 2

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LOCKHEED MARTIN                                    Post-Proposal Letter Contract

          The proposed Program extends the work performed under these contracts,
     and as such is accorded all rights of an SBIR Phase III funding agreement.
     The rights are subject to Patent Rights, Rights in Data, and Rights in
     Technical Data provisions of FAR 52.227-11, 52.227-20 and DFARS
     252.227-7018.

9.   This contract is subject to the Cost Accounting Standards (CAS), as
     provided in Attachment A of MS2 RFP #29-RA-042904.

10.  This is a rated contract certified for National Defense. The Contractor is
     required to follow all provisions of the Defense Priorities and Allocations
     System (DPAS) regulations (15 CFR 700). The rating on this order is DO-A7.

11.  This authorization is subject to your prompt acceptance. Please return a
     signed copy by FAX no later than cob, Monday, September 20, 2004,
     confirming your acceptance of the contents herein and acknowledging that
     the effort authorized has been initiated.

Contractor: OCEAN POWER TECHNOLOGIES    LOCKHEED MARTIN CORPORATION

By: /s/ Charles F. Dunleavy             By: /s/ Brenda Aanderud
    ---------------------------------       ------------------------------------
Title: C.F.O.                           Title: Staff Subcontract Administrator
Date: 22 September 2004                 Date: 9/17/04

S 860 (03/04)                                              TAB - LETTER CONTRACT

                                   PAGE 2 OF 2
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Section A - PO #DM259735
LOCKHEED MARTIN CORPORATION

CORPDOC 4

                                                                 LOCKHEED MARTIN

      COST REIMBURSEMENT GENERAL PROVISIONS AND FAR FLOWDOWN PROVISIONS FOR
         SUBCONTRACTS/PURCHASE ORDERS (ALL AGENCIES) FOR NON-COMMERCIAL
                               ITEMS UNDER A U.S.
                            GOVERNMENT PRIME CONTRACT

SECTION I: GENERAL PROVISIONS
1    Acceptance of Contract/Terms and Conditions
2    Allowable Cost and Payment
3    Applicable Laws
4    Assignment
5    Communication With Lockheed Martin Customer
6    Contract Direction
7    Definitions
8    Disputes
9    Electronic Contracting
10   Export Control
11   Extras
12   Fee
13   Furnished Property
14   Gratuities/Kickbacks
15   Independent Contractor Relationship
16   Information of Lockheed Martin
17   Information of Seller
18   Insurance/Entry on Lockheed Martin Property
19   Intellectual Property
20   Offset Credit/Cooperation
21   Packing and Shipment
22   Parts Obsolescence
23   Payments, Taxes, and Duties
24   Precedence
25   Priority Rating
26   Quality Control System
27   Release of Information
28   Severability
29   Survivability
30   Timely Performance
31   Waivers, Approvals, and Remedies

SECTION II: FAR FLOWDOWN PROVIIONS
A    Incorporation of FAR Clauses
B    Government Subcontract
C    Notes
D    Amendments Required by Prime Contract
E    Preservation of the Government's Rights
F    FAR Flowdown Clauses
G    Certification and Representations

SECTION I: GENERAL PROVISIONS

1.   ACCEPTANCE OF CONTRACT/TERMS AND CONDITIONS

     (a)  This Contract integrates, merges, and supersedes any prior offers,
          negotiations, and agreements concerning the subject matter hereof and,
          together with Exhibits, Attachments, and any Task Order(s) issued
          hereunder, constitutes the entire agreement between the parties.

     (b)  SELLER's acknowledgment, acceptance of payment, or commencement of
          performance, shall constitute SELLER's unqualified acceptance of this
          Contract.

     (c)  ADDITIONAL OR DIFFERING TERMS OR CONDITIONS PROPOSED BY SELLER OR
          INCLUDED IN SELLER'S ACKNOWLEDGMENT ARE OBJECTED TO BY LOCKHEED MARTIN
          AND HAVE NO EFFECT UNLESS EXPRESSLY ACCEPTED IN WRITING BY LOCKHEED
          MARTIN.

2.   ALLOWABLE COST AND PAYMENT.

     (a) INVOICING. LOCKHEED MARTIN shall make payments to SELLER when requested
     as work progresses, but (except for Small Business Concerns) not more often
     than once every 2 weeks, in amounts determined to be allowable by LOCKHEED
     MARTIN in accordance with the terms of this Contract and Subpart 31.2 of
     the FAR, and agency supplements as appropriate, in effect on the date of
     this Contract. If the Contract is with an educational institution, FAR
     Subpart 31.3 shall apply; and if with a non-profit organization other than
     an educational institution, FAR Subpart 31.7 shall apply. SELLER may submit
     to the LOCKHEED MARTIN Procurement Representative, in such form and
     reasonable detail as the Representative may require, an invoice or voucher
     supported by a statement of the claimed allowable cost for performing this
     Contract.

     (b)  REIMBURSING COSTS.

          (1)  For the purpose of reimbursing allowable costs (except as
               provided in paragraph (b)(2) of the clause, with respect to
               pension, deferred profit sharing, and employee stock ownership
               plan contributions), the term "costs" includes only:

               (i)  Those recorded costs that, at the time of the request for
                    reimbursement, SELLER has paid by cash, check, or other form
                    of actual payment for items or services purchased directly
                    for this Contract;

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               (ii) When SELLER is not delinquent in paying costs of contract
                    performance in the ordinary course of business, costs
                    incurred, but not necessarily paid, for--

                    (A)  Work purchased directly for the Contract and associated
                         financing payments to subcontractors, provided payments
                         determined due will be made--

                         (1)  In accordance with the terms and conditions of a
                              subcontract or invoice; and

                         (2)  Ordinarily within 30 days of prior to the
                              submission of SELLER's payment request to the
                              Government;

                    (B)  Materials issued from SELLER's inventory and placed in
                         the production process for use on this Contract;

                    (C)  Direct labor;

                    (D)  Direct travel;

                    (E)  Other direct in-house costs; and

                    (F)  Properly allocable and allowable indirect costs, as
                         shown in the records maintained by SELLER for purposes
                         of obtaining reimbursement under Government contracts;
                         and

               (iii) The amount of financing payments that have been paid by
                    cash, check, or other forms of payment to SELLER's
                    subcontractors.

          (2)  Accrued costs of SELLER contributions under employee pension
               plans shall be excluded until actually paid unless:

               (i)  SELLER's practice is to make contributions to the retirement
                    fund quarterly or more frequently; and

               (ii) The contribution does not remain unpaid 30 days after the
                    end of the applicable quarter or shorter payment period (any
                    contribution remaining unpaid shall be excluded from
                    SELLER's indirect costs for payment purposes).

          (3)  Notwithstanding the audit and adjustment of invoices or vouchers
               under paragraph (g) of this clause, allowable indirect costs
               under this contract shall be obtained by applying indirect cost
               rates established in accordance with paragraph (d) of this
               clause.

          (4)  Any statements in specifications or other documents incorporated
               in this Contract by reference designating performance of services
               or furnishing of materials at SELLER's expense or at no cost to
               LOCKHEED MARTIN shall be disregarded for purposes of
               cost-reimbursement under this clause.

     (c)  SMALL BUSINESS CONCERNS. A small business concern may receive more
          frequent payments than every 2 weeks.

     (d)  FINAL INDIRECT COST RATES. LOCKHEED MARTIN shall reimburse SELLER on
          the basis of final annual indirect cost rates and the appropriate
          bases established by SELLER and the Government in effect for the
          period covered by the indirect cost rate proposal. Such rates and
          bases shall not change any monetary ceiling, contract obligation, or
          specific cost allowance or disallowance provided for in this Contract.
          The rates and bases shall be deemed incorporated into this Contract
          upon execution.

     (e)  BILLING RATES. There shall be included as allowable indirect costs
          such overhead rates as may be established by SELLER and the cognizant
          Government agency in accordance with the principles of the FAR and
          applicable FAR supplement. Pending establishment of final indirect
          overhead rates for any period, SELLER shall be reimbursed at billing
          rates approved by the cognizant Government agency, which billing rates
          may be revised from time to time subject to such approval and subject
          to appropriate adjustment when the final rates for that period are
          established.

     (f)  QUICK-CLOSEOUT PROCEDURES. When SELLER and LOCKHEED MARTIN agree,
          quick-closeout procedures of Subpart 42.7 of the FAR may be used.

     (g)  AUDIT. At any time or times before final payment, LOCKHEED MARTIN or
          the Contracting Officer may have SELLER's invoices or vouchers and
          statements of cost audited. Any payment may be (1) reduced by amounts
          found not to constitute allowable costs or (2) adjusted for prior
          overpayments or underpayments.

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     (h)  FINAL PAYMENT.

          (1)  SELLER shall submit a completion invoice or voucher, designated
               as such, promptly upon completion of the Work, but no later than
               one year (or longer, as LOCKHEED MARTIN may approve in writing)
               from the completion date. Upon approval of that completion
               invoice or voucher and upon SELLER's compliance with all terms of
               this Contract, LOCKHEED MARTIN shall promptly pay any balance of
               allowable costs and that part of the fee (if any) not previously
               paid.

          (2)  SELLER shall pay to LOCKHEED MARTIN any refunds, rebates,
               credits, or other amounts (including interest, if any) accruing
               to or received by SELLER or any assignee under this Contract to
               the extent that those amounts are properly allocable to costs for
               which SELLER has been reimbursed by LOCKHEED MARTIN. Reasonable
               expenses incurred by SELLER for securing refunds, rebates,
               credits, or other amounts shall be allowable costs if approved by
               LOCKHEED MARTIN: Before final payment under this contract, SELLER
               and each assignee whose assignment is in effect at the time of
               final payment shall execute and deliver:

               (i)  An assignment to LOCKHEED MARTIN, in form and substance
                    satisfactory to LOCKHEED MARTIN, of refunds, rebates,
                    credits, or other amounts (including interest, if any)
                    properly allocable to costs for which SELLER has been
                    reimbursed by LOCKHEED MARTIN under this Contract; and

               (ii) A release discharging LOCKHEED MARTIN, the Government, its
                    officers, agents, and employees from all liabilities,
                    obligations, and claims arising out of or under this
                    Contract, except:

                    (A)  Specified claims stated in exact amounts, or in
                         estimated amounts when the exact amounts are not known;

                    (B)  Claims (including reasonable incidental expenses) based
                         upon liabilities of SELLER to third parties arising out
                         of the performance of this Contract; provided, that the
                         claims are not known to SELLER on the date of the
                         execution of the release, and that SELLER gives notice
                         of the claims in writing to LOCKHEED MARTIN within 6
                         years following the release date or notice of final
                         payment date, whichever is earlier; and

                    (C)  Claims for reimbursement of costs, including reasonable
                         incidental expenses, incurred by SELLER under the
                         patent clauses of this Contract, excluding, however,
                         any expenses arising from SELLER's indemnification of
                         LOCKHEED MARTIN and the Government against patent
                         liability.

     (i)  SUBCONTRACTS. No subcontract placed under this Contract shall provide
          for payment on a cost-plus-a-percentage-of-cost basis, and any fee
          payable under cost-reimbursements type subcontracts shall not exceed
          the fee limitations in paragraph 15.404-4(c) of the FAR.

3.   APPLICABLE LAWS

     (a)  This Contract shall be governed by and construed in accordance with
          the laws of the State from which this Contract is issued, excluding
          its choice of law rules, except that any provision in this Contract
          that is (i) incorporated in full text or by reference from the Federal
          Acquisition Regulations (FAR) or (ii) incorporated in full text or by
          reference from any agency regulation that implements or supplements
          the FAR or (iii) that is substantially based on any such agency
          regulation or FAR provision, shall be construed and interpreted
          according to the federal common law of Government contracts as
          enunciated and applied by federal judicial bodies, boards of contracts
          appeals, and quasi-judicial agencies of the federal Government.

     (b)  (1)  SELLER agrees to comply with all applicable laws, orders,
               rules, regulations, and ordinances. SELLER shall procure all
               licenses/permits and pay all fees and other required charges.
               SELLER shall comply with all applicable guidelines and directives
               of any local, state, and/or federal governmental authority.

          (2)  If: (i) LOCKHEED MARTIN's contract cost or fee is reduced; (ii)
               LOCKHEED MARTIN's costs are determined to be unallowable; (iii)
               any fines, penalties, or interest are assessed on LOCKHEED
               MARTIN; or (iv) LOCKHEED MARTIN incurs any other costs or
               damages; as a result of any violation of applicable laws, orders,
               rules, regulations, or ordinances by SELLER, its officers,
               employees, agents, suppliers, or subcontractors at any tier,
               LOCKHEED MARTIN may proceed as provided for in (4) below.

          (3)  Where submission of cost or pricing data is required or requested
               at any time prior to or during performance of this Contract, if
               SELLER or its lower-tier subcontractors: (i) submit and/or
               certify cost or pricing data that are defective; (ii) with notice
               of applicable cutoff dates and upon LOCKHEED MARTIN's request to
               provide cost or pricing data, submit cost or pricing data,
               whether certified or not certified at the time of submission, as
               a prospective subcontractor, and any such data are defective as
               of the applicable cutoff date on LOCKHEED MARTIN's Certificate of
               Current Cost or Pricing Data; (iii) claim an exception to a
               requirement to submit cost or pricing data and such exception is
               invalid; (iv) furnish data of any description that is inaccurate;
               or if (v) the U.S. Government alleges any of the foregoing; and,
               as a result, (1) LOCKHEED MARTIN's Contract price or fee is
               reduced; (2) LOCKHEED MARTIN's costs are determined to be
               unallowable; (3) any fines, penalties, or interest are assessed
               on

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               LOCKHEED MARTIN; or (4) LOCKHEED MARTIN incurs any other costs or
               damages; LOCKHEED MARTIN may proceed as provided for in paragraph
               (4) below.

          (4)  UPON THE OCCURRENCE OF ANY OF THE CIRCUMSTANCES IDENTIFIED IN
               PARAGRAPHS (2) AND (3) ABOVE, LOCKHEED MARTIN MAY MAKE A
               REDUCTION OF CORRESPONDING AMOUNTS (IN WHOLE OR IN PART) IN THE
               COSTS AND FEE OF THIS CONTRACT OR ANY OTHER CONTRACT WITH SELLER,
               AND/OR MAY DEMAND PAYMENT (IN WHOLE OR IN PART) OF THE
               CORRESPONDING AMOUNTS. SELLER SHALL PROMPTLY PAY AMOUNTS SO
               DEMANDED.

     (c)  SELLER represents that each chemical substance constituting or
          contained in Work sold or otherwise transferred to LOCKHEED MARTIN
          hereunder is on the list of chemical substances compiled and published
          by the Administrator of the Environmental Protection Administration
          pursuant to the Toxic Substances Control Act (15 U.S.C. Sec. 2601 et
          seq.) as amended.

     (d)  SELLER shall provide to LOCKHEED MARTIN with each delivery any
          Material Safety Data Sheet applicable to the Work in conformance with
          and containing such information as required by the Occupational Safety
          and Health Act of 1970 and regulations promulgated thereunder, or its
          state approved counterpart.

4.   ASSIGNMENT

     Any assignment of SELLER's Contract rights or delegation of SELLER's duties
     shall be void, unless prior written consent is given by LOCKHEED MARTIN.
     SELLER may assign rights to be paid amounts due, or to become due, to a
     financing institution if LOCKHEED MARTIN is promptly furnished a signed
     copy of such assignment reasonably in advance of the due date for payment
     of any such amounts. Amounts assigned shall be subject to setoff or
     recoupment for any present or future claims of LOCKHEED MARTIN against
     SELLER. LOCKHEED MARTIN shall have the right to make settlements and/or
     adjustments in the estimated cost and fee without notice to any assignee.

5.   COMMUNICATION WITH LOCKHEED MARTIN CUSTOMER

     LOCKHEED MARTIN shall be solely responsible for all liaison and
     coordination with the LOCKHEED MARTIN customer, including the U.S.
     Government, as it affects the applicable prime contract, this Contract, and
     any related contract

6.   CONTRACT DIRECTION

     (a)  Only the LOCKHEED MARTIN Procurement Representative has authority to
          make changes in or amendments to this Contract. Changes and amendments
          must be in writing.

     (b)  LOCKHEED MARTIN engineering and technical personnel may from time to
          time render assistance or give technical advice or discuss or effect
          an exchange of information with SELLER's personnel concerning the Work
          hereunder. No such action shall be deemed to be a change under the
          "Changes" clause of this Contract and shall not be the basis for
          equitable adjustment.

     (c)  Except as otherwise provided herein, all notices to be furnished by
          the SELLER shall be sent to the LOCKHEED MARTIN Procurement
          Representative.

7.   DEFINITIONS

     The following terms shall have the meanings set forth below:

     (a)  "Contract" means the instrument of contracting, such as "PO",
          "Purchase Order", or "Task Order", or other such type designation,
          including all referenced documents, exhibits and attachments. If these
          terms and conditions are incorporated into a "master" agreement that
          provides for releases, (in the form of a purchase order or other such
          document) the term "Contract" shall also mean the release document for
          the Work to be performed.

     (b)  "FAR" means the Federal Acquisition Regulation, issued as Chapter 1 of
          Title 48, Code of Federal Regulations.

     (c)  "LOCKHEED MARTIN", means LOCKHEED MARTIN CORPORATION, acting through
          its companies or business units as identified on the face of this
          Contract. If a subsidiary or affiliate of LOCKHEED MARTIN CORPORATION
          is identified on the face of this Contract, then "LOCKHEED MARTIN"
          means that subsidiary or affiliate.

     (d)  "LOCKHEED MARTIN Procurement Representative" means a person authorized
          by LOCKHEED MARTIN's cognizant procurement organization to administer
          and/or execute this Contract.

     (e)  "PO" or "Purchase Order" means this Contract.

     (f)  "SELLER" means the party identified on the face of this Contract with
          whom LOCKHEED MARTIN is contracting.

     (g)  "Task Order" means a separate order issued under this Contract.

                                       4

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     (h)  "Work" means all required labor, articles, materials, supplies, goods
          and services constituting the subject matter of this Contract.

8.   DISPUTES

     All disputes under this Contract which are not disposed of by mutual
     agreement may be decided by recourse to an action at law or in equity.
     Until final resolution of any dispute hereunder, SELLER shall diligently
     proceed with the performance of this Contract as directed by LOCKHEED
     MARTIN.

9.   ELECTRONIC CONTRACTING

     The parties agree that if this Contract is transmitted electronically
     neither party shall contest the validity of this Contract, or any
     Acknowledgement thereof, on the basis that this Contract or Acknowledgement
     contains an electronic signature.

10.  EXPORT CONTROL

     (a)  SELLER agrees to comply with all applicable U.S. export control laws
          and regulations, specifically including, but not limited to, the
          requirements of the Arms Export Control Act, 22 U.S.C.2751-2794,
          including the International Traffic in Arms Regulation (ITAR), 22
          C.F.R. 120 et seq.; and the Export Administration Act, 50 U.S.C. app.
          2401-2420, including the Export Administration Regulations, 15 C.F.R.
          730-774; including the requirement for obtaining any export license or
          agreement, if applicable. Without limiting the foregoing, SELLER
          agrees that it will not transfer any export controlled item, data, or
          services, to include transfer to foreign persons employed by or
          associated with, or under contract to SELLER or SELLER's lower-tier
          suppliers, without the authority of an export license, agreement, or
          applicable exemption or exception.

     (b)  SELLER agrees to notify LOCKHEED MARTIN if any deliverable under this
          Contract is restricted by export control laws or regulations.

     (c)  SELLER shall immediately notify the LOCKHEED MARTIN Procurement
          Representative if SELLER is, or becomes, listed in any Denied Parties
          List or if SELLER's export privileges are otherwise denied, suspended
          or revoked in whole or in part by any U.S. Government entity or
          agency.

     (d)  If SELLER is engaged in the business of either exporting or
          manufacturing (whether exporting or not) defense articles or
          furnishing defense services, SELLER represents that it is registered
          with the Office of Defense Trade Controls, as required by the ITAR,
          and it maintains an effective export/import compliance program in
          accordance with the ITAR. NOTE: IT IS UNDERSTOOD THAT THIS PARAGRAPH
          DOES NOTE APPLY UNTIL SUCH TIME AS THE TWO PARTIES AFFIRMLY AGREE THAT
          THE PARAGRAPH WILL APPLY.

     (e)  Where SELLER is a signatory under a LOCKHEED MARTIN export license or
          export agreement (e.g., TAA, MLA), SELLER shall provide prompt
          notification to the LOCKHEED MARTIN Procurement Representative in the
          event of changed circumstances including, but not limited to,
          ineligibility, a violation or potential violation of the ITAR, and the
          initiation or existence of a U.S. Government investigation, that could
          affect the Seller's performance under this Contract.

     (f)  SELLER SHALL BE RESPONSIBLE FOR ALL LOSSES, COSTS, CLAIMS, CAUSES OF
          ACTION, DAMAGES, LIABILITIES AND EXPENSE, INCLUDING ATTORNEYS' FEES,
          ALL EXPENSE OF LITIGATION AND/OR SETTLEMENT, AND COURT COSTS, ARISING
          FROM ANY ACT OR OMISSION OF SELLER, ITS OFFICERS, EMPLOYEES, AGENTS,
          SUPPLIERS, OR SUBCONTRACTORS AT ANY TIER, IN THE PERFORMANCE OF ANY OF
          ITS OBLIGATIONS UNDER THIS CLAUSE.

11.  EXTRAS

     Work shall not be supplied in excess of quantities specified in this
     Contract. SELLER shall be liable for handling charges and return shipment
     costs for any excess quantities.

12.  FEE (Applicable only if this Contract includes a fee.)

     LOCKHEED MARTIN shall pay the SELLER for performing this Contract the fee
     as specified in this Contract.

13.  FURNISHED PROPERTY

     (a)  LOCKHEED MARTIN may provide to SELLER property owned by either
          LOCKHEED MARTIN or its customer (Furnished Property). Furnished
          Properly shall be used only for the performance of this Contract.

     (b)  Title to Furnished Property shall remain in LOCKHEED MARTIN or its
          customer. SELLER shall clearly mark (if not so marked) all Furnished
          Property to show its ownership.

     (c)  Except for reasonable wear and tear, SELLER shall be responsible for,
          and shall promptly notify LOCKHEED MARTIN of, any loss or damage.
          SELLER shall manage, maintain, and preserve Furnished Property in
          accordance with good commercial practice.

     (d)  At LOCKHEED MARTIN's request, and/or upon completion of this Contract,
          the SELLER shall submit, in an acceptable form, inventory lists of
          Furnished Property and shall deliver or make such other disposal as
          may be directed by LOCKHEED MARTIN.

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     (e)  The Government Property Clause contained in Section II shall apply in
          lieu of paragraphs (a) through (d) above with respect to
          Government-furnished property, or property to which the Government may
          take title under this Contract.

14.  GRATUITIES/KICKBACKS

     (a)  No gratuities (in the form of entertainment, gifts or otherwise) or
          kickbacks shall be offered or given by SELLER, to any employee of
          LOCKHEED MARTIN for the purpose of obtaining or rewarding favorable
          treatment as a supplier.

     (b)  BY ACCEPTING THIS CONTRACT, SELLER CERTIFIES AND REPRESENTS THAT IT
          HAS NOT MADE OR SOLICITED AND WILL NOT MAKE OR SOLICIT KICKBACKS IN
          VIOLATION OF FAR 52.203-7 OR THE ANTI-KICKBACK ACT OF 1986 (41 USC
          51-58), BOTH OF WHICH ARE INCORPORATED HEREIN BY THIS SPECIFIC
          REFERENCE, EXCEPT THAT PARAGRAPH (C)(1) OF FAR 52.203-7 SHALL NOT
          APPLY.

15.  INDEPENDENT CONTRACTOR RELATIONSHIP

     (a)  SELLER is an independent contractor in all its operations and
          activities hereunder. The employees used by SELLER to perform Work
          under this Contract shall be SELLER's employees exclusively without
          any relation whatsoever to LOCKHEED MARTIN.

     (b)  SELLER SHALL BE RESPONSIBLE FOR ALL LOSSES, COSTS, CLAIMS, CAUSES OF
          ACTION, DAMAGES, LIABILITIES, AND EXPENSES, INCLUDING ATTORNEYS' FEES,
          ALL EXPENSES OF LITIGATION AND/OR SETTLEMENT, AND COURT COSTS, ARISING
          FROM ANY ACT OR OMISSION OF SELLER, ITS OFFICERS, EMPLOYEES, AGENTS,
          SUPPLIERS, OR SUBCONTRACTORS AT ANY TIER, IN THE PERFORMANCE OF ANY OF
          ITS OBLIGATIONS UNDER THIS CONTRACT. THIS INDEMNITY AND HOLD HARMLESS
          SHALL NOT BE CONSIDERED AN ALLOWABLE COST UNDER ANY PROVISIONS OF THIS
          CONTRACT EXCEPT WITH REGARD TO ALLOWABLE INSURANCE COSTS.

16.  INFORMATION OF LOCKHEED MARTIN

     Information provided by LOCKHEED MARTIN to SELLER remains the property of
     LOCKHEED MARTIN. SELLER agrees to comply with the terms of any proprietary
     information agreement with LOCKHEED MARTIN and to comply with all
     proprietary information markings and restrictive legends applied by
     LOCKHEED MARTIN to anything provided hereunder to SELLER. SELLER agrees not
     to use any LOCKHEED MARTIN provided information for any purpose except to
     perform this Contract and agrees not to disclose such information to third
     parties without the prior written consent of LOCKHEED MARTIN.

17.  INFORMATION OF SELLER

     SELLER shall not provide any proprietary information to LOCKHEED MARTIN
     without prior execution of a proprietary information agreement by the
     parties.

18.  INSURANCE/ENTRY ON LOCKHEED MARTIN PROPERTY

     (a)  In the event that SELLER, its employees, agents, or subcontractors
          enter the site(s) of LOCKHEED MARTIN or its customers for any reason
          in connection with this Contract then SELLER and its subcontractors
          shall procure and maintain for the performance of this Contract
          worker's compensation, comprehensive general liability, bodily injury
          and property damage insurance in reasonable amounts, and such other
          insurance as LOCKHEED MARTIN may require. In addition, SELLER and its
          subcontractors shall comply with all site requirements. SELLER shall
          provide LOCKHEED MARTIN thirty (30) days advance written notice prior
          to the effective date of any cancellation or change in the term or
          coverage of any of SELLER's required insurance, provided however such
          notice shall not relieve SELLER of its obligations to procure and
          maintain the required insurance. If requested, SELLER shall send a
          "Certificate of Insurance" showing SELLER's compliance with these
          requirements, provided however such notice shall not relieve SELLER's
          of its obligations to procure and maintain the required insurance.
          SELLER shall name LOCKHEED MARTIN as an additional insured for the
          duration of this Contract. Insurance maintained pursuant to this
          clause shall be considered primary as respects the interest of
          LOCKHEED MARTIN and is not contributory with any insurance which
          LOCKHEED MARTIN may carry. "Subcontractor" as used in this clause
          shall include SELLER's subcontractors at any tier. SELLER's
          obligations for procuring and maintaining insurance coverages are
          freestanding and are not affected by any other language in this
          Contract.

     (b)  SELLER SHALL INDEMNIFY AND BOLD HARMLESS LOCKHEED MARTIN, ITS
          OFFICERS, EMPLOYEES, AND AGENTS FROM ANY LOSSES, COSTS, CLAIMS, CAUSES
          OF ACTION, DAMAGES, LIABILITIES, AND EXPENSES, INCLUDING ATTORNEYS'
          FEES, ALL EXPENSES OF LITIGATION AND/OR SETTLEMENT, AND COURT COSTS,
          BY REASON OF PROPERTY DAMAGE OR LOSS OR PERSONAL INJURY TO ANY PERSON
          CAUSED IN WHOLE OR IN PART BY THE ACTIONS OR OMISSIONS OF SELLER, ITS
          OFFICERS, EMPLOYEES, AGENTS, SUPPLIERS, OR SUBCONTRACTORS.

19.  INTELLECTUAL PROPERTY

     (a)  SELLER WARRANTS THAT THE WORK PERFORMED OR DELIVERED UNDER THIS
          CONTRACT WILL NOT INFRINGE OR OTHERWISE VIOLATE THE INTELLECTUAL
          PROPERTY RIGHTS OF ANY THIRD PARTY IN THE UNITED STATES OR ANY FOREIGN
          COUNTRY. SELLER AGREES TO DEFEND, INDEMNIFY, AND HOLD HARMLESS
          LOCKHEED MARTIN AND ITS CUSTOMERS FROM AND AGAINST ANY CLAIMS,
          DAMAGES, LOSSES, COSTS, AND EXPENSES, INCLUDING REASONABLE ATTORNEYS
          FEES, ARISING OUT OF ANY ACTION BY A THIRD PARTY THAT IS BASED UPON A
          CLAIM THAT THE WORK PERFORMED OR DELIVERED UNDER THIS CONTRACT
          INFRINGES OR OTHERWISE VIOLATES THE INTELLECTUAL PROPERTY RIGHTS OF
          ANY PERSON OR ENTITY. THIS INDEMNITY AND HOLD HARMLESS SHALL NOT BE
          CONSIDERED AN ALLOWABLE COST UNDER ANY PROVISIONS OF THIS CONTRACT
          EXCEPT WITH REGARD TO ALLOWABLE INSURANCE COSTS.

                                       6

<PAGE>

     (b)  Unless LOCKHEED MARTIN's Prime Contract contains 52.227-3, "Patent
          Indemnity", then SELLER's obligation to defend, indemnify, and hold
          harmless LOCKHEED MARTIN and its customers under this Paragraph 17(a)
          shall not apply to the extent FAR 52.227-1 "Authorization and
          Consent", applies to LOCKHEED MARTIN's contract

     (c)  Seller shall provide to LOCKHEED MARTIN only such rights as are
          reasonably necessary to meet and perform the requirements of LOCKHEED
          MARTIN's Prime Contract.

20.  OFFSET CREDIT/COOPERATION

     This Contract has been entered into in direct support of LOCKHEED MARTIN's
     international offset programs. All offset benefit credits resulting from
     this Contract are the sole property of LOCKHEED MARTIN to be applied to the
     offset program of its choice. SELLER agrees to assist LOCKHEED MARTIN in
     securing appropriate offset credits from the respective country government
     authorities.

21.  PACKING AND SHIPMENT

     (a)  Unless otherwise specified, all Work is to be packed in accordance
          with good commercial practice.

     (b)  A complete packing list shall be enclosed with all shipments. SELLER
          shall mark containers or packages with necessary lifting, loading, and
          shipping information, including the LOCKHEED MARTIN Contract number,
          item number, dates of shipment, and the names and addresses of
          consignor and consignee. Bills of lading shall include this Contract
          number.

     (c)  Unless otherwise specified, delivery shall be FOB Place of Shipment.

22.  PARTS OBSOLESCENCE

     LOCKHEED MARTIN may desire to place additional orders for Work purchased
     hereunder. SELLER shall provide LOCKHEED MARTIN with a "Last Time Buy
     Notice" at least twelve (12) months prior to any action to discontinue any
     Work purchased under this Contract.

23.  PAYMENTS, TAXES, AND DUTIES

     (a)  Unless otherwise provided, terms of payment shall be net 30 days from
          the latest of the following: (i) LOCKHEED MARTIN's receipt of the
          SELLER's proper invoice; (ii) Scheduled delivery date of the Work; or
          (iii) Actual delivery of the Work. LOCKHEED MARTIN shall have a right
          of setoff against payments due or at issue under this Contract or any
          other contract between the parties.

     (b)  Each payment made shall be subject to reduction to the extent of
          amounts which are found by LOCKHEED MARTIN not to have been properly
          payable, and shall also be subject to reduction for overpayments.

     (c)  Payment shall be deemed to have been made as of the date of mailing
          LOCKHEED MARTIN's payment or electronic funds transfer.

     (d)  Unless otherwise specified, estimated costs include all applicable
          federal, state, and local taxes, duties, tariffs, and similar fees
          imposed by any government, all of which shall be listed separately on
          the invoice.

24.  PRECEDENCE

     Any inconsistencies in this Contract shall be resolved in accordance with
     the following descending order of precedence: (i) Face of the Purchase
     Order and/or Task Order, release document or schedule, (including any
     continuation sheets), as applicable, including any special provisions; (ii)
     This CORPDOC ; (iii) Statement of Work.

25.  PRIORITY RATING

     If so identified, this Contract is a "rated order" certified for national
     defense use, and the SELLER shall follow all the requirements of the
     Defense Priorities and Allocation System Regulation (15 CFR Part 700).

26.  QUALITY CONTROL SYSTEM

     (a)  SELLER shall provide and maintain a quality control system to an
          industry recognized Quality Standard and in compliance with any other
          specific quality requirements identified in this Contract. NOTE: IT IS
          UNDERSTOOD THAT THIS PARAGRAPH DOES NOTE APPLY UNTIL SUCH TIME AS THE
          TWO PARTIES AFFIRMLY AGREE THAT THE PARAGRAPH WILL APPLY.

     (b)  Records of all quality control inspection work by SELLER shall be kept
          complete and available to LOCKHEED MARTIN and its customers.

27.  RELEASE OF INFORMATION

     Except as required by law, no public release of any information, or
     confirmation or denial of same, with respect to this Contract or the
     subject matter hereof, will be made by SELLER without the prior written
     approval of LOCKHEED MARTIN.

                                       7

<PAGE>

28.  SEVERABILITY

     Each paragraph and provision of this Contract is severable, and if one or
     more paragraphs or provisions are declared invalid, the remaining
     paragraphs and provisions of this Contract will remain in full force and
     effect.

29.  SURVIVABILITY

     (a)  If this Contract expires, is completed or terminated, SELLER shall not
          be relieved of those obligations contained in the following
          provisions:

          Allowable Cost and Payment
          Applicable Laws
          Electronic Contracting
          Export Control
          Independent Contractor Relationship
          Information of Lockheed Martin
          Insurance/Entry on Lockheed Martin Property
          Intellectual Property
          Release of Information

     (b)  Those U. S. Government flowdown provisions that by their nature should
          survive.

30.  TIMELY PERFORMANCE

     (a)  SELLER's timely performance is a critical element of this Contract.

     (b)  Unless advance shipment has been authorized in writing by LOCKHEED
          MARTIN, LOCKHEED MARTIN may store at SELLER's expense, or return,
          shipping charges collect, all Work received in advance of the
          scheduled delivery date.

     (c)  If SELLER becomes aware of difficulty in performing the Work, SELLER
          shall timely notify LOCKHEED MARTIN, in writing, giving pertinent
          details. This notification shall not change any delivery schedule.

     (d)  In the event of a termination or change, no claim will be allowed for
          any manufacture or procurement in advance of SELLER's normal flow time
          unless there has been prior written consent by LOCKHEED MARTIN.

31.  WAIVERS, APPROVALS, AND REMEDIES

     (a)  Failure by LOCKHEED MARTIN to enforce any provisions of this Contract
          shall not be construed as a waiver of the requirements of such
          provisions, or as a waiver of the right of LOCKHEED MARTIN thereafter
          to enforce each such provision.

     (b)  LOCKHEED MARTIN's approval of documents shall not relieve SELLER of
          its obligation to comply with the requirements of this Contract

     (c)  The rights and remedies of LOCKHEED MARTIN in this Contract are in
          addition to any other rights and remedies provided by law or in
          equity.

                                       8

<PAGE>

SECTION II: FAR FLOWDOWN PROVISIONS

A.   INCORPORATION OF FAR CLAUSES

     The Federal Acquisition Regulation (FAR) clauses referenced below are
     incorporated herein by reference, with the same force and effect as if they
     were given in full text, and are applicable, including any notes following
     the clause citation, to this Contract. If the date or substance of any of
     the clauses listed below is different from the date or substance of the
     clause actually incorporated in the Prime Contract referenced by number
     herein, the date or substance of the clause incorporated by said Prime
     Contract shall apply instead. The Contracts Disputes Act shall have no
     application to this Contract Any reference to a "Disputes" clause shall
     mean the "Disputes" clause of this Contract.

B.   GOVERNMENT SUBCONTRACT

     This Contract is entered into by the parties in support of a U.S.
     Government Contract. As used in the FAR clauses referenced below and
     otherwise in this Contract:

     1.   "Commercial Item" means a commercial item as defined in FAR 2.101.

     2.   "Contract" means this contract

     3.   "Contracting Officer" shall mean the U.S. Government Contracting
          Officer for LOCKHEED MARTIN's government prime contract under which
          this Contract is entered.

     4.   "Contractor" and "Offerer" means the SELLER, as defined in this
          CORPDOC 4, acting as the immediate (first-tier) subcontractor to
          LOCKHEED MARTIN.

     5.   "Prime Contract" means the contract between LOCKHEED MARTIN and the
          U.S. Government or between LOCKHEED MARTIN and its higher-tier
          contractor who has a contract with the U.S. Government

     6.   "Subcontract" means any contract placed by the Contractor or
          lower-tier subcontractors under this Contract.

C.   NOTES

     1.   Substitute "LOCKHEED MARTIN" for "Government" or "United States"
          throughout this clause.

     2.   Substitute "LOCKHEED MARTIN Procurement Representative" for
          "Contracting Officer", "Administrative Contracting Officer", and "ACO"
          throughout this clause.

     3.   Insert "and LOCKHEED MARTIN" after "Government" throughout this
          clause.

     4.   Insert "or LOCKHEED MARTIN" after "Government" throughout this clause.

     5.   Communication/notification required under this clause from/to the
          SELLER to/from the Contracting Officer shall be through LOCKHEED
          MARTIN.

     6.   Insert "and LOCKHEED MARTIN" after "Contracting Officer" throughout
          the clause.

     7.   Insert "or LOCKHEED MARTIN Procurement Representative" after
          "Contracting Officer" throughout the clause.

D.   AMENDMENTS REQUIRED BY PRIME CONTRACT

     Contractor agrees that upon the request of LOCKHEED MARTIN it will
     negotiate in good faith with LOCKHEED MARTIN relative to amendments to this
     Contract to incorporate additional provisions herein or to change
     provisions hereof, as LOCKHEED MARTIN may reasonably deem necessary in
     order to comply with the provisions of the applicable Prime Contract or
     with the provisions of amendments to such Prime Contract. If any such
     amendment to this Contract causes an increase or decrease in the estimated
     cost of, or the time required for, performance of any part of the Work
     under this Contract, an equitable adjustment shall be made pursuant to the
     "Changes" clause of this Contract.

E.   PRESERVATION OF THE GOVERNMENT'S RIGHTS

     If LOCKHEED MARTIN furnishes designs, drawings, special tooling, equipment,
     engineering data, or other technical or proprietary information (Furnished
     Items) to which the U.S. Government owns or has the right to authorize the
     use of, nothing herein shall be construed to mean that LOCKHEED MARTIN,
     acting on its own behalf, may modify or limit any rights the Government may
     have to authorize the Contractor's use of such Furnished Items in support
     of other U.S. Government prime contracts.

                                       9
<PAGE>

F.   FAR FLOWDOWN CLAUSES

<TABLE>
<CAPTION>
    REFERENCE       TITLE
    ---------       -----
<S>                 <C>
1.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT:

(a)  52.211-5       MATERIAL REQUIREMENTS (AUG 2000) (Note 2 applies.)

(b)  52.215-20      REQUIREMENTS FOR COST OR PRICING DATA OR INFORMATION OTHER
                    THAN COST OR PRICING DATA (OCT 1997) (Note 2 applies.)

(c)  52.215-21      REQUIREMENTS FOR COST OR PRICING DATA OR INFORMATION OTHER
                    THAN COST OR PRICING DATA - MODIFICATIONS (OCT 1997) (Note 2
                    applies.)

(d)  52.216-8       FIXED FEE (MAR 1997) (Applicable only if this Contract
                    includes a fixed fee. Notes 1 and 2 apply. Delete the last
                    two sentences of the clause.)

(e)  52.216-10      INCENTIVE FEE (MAR 1997) (Applicable only if this Contract
                    includes an incentive fee. Notes 1 and 2 apply, except in
                    subparagraphs (e) (v) and (e) (vi) where "Government" is
                    unchanged. In subparagraph (e) (iv) and the last two
                    sentences of paragraph (c) is deleted. The amounts in
                    paragraph (e) are set forth on the face of the contract.)

(f)  52.219-8       UTILIZATION OF SMALL BUSINESS CONCERNS (OCT 2000)

(g)  52.222-2       PAYMENT FOR OVERTIME PREMIUMS (JUL 1990) (Insert ZERO in the
                    Blank. Notes 2 and 3 apply.)

(f)  52.222-21      PROHIBITION OF SEGREGRATED FACILITIES (FEB 1999)

(g)  52.222-26      EQUAL OPPORTUNITY (APR 2002) (Only paragraphs (b)(1)-(11)
                    applies.)

(h)  52.225-13      RESTRICTIONS ON CERTAIN FOREIGN PURCHASES (OCT 2003)

(i)  52.227-14      RIGHTS IN DATA - GENERAL (JUN 1987)

(j)  52.232-20      LIMITATION OF COST (APR 1984) (Applicable when this Contract
                    becomes fully funded. Notes 1 and 2 apply.)

(k)  52.232-22      LIMITATION OF FUNDS (APR 1984) (Applicable if this Contract
                    is incrementally funded. When the Contract becomes fully
                    funded 52.232-20 shall apply in lieu of this clause. Notes 1
                    and 2 apply.)

(l)  52.234-1       INDUSTRIAL RESOURCES DEVELOPED UNDER DEFENSE PRODUCTION ACT
                    TITLE III (DEC 1994) (Notes 1 and 2 apply.)

(m)  52.242-13      BANKRUPTCY (JUL 1995)(Notes 1 and 2 apply.)

(n)  52.242-15      STOP-WORK ORDER (AUG 1989) with ALT I (APR 1984) (Notes 1
                    and 2 apply.)

(o)  52.243-2       CHANGES - COST REIMBURSEMENT (AUG 1987) (Notes 1 and 2
                    apply.)

(p)  52.244-6       SUBCONTRACTS FOR COMMERCIAL ITEMS (APR 2003).

(q)  52.246-3       INSPECTION OF SUPPLIES - COST REIMBURSEMENT (MAR 2001) (Note
                    1 applies, except in paragraphs (b), (c), and (d) where Note
                    3 applies, and in paragraph (k) where the term is unchanged.
                    In paragraph (e), change "60 days" to "120 days", and in
                    paragraph (f) change "6 months" to "12 months".)

(r)  52.246-5       INSPECTION OF SERVICES - COST REIMBURSEMENT (APR 1984) (Note
                    3 applies in paragraphs (b) and (c). Note 1 applies in
                    paragraphs (d) and(e).)

(s)  52.247-64      PREFERENCE FOR PRIVATELY OWNED U.S.-FLAG COMMERCIAL VESSELS
                    (APR 2003)

(t)  52.249-6       TERMINATION (COST-REIMBURSEMENT) (SEP 1996) (Notes 1 and 2
                    apply. Substitute "90 days" for "120 days" and "90-day" for
                    "120-day" in paragraph (d). Substitute "180 days" for "1
                    year" in paragraph (f). In paragraph (j) "right of appeal",
                    "timely appeal" and "on an appeal" shall mean the right to
                    proceed under the
</TABLE>

                                       10

<PAGE>

<TABLE>
<S>                 <C>
                    "Disputes" clause of this Contract. Settlements and payments
                    under this clause may be subject to the approval of the
                    Contracting Officer.)

(u)  52.249-14      EXCUSABLE DELAYS (APR 1984) (Note 2 applies; Note 1 applies
                    to (c). In (a)(2) delete "or contractual".)

2.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $10,000:

(a)  52.222-36      AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES (JUN 1998)

3.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $25,000:

(a)  52.222-35      EQUAL OPPORTUNITY FOR SPECIAL DISABLED VETERANS, VETERANS OF
                    THE VIETNAM ERA, AND OTHER ELIGIBLE VETERANS (DEC 2001)

(b)  52.222-37      EMPLOYMENT REPORTS ON SPECIAL DISABLED VETERANS, VETERANS OF
                    THE VIETNAM ERA, AND OTHER ELIGIBLE VETERANS (DEC 2001)

4.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $100,000:

(a)  52.203-6       RESTRICTIONS ON SUBCONTRACTOR SALES TO THE GOVERNMENT
                    (JUL 1995)

(b)  52.203-12      LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL
                    TRANSACTIONS (JUN 2003)

(c)  52.215-2       AUDIT AND RECORDS-NEGOTIATION (JUN 1999) (Applicable if: (1)
                    Contractor is required to furnish cost or pricing data, or
                    (2) the Contract requires Contractor to furnish cost,
                    funding, or performance reports. If this is a cost type
                    contract with an educational institution or other non-profit
                    organization, add ALT II (APR 1998). Note 3 applies.)

(d)  52.215-14      INTEGRITY OF UNIT PRICES (OCT 1997) (Delete paragraph (b)
                    of the clause.)

(e)  52.222-4       CONTRACT WORK HOURS AND SAFETY STANDARDS ACT - OVERTIME
                    COMPENSATION (SEP 2000)

(f)  52.223-14      TOXIC CHEMICAL RELEASE REPORTING (AUG 2003) (Note 2 applies.
                    Delete paragraph (e).)

(g)  52.227-1       AUTHORIZATION AND CONSENT (JUL 1995) (Applicable only if the
                    Prime Contract contains this clause.)

(h)  52.227-2       NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT
                    INFRINGEMENT (AUG 1996) (Notes 2 and 4 apply.)

(i)  52.248-1       VALUE ENGINEERING (FEB 2000) (Note 1 applies, except in
                    paragraphs (c)(5) and (m), where note 3 applies and where
                    "Government" proceeds "cost" throughout. Note 2 applies.)

5.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $500,000:

(a)  52.219-9       SMALL BUSINESS SUBCONTRACTING PLAN (JAN 2002) (Applicable if
                    the Contractor is not a small business. Note 2 is,
                    applicable to paragraph (c) only. The Contractor's
                    subcontracting plan is incorporated herein by reference.)

6.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $550,000:

(a)  52.215-12      SUBCONTRACTOR COST OR PRICING DATA (OCT 1997) (Applicable if
                    not otherwise exempt under FAR 15.403.)

(b)  52.215-13      SUBCONTRACTOR COST OR PRICING DATA - MODIFICATIONS (OCT
                    1997) (Applicable for modifications if not otherwise exempt
                    under FAR 15.403.)

7.   THE FOLLOWING FAR CLAUSES APPLY TO THIS CONTRACT AS INDICATED:

(a)  52.204-2       SECURITY REQUIREMENTS (AUG 1996) (Applicable if the Work
                    requires access to classified information.)
</TABLE>

                                       11

<PAGE>

<TABLE>
<S>                 <C>
(b)  52.215-10      PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA (OCT
                    1997) (Applicable if submission of cost or pricing data is
                    required. Notes 2 and 4 apply. Note 7 applies to paragraph
                    (c)(1). Rights and obligations under this clause shall
                    survive completion of the Work and final payment under this
                    Contract.)

(c)  52.215-11      PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA -
                    MODIFICATIONS (OCT 1997) (Applicable if submission of cost
                    or pricing data is required for modifications. Notes 2 and 4
                    apply. Note 7 applies to paragraph (d)(1) Rights and
                    obligations under this clause shall survive completion of
                    the Work and final payment under this Contract.)

(d)  52.215-15      PENSION ADJUSTMENTS AND ASSET REVERSIONS (DEC 1998)
                    (Applicable if this Contract meets the applicability
                    requirements of FAR 15.408(g). Note 5 applies.)

(e)  52.215-16      FACILITIES CAPITAL COST OF MONEY (JUN 2003) (Applicable only
                    if this Contract is subject to the Cost Principles at FAR
                    Subpart 31.2 and the Contractor proposed facilities capital
                    cost of money in its offer.)

(f)  52.215-17      WAIVER OF FACILITIES CAPITAL COST OF MONEY (OCT 1997)
                    (Applicable only if this Contract is subject to the Cost
                    Principles at FAR Subpart 31.2 and the Contractor did not
                    propose facilities capital cost of money in its offer.)

(g)  52.215-18      REVERSION OR ADJUSTMENT OF PLANS FOR POST-RETIREMENT
                    BENEFITS (PRB) OTHER THAN PENSIONS (OCT 1997) (Applicable if
                    this Contract meets the applicability requirements of FAR
                    15.408(j). Note 5 applies.)

(h)  52.215-19      NOTIFICATION OF OWNERSHIP CHANGES (OCT 1997) (Applicable if
                    this Contract meets the applicability requirements of FAR
                    15.408(k). Note 5 applies.)

(i)  52.223-3       HAZARDOUS MATERIAL IDENTIFICATION AND MATERIAL SAFETY DATA
                    (JAN 1997) (Applicable if this Contract involves hazardous
                    material. Notes 2 and 3 apply, except for paragraph (f)
                    where Note 4 applies.)

(j)  52.223-7       NOTICE OF RADIOACTIVE MATERIALS (JAN 1997) (Applicable to
                    Work containing covered radioactive material. In the blank
                    insert "30". Notes 1 and 2 apply.)

(k)  52.223-11      OZONE-DEPLETING SUBSTANCES (MAR 2001) (Applicable if the
                    Work was manufactured with or contains ozone-depleting
                    substances.)

(l)  52.225-1       BUY AMERICAN ACT--SUPPLIES (JUN 2003) (Applicable if the
                    Work contains other than domestic components. Note 2 applies
                    to the first time "Contracting Officer" is mentioned in
                    paragraph (c).)

(m)  52.225-5       TRADE AGREEMENTS (OCT 2003) (Applicable if the Work contains
                    other than domestic components U.S. made, designated
                    country, Caribbean or NAFTA country end products.)

(n)  52.225-8       DUTY FREE ENTRY (FEB 2000) (Applicable if supplies will be
                    imported into the Customs Territory of the United States.
                    Note 2 applies.)

(o)  52.227-9       REFUND OF ROYALTIES (APR 1984) (Applicable when reported
                    royalty exceeds $250. Note 1 applies except for the first
                    two times "Government" appears in paragraph (d). Note 2
                    applies.)

(p)  52.227-10      FILING OF PATENT APPLICATIONS-CLASSIFIED SUBJECT MATTER (APR
                    1984) (Applicable if the Work or any patent application may
                    cover classified subject matter.)

(q)  52.227-11      PATENT RIGHTS-RETENTION BY THE CONTRACTOR (SHORT FORM) (JUN
                    1997) (Applicable if this Contract is for experimental,
                    developmental, or research Work and Contractor is a small
                    business concern or domestic nonprofit organization. Reports
                    required by this clause shall be filed with the agency
                    identified in this Contract. If no agency is identified,
                    contact the LOCKHEED MARTIN Procurement Representative
                    identified on the face of this Contract.)

(r)  52.227-12      PATENT RIGHTS-RETENTION BY THE CONTRACTOR (LONG FORM) (JAN
                    1997) (Applicable if this Contract is for experimental,
                    developmental, or research Work and Contractor is a large
                    business concern. Reports required by this clause shall be
                    filed with the agency identified in this Contract. If no
                    agency is identified, contact the LOCKHEED MARTIN
                    Procurement Representative identified on the face of this
                    Contract)

(s)  52.228-5       INSURANCE - WORK ON A GOVERNMENT INSTALLATION (JAN 1997)
                    (Applicable if this Contract involves Work on a Government
                    installation. Note 2 applies. Note 4 applies to paragraph
                    (b).)
</TABLE>

                                       12

<PAGE>

<TABLE>
<S>                 <C>
(t)  52.230-2       COST ACCOUNTING STANDARDS (APR 1998) (When referenced in the
                    Contract, full CAS coverage applies. "United States" means
                    "United States or Lockheed Martin." Delete paragraph (b) of
                    the clause.)

(u)  52.230-3       DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES (APR
                    1998) (When referenced in this Contract, modified CAS
                    coverage applies. "United States" means "United States or
                    Lockheed Martin". Delete paragraph (b) of the clause.)

(v)  52.230-6       ADMINISTRATION OF COST ACCOUNTING STANDARDS (NOV 1999)
                    (Applicable if FAR 52.230-2 or FAR 52.230-3 applies.)

(w)  52.233-3       PROTEST AFTER AWARD (AUG 1996) ALTI(JUN 1985) (In the event
                    LOCKHEED MARTIN's customer has directed LOCKHEED MARTIN to
                    stop performance of the Work under the Prime Contract under
                    which this Contract is issued pursuant to FAR 33.1, LOCKHEED
                    MARTIN may, by written order to Contractor, direct
                    Contractor to stop performance of the Work called for by
                    this Contract. "30 days" means "20 days" in paragraph
                    (b)(2). Note 1 applies, except the first time "Government"
                    appears in paragraph (f). In paragraph (f) add after
                    "33.104(h)(1)" the following: "and recovers those costs from
                    LOCKHEED MARTIN". Note 2 applies.)

(x)  52.237-2       PROTECTION OF GOVERNMENT BUILDINGS, EQUIPMENT AND VEGETATION
                    (APR 1984) (Applicable if Work is performed on a Government
                    installation. Note 2 applies. Note 4 applies to the second
                    time "Government" appears in the clause.)

(y)  52.243-6       CHANGE ORDER ACCOUNTING (APR 1984) (Applicable only if Prime
                    Contract requires Change Order Accounting. Note 2 applies. )

(z)  52.245-5       GOVERNMENT PROPERTY (COST-REIMBURSEMENT, TIME-AND-MATERIAL,
                    OR LABOR-HOUR CONTRACTS) (JUN 2003) (Applicable if
                    Government Property is furnished in the performance of this
                    Contract. Note 1 applies, except in the phrases "Government
                    property", "Government-furnished property", and in
                    references to title to property. Note 2 applies. Paragraphs
                    (g)(1), (g)(2), and (g)(3) are deleted and replaced with the
                    following: "Contractor assumes the risk of, and shall be
                    responsible for, any loss or destruction, or damage to,
                    Government property covered by this clause. Contractor shall
                    not be liable for reasonable wear and tear to Government
                    property or for Government Property properly consumed in the
                    performance of this Contract." The following is added as
                    paragraph (m): "Contractor shall provide to LOCKHEED MARTIN
                    immediate notice of any disapproval, withdrawal of approval,
                    or non-acceptance by the Government of its property control
                    system.")

(aa) 52.245-18      SPECIAL TEST EQUIPMENT (FEB 1993) (Applicable if this
                    Contract involves the acquisition or fabrication of Special
                    Test Equipment. Note 4 applies, except in paragraphs (b),
                    (c) and (d). Note 2 applies to paragraphs (b) and (d). Note
                    5 applies. In paragraph (b) and (e), change "30 days" to "60
                    days".)

(bb) 52.247-63      PREFERENCE FOR U.S.-FLAG AIR CARRIERS (JUN 2003) (Applicable
                    if this Contract involves international air transportation.)
</TABLE>

G.   CERTIFICATIONS AND REPRESENTATIONS

     (1)  THIS CLAUSE CONTAINS CERTIFICATIONS AND REPRESENTATIONS THAT ARE
          MATERIAL REPRESENTATIONS OF FACT UPON WHICH LOCKHEED MARTIN WILL RELY
          IN MAKING AWARDS TO CONTRACTOR. BY SUBMITTING ITS WRITTEN OFFER, OR
          PROVIDING ORAL OFFERS/QUOTATIONS AT THE REQUEST OF LOCKHEED MARTIN, OR
          ACCEPTING ANY CONTRACT, CONTRACTOR CERTIFIES TO THE REPRESENTATIONS
          AND CERTIFICATIONS AS SET FORTH BELOW IN THIS CLAUSE. THESE
          CERTIFICATIONS SHALL APPLY WHENEVER THESE TERMS AND CONDITIONS ARE
          INCORPORATED BY REFERENCE IN ANY CONTRACT, AGREEMENT, OTHER
          CONTRACTUAL DOCUMENT OR ANY QUOTATION, REQUEST FOR QUOTATION (ORAL OR
          WRITTEN), REQUEST FOR PROPOSAL OR SOLICITATION (ORAL OR WRITTEN),
          ISSUED BY LOCKHEED MARTIN. CONTRACTOR SHALL IMMEDIATELY NOTIFY
          LOCKHEED MARTIN OF ANY CHANGE OF STATUS WITH REGARD TO THESE
          CERTIFICATIONS AND REPRESENTATIONS.

          (a)  FAR 52.203-11 CERTIFICATION AND DISCLOSURE REGARDING PAYMENTS TO
               INFLUENCE CERTAIN FEDERAL TRANSACTIONS (Applicable to
               solicitations and contracts exceeding $100,000)

               (1)  The definitions and prohibitions contained in the clause at
                    FAR 52.203-12, Limitation on Payments to Influence Certain
                    Federal Transactions are hereby incorporated by reference in
                    paragraph (b) of this certification.

               (2)  Contractor certifies that to the best of its knowledge and
                    belief that on and after December 23,1989-

                    (a)  No Federal appropriated funds have been paid or will be
                         paid to any person for influencing or attempting to
                         influence an officer or employee of any agency, a
                         Member of Congress, an officer or employee of Congress,
                         or an employee of a Member of Congress on his or her
                         behalf in connection with the awarding of any Federal
                         contract, the making of any Federal grant, the making
                         of any Federal loan, the entering into of any
                         cooperative agreement, and the extension, continuation,
                         renewal, amendment or modification of any Federal
                         contract, grant, loan, or cooperative agreement;

                                       13

<PAGE>

                    (b)  If any funds other than Federal appropriated funds
                         (including profit or fee received under a covered
                         Federal transaction) have been paid, or will be paid,
                         to any person for influencing or attempting to
                         influence an officer or employee of any agency, a
                         Member of Congress, an officer or employee of Congress,
                         or an employee of a Member of Congress on his or her
                         behalf in connection with a solicitation or order, the
                         offeror shall complete and submit, with its offer, OMB
                         standard form LLL, Disclosure of Lobbying Activities,
                         in accordance with its instructions, and

                    (c)  Contractor will include the language of this
                         certification in all subcontracts at any tier and
                         require that all recipients of subcontract awards in
                         excess of $100,000 shall certify and disclose
                         accordingly.

               (3)  Submission of this certification and disclosure is a
                    prerequisite for making or entering into a contract as
                    imposed by section 1352, title 31, United States Code. Any
                    person who makes an expenditure prohibited under this
                    provision or who fails to file or amend the disclosure form
                    to be filed or amended by this provision, shall be subject
                    to a civil penalty of not less than $10,000, and not more
                    than $100,000, for each such failure.

          (b)  FAR 52.209-5 CERTIFICATION REGARDING DEBARMENT, SUSPENSION,
               PROPOSED DEBARMENT, AND OTHER RESPONSIBILITY MATTERS.

               (1)  Contractor certifies that, to the best of its knowledge and
                    belief, that Contractor and/or any of its Principals, (as
                    defined in FAR 52.209-5,) are not presently debarred,
                    suspended, proposed for debarment, or declared ineligible
                    for the award of contracts by any Federal agency.

               (2)  Contractor shall provide immediate written notice to
                    LOCKHEED MARTIN if, any time prior to award of any contract,
                    it learns that its certification was erroneous when
                    submitted or has become erroneous by reason of changed
                    circumstances.

          (c)  FAR 52.222-22 PREVIOUS CONTRACTS AND COMPLIANCE REPORTS.

          Contractor represents that if Contractor has participated in a
          previous contract or subcontract subject to the Equal Opportunity
          clause (FAR 52.222-26) and (i) Contractor has filed all required
          compliance reports and (ii) that representations indicating submission
          of required compliance reports, signed by proposed subcontractors,
          will be obtained before subcontract awards.

          (d)  FAR 52.222-25 AFFIRMATIVE ACTION COMPLIANCE.

          Contractor represents (1) that Contractor has developed and has on
          file at each establishment, affirmative action programs required by
          the rules and regulations of the Secretary of Labor (41 CFR 60-1 and
          60-2), or (2) that in the event such a program does not presently
          exist, Contractor will develop and place in operation such a written
          Affirmative Action Compliance Program within 120 days from the award
          of this Contract.

          (e)  FAR 52.323-13 CERTIFICATION OF TOXIC CHEMICAL RELEASE REPORTING
               (Applicable to competitive solicitations/contracts which exceed
               $100,000)

               (1)  Submission of this certification is a prerequisite for
                    making or entering into this contract imposed by Executive
                    Order 12969, August 8, 1995.

               (2)  Contractor certifies that--

                    (a)  As the owner or operator of facilities that will be
                         used in the performance of this contract that are
                         subject to the filing and reporting requirements
                         described in section 313 of the Emergency Planning and
                         Community Right-to-Know Act of 1986(EPCRA) (42 U.S.C.
                         11023) and section 6607 of the Pollution Prevention Act
                         of 1990 (PPA) (42 U.S.C. 13106),Contractor will file
                         and continue to file for such facilities for the life
                         of the contract the Toxic Chemical Release Inventory
                         Form (Form R) as described in sections 313(a) and (g)
                         of EPCRA and section 6607 of PPA; or

                    (b)  None of its owned or operated facilities to be used in
                         the performance of this contract is subject to the Form
                         R filing and reporting requirements because each such
                         facility is exempt for at least one of the following
                         reasons:

                         (i)  The facility does not manufacture, process or
                              otherwise use any toxic chemicals listed in 40
                              C.F.R. 372.65;

                         (ii) The facility does not have 10 or more full-time
                              employees as specified in section 313(b)(1)(A) of
                              EPCRA, 42 U.S.C. 11023(b)(1)(A);

                         (iii)The facility does not meet the reporting
                              thresholds of toxic chemicals established under
                              section 313(f) of EPCRA, 42 U.S.C. 11023(f)
                              (including the alternate thresholds at 40 CFR
                              372.27, provided an appropriate certification form
                              has been filed with EPA);

                         (iv) The facility does not fall within Standard
                              Industrial Classification Code (SIC) codes or
                              their corresponding North American Industry
                              Classification System (NAICS); or

                                       14

<PAGE>

                              (A)  Major group code 10 (except 1011, 1081, and
                                   1094).

                              (B)  Major group code 12 (except 1241).

                              (C)  Major group codes 20 through 39.

                              (D)  Industry code 4911, 4931, or 4939 (limited to
                                   facilities that combust coal and/or oil for
                                   the purpose of generating power for
                                   distribution in commerce).

                              (E)  Industry code 4953 (limited to facilities
                                   regulated under the Resource Conservation and
                                   Recovery Act, Subtitle C (42 U.S.C. 6921, et
                                   seq.), 5169, 5171, or 7389 (limited to
                                   facilities primarily engaged in solvent
                                   recovery services on a contract or fee
                                   basis); or

                         (v)  The facility is not located in the United States
                              or its outlying areas.

                                       15

<PAGE>

Section A - PO #DM259735
LOCKHEED MARTIN CORPORATION

CORPDOC 4A

                                                                 LOCKHEED MARTIN

  COST REIMBURSEMENT DEFENSE FEDERAL ACQUISITION REGULATION SUPPLEMENT (DFARS)
  FLOWDOWN PROVISIONS FOR SUBCONTRACTS/PURCHASE ORDERS FOR NON-COMMERCIAL ITEMS
                     UNDER A U.S. GOVERNMENT PRIME CONTRACT

A.   INCORPORATION OF DFARS CLAUSES

     The Defense Federal Acquisition Regulation Supplement (DFARS) clauses
     referenced below are incorporated herein by reference, with the same force
     and effect as if they were given in full text, and are applicable,
     including any notes following the clause citation, to this Contract. If the
     date or substance of any of the clauses listed below is different from the
     date or substance of the clause actually incorporated in the Prime Contract
     referenced by number herein, the date or substance of the clause
     incorporated by said Prime Contract shall apply instead. The Contracts
     Disputes Act shall have no application to this Contract. Any reference to a
     "Disputes" clause shall mean the "Disputes" clause of this Contract

B.   GOVERNMENT SUBCONTRACT

     This Contract is entered into by the Parties in support of a U.S.
     Government contract.

     As used in the clauses referenced below and otherwise in this Contract:

     1.   "Commercial Item" means a commercial item as defined in FAR 2.101.

     2.   "Contract" means this contract.

     3.   "Contracting Officer" shall mean the U.S. Government Contracting
          Officer for LOCKHEED MARTIN's government prime contract under which
          this Contract is entered.

     4.   "Contractor" or "Offeror" means the SELLER, as defined in CORPDOC 4,
          acting as the immediate (first-tier) subcontractor to LOCKHEED MARTIN.

     5.   "Prime Contract" means the contract between LOCKHEED MARTIN and the
          U.S. Government or between LOCKHEED MARTIN and its higher-tier
          contractor who has a contract with the U.S. Government.

     6.   "Subcontract" means any contract placed by the Contractor or
          lower-tier subcontractors under this Contract.

C.   NOTES

     1.   Substitute "LOCKHEED MARTIN" for "Government" or "United States"
          throughout this clause.

     2.   Substitute "LOCKHEED MARTIN Procurement Representative" for
          "Contracting Officer", "Administrative Contracting Officer", and "ACO"
          throughout this clause.

     3.   Insert "and LOCKHEED MARTIN" after "Government" throughout this
          clause.

     4.   Insert "or LOCKHEED MARTIN" after "Government" throughout this clause.

     5.   Communication/notification required under this clause from/to
          Contractor to/from the Contracting Officer shall be through LOCKHEED
          MARTIN.

     6.   Insert "and LOCKHEED MARTIN" after "Contracting Officer" throughout
          the clause.

     7.   Insert "or LOCKHEED MARTIN Procurement Representative" after
          "Contracting Officer" throughout the clause.

                                        1

<PAGE>

D.   AMENDMENTS REQUIRED BY PRIME CONTRACT

     Contractor agrees that upon the request of LOCKHEED MARTIN it will
     negotiate in good faith with LOCKHEED MARTIN relative to amendments to this
     Contract to incorporate additional provisions herein or to change
     provisions hereof, as LOCKHEED MARTIN may reasonably deem necessary in
     order to comply with the provisions of the applicable Prime Contract or
     with the provisions of amendments to such Prime Contract. If any such
     amendment to this Contract causes an increase or decrease in the estimated
     cost of, or the time required for, performance of any part of the Work
     under this Contract, an equitable adjustment shall be made pursuant to the
     "Changes" clause of this Contract.

E.   PRESERVATION OF THE GOVERNMENT'S RIGHTS

     If LOCKHEED MARTIN furnishes designs, drawings, special tooling, equipment,
     engineering data, or other technical or proprietary information (Furnished
     Items) which the U.S. Government owns or has the right to authorize the use
     of, nothing herein shall be construed to mean that LOCKHEED MARTIN, acting
     on its own behalf, may modify or limit any rights the Government may have
     to authorize the Contractor's use of such Furnished Items in support of
     other U.S. Government prime contracts.

F.   DOD FAR SUPPLEMENT (DFARS) FLOWDOWN CLAUSES

<TABLE>
<CAPTION>
    REFERENCE       TITLE
    ---------       -----
<S>                 <C>
1.   THE FOLLOWING DFARS CLAUSES APPLY TO THIS CONTRACT:

(a)  252.225-7001   BUY AMERICAN ACT AND BALANCE OF PAYMENTS PROGRAM (APR 2003)
                    (Applicable if the Work contains other than domestic
                    components. Applicable in lieu of FAR 52.225-1 and FAR
                    52.225-5.)

(b)  252.225-7014   PREFERENCE FOR DOMESTIC SPECIALTY METALS (MAR 1998) and ALT
                    I (MAR 1998) (Applicable if the Work to be furnished
                    contains specialty metals.)

(c)  252.225-7021   TRADE AGREEMENTS (AUG 2003) (Applicable if the Work contains
                    other than domestic components. Applicable in lieu of FAR
                    52.225-1 and FAR 52.225-5.)

(d)  252.227-7013   RIGHTS IN TECHNICAL DATA - NON-COMMERCIAL ITEMS (NOV 1995)
                    (Applicable in lieu of FAR 52.227-14.)

(e)  252.227-7014   RIGHTS IN NON-COMMERCIAL COMPUTER SOFTWARE AND
                    NON-COMMERCIAL COMPUTER SOFTWARE DOCUMENTATION (JUN 1995)
                    (Applicable in lieu of FAR 52.227-14.)

(f)  252.227-7016   RIGHTS IN BID OR PROPOSAL INFORMATION (JUN 1995)

(g)  252.227-7019   VALIDATION OF ASSERTED RESTRICTIONS - COMPUTER SOFTWARE (JUN
                    1995)

(h)  252.227-7025   LIMITATIONS ON THE USE OR DISCLOSURE OF GOVERNMENT-FURNISHED
                    INFORMATION MARKED WITH RESTRICTIVE LEGENDS (JUN 1995) (For
                    paragraph (c)(1), Note 3 applies.)

(i)  252.227-7026   DEFERRED DELIVERY OF TECHNICAL DATA OR COMPUTER SOFTWARE
                    (APR 1988) (Note 1 applies.)

(j)  252.227-7027   DEFERRED ORDERING OF TECHNICAL DATA OR COMPUTER SOFTWARE
                    (APR 1988) (Note 1 applies, only the first time "Government
                    appears.)

(k)  252.227-7028   TECHNICAL DATA OR COMPUTER SOFTWARE PREVIOUSLY DELIVERED TO
                    THE GOVERNMENT (JUN 1995) (The term "contract" and
                    "subcontract" shall not change in meaning, except for the
                    first reference to "contract".)

(l)  252.227-7030   TECHNICAL DATA - WITHHOLDING OF PAYMENT (MAR 2000) (Notes 1
                    and 2 apply to (a). Note 4 applies to (b))

(m)  252.227-7036   DECLARATION OF TECHNICAL DATA CONFORMITY (JAN 1997)

(n)  252.227-7037   VALIDATION OF RESTRICTIVE MARKINGS ON TECHNICAL DATA (SEP
                    1999)

(o)  252.228-7005   ACCIDENT REPORTING AND INVESTIGATION INVOLVING AIRCRAFT,
                    MISSILES, AND SPACE LAUNCH VEHICLES (DEC 1991) (In paragraph
                    (a), Note 5 applies. In paragraph (b), Note 3 applies.)
</TABLE>

                                       2

<PAGE>

<TABLE>
<S>                 <C>
(p)  252.231-7000   SUPPLEMENTAL COST PRINCIPLES (DEC 1991)

(q)  252.243-7001   PRICING OF CONTRACT MODIFICATIONS (DEC 1991)

(r)  252.247-7024   NOTIFICATION OF TRANSPORTATION OF SUPPLIES BY SEA (MAR 2000)
                    (Applicable if this Contract meets the criteria set forth in
                    paragraph (b) (2) (ii) of the clause. Notes 1 and 2 apply)

2.   THE FOLLOWING DFARS CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $100,000:

(a)  252.203-7001   PROHIBITION ON PERSONS CONVICTED OF FRAUD OR OTHER DEFENSE
                    CONTRACT-RELATED FELONIES (MAR 1999) (In this clause, the
                    terms "contract", "contractor", and "subcontract" shall not
                    change in meaning in paragraphs (a) thru (d). Delete
                    paragraph g. Note 5 applies.)

(b)  252.209-7000   ACQUISITION FROM SUBCONTRACTORS SUBJECT TO ON-SITE
                    INSPECTION UNDER THE INTERMEDIATE RANGE NUCLEAR FORCES (INF)
                    TREATY (NOV 1995) (Note 5 applies.)

(c)  252.247-7023   TRANSPORTATION OF SUPPLIES BY SEA (MAY 2002) (Applicable in
                    lieu of FAR 52.247-64 in all Contracts for ocean
                    transportation of supplies. In the first sentence of
                    paragraph (g) insert a period after "Contractor" and delete
                    the balance of the sentence. Paragraphs (f) and (g) shall
                    not apply if this Contract is at or below $100,000. Notes 1
                    and 2 apply to paragraph (g).)

3.   THE FOLLOWING DFARS CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $500,000:

(a)  252.225-7026   REPORTING OF CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES
                    (APR 2003) (Delete paragraph (c).)

(b)  252.249-7002   NOTIFICATION OF ANTICIPATED CONTRACT TERMINATION OR
                    REDUCTION (DEC 1996) (Note 2 applies. Delete paragraph (d)
                    (1) and the first five words of paragraph (d) (2).)

4.   THE FOLLOWING DFARS CLAUSES APPLY TO THIS CONTRACT IF THE VALUE OF THIS
     CONTRACT EQUALS OR EXCEEDS $1,000,000:

(a)  252.211-7000   ACQUISITION STREAMLINING (DEC 1991) (Note 1 applies.)

5.   THE FOLLOWING DFARS CLAUSES APPLY TO THIS CONTRACT AS INDICATED:

(a)  252.215-7000   PRICING ADJUSTMENTS (DEC 1991) (Applicable if FAR 52.215-12
                    or 52.215-13 applies to this Contract.)

(b)  252.219-7003   SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED SMALL BUSINESS
                    SUBCONTRACTING PLAN (DoD CONTRACTS) (APR 1996) (Applicable
                    if FAR 52.219-9 applies to this Contract. Delete paragraph
                    (g).)

(c)  252.223-7001   HAZARD WARNING LABELS (DEC 1991) (Applicable if this
                    Contract requires the delivery of hazardous materials.)

(d)  252.223-7002   SAFETY PRECAUTIONS FOR AMMUNITION AND EXPLOSIVES (MAY 1994)
                    (Applicable only if the articles furnished under this
                    Contract contain ammunition or explosives, including liquid
                    and solid propellants. Notes 2, 3, and 5 apply to paragraphs
                    g(1)(i) and e(1)(ii). Note 3 applies. Delete "prime" to
                    g(1)(ii) and add "and LOCKHEED MARTIN Procurement
                    Representative". Delete in g(1)(ii) "substituting its name
                    for references to the Government".)

(e)  252.223-7003   CHANGE IN PLACE OF PERFORMANCE - AMMUNITION AND EXPLOSIVES
                    (DEC 1991) (Applicable if DFARS 252.223-7002 applies to this
                    Contract. Notes 2 and 4 apply.)

(f)  252.223-7007   SAFEGUARDING SENSITIVE CONVENTIONAL ARMS, AMMUNITION, AND
                    EXPLOSIVES (SEP 1999) (Applicable if this Contract is for
                    the development, production, manufacture, or purchase of
                    arms, ammunition, and explosives or when arms, ammunition,
                    and explosives will be provided to Contractor as Government
                    Furnished Property.)

(g)  252.225-7001   BUY AMERICAN ACTBALANCE OF PAYMENTS PROGRAM (APR 2003)
                    (Applicable if the Work contains other than domestic
                    components. Applicable in lieu of FAR 52.225-1 and FAR
                    52.225-5.)

(h)  252.225-7016   RESTRICTION ON ACQUISITION OF BALL AND ROLLER BEARINGS (APR
                    2003) (Applicable if Work supplied under this Contract
                    contains ball or roller bearings. Note 2 applies.)
</TABLE>

                                       3

<PAGE>

<TABLE>
<S>                 <C>
(i)  252.225-7021   TRADE AGREEMENTS (AUG 2003) (Applicable if the Work contains
                    other than domestic components. Applicable in lieu of FAR
                    52.225-1 and FAR 52.225-5.)

(j)  252.225-7033   WAIVER OF UNITED KINGDOM LEVIES (OCT 1992) (Applicable if
                    this Contract is with a United Kingdom firm. Note 2 applies.
                    Note 3 applies to (c)(3).)

(k)  252.225-7043   ANTI-TERRORISM/FORCE PROTECTION FOR DEFENSE CONTRACTORS
                    OUTSIDE THE UNITED STATES (JUN 1998) (Applies where
                    contractor will be performing or traveling outside the U.S.
                    under this Contract. For paragraph (c), see applicable
                    information cited in DFARS 225.7401.)

(l)  252-226-7001   UTILIZATION OF INDIAN ORGANIZATIONS, AND INDIAN-OWNED
                    ECONOMIC ENTERPRISES AND NATIVE HAWAIIN SMALL BUSINESS
                    CONCERNS (OCT 2003) (This clause is applicable only when
                    included in LOCKHEED MARTIN's Prime Contract and if this
                    contract is more than $500,000. In e(l), "Contractor" shall
                    mean "LOCKHEED MARTIN". Note 2 applies to (c) the first time
                    "Contracting Officer" appears.)

(m)  252.235-7003   FREQUENCY AUTHORIZATION (DEC 1991) (Applicable if this
                    Contract requires developing, producing, constructing,
                    testing, or operating a device requiring a frequency
                    authorization. Note 2 applies.)

(n)  252.245-7001   REPORTS OF GOVERNMENT PROPERTY (MAY 1994) (Applicable if
                    Government Property is provided or acquired under this
                    Contract. Contractor shall submit its required reports to
                    LOCKHEED MARTIN. In paragraph (a)(3), change October 31 to
                    October 10.)
</TABLE>

                                       4

<PAGE>

PURCHASE ORDER NO. DM259735 - SECTION A

Date:      March 24, 2005

Seller:    Ocean Power Technologies (OPT)   Payment Terms:      Net 30
           1590 Reed Rd.
           Pennington, NJ 08534             Govt. Contract No.: N00039-04-C-0035

Attention: Ms. Debbie Montagna              DPAS Rating:        DO-A7

1.   PARTIES/TYPE OF CONTRACT

     This cost plus fixed fee (CPFF) Purchase Order between Lockheed Martin
     Maritime Systems & Sensors, a business unit of Lockheed Martin Corporation
     (hereinafter referred to as "Buyer") located at 9500 Godwin Drive,
     Manassas, VA 20110 and Ocean Power Technologies (OPT), (hereinafter
     referred to as "Seller") located at 1590 Reed Rd., Pennington, NJ 08534
     definitizes Letter Contract #DM259735 and is placed on the basis set forth
     herein.

     The Buyer's procurement representative is the only person authorized to
     approve changes to the terms and conditions or the requirements of the
     Purchase Order. If the Seller complies with any order, direction,
     interpretation, approval, or disapproval, conditional approval, or
     determination (written or oral), from someone other than the Buyer's
     procurement representative, it shall be at Seller's own risk and Buyer
     shall not be liable for any increased cost or delay in performance in
     accordance with the requirements set forth herein. The Seller shall ensure
     that all Seller's personnel are aware of this provision.

     Buyer is a signatory to the Defense Industry Initiatives on Business
     Conduct and Ethics (DII).

     The Seller agrees to indemnify Buyer for any amounts required to be paid to
     the United States Government by virtue of the Seller's violation of Public
     Law 100-679 (see FAR 52.203- 10(c)). This applies to Purchase Orders over
     $50,000 or Purchase Order modifications over $50,000.

2.   PRODUCT/SERVICES

     Seller will provide articles, services and/or data as set forth in Schedule
     A of this purchase order (copy attached).

3.   REQUIREMENTS/DATA

     This is a rated order certified for national defense use, and Seller shall
     follow all requirements of the Defense Priorities and Allocations System
     Regulation (15 CFR Part 350). Seller accepts said rating unless rejected in
     writing within ten (10) days if "DO" rating, or five (5) days if "DX"
     rating from the date of order receipt.

     -    Government Contract Number   N00039-04-C-0035

     -    DPAS Rating:                 DO-A7

     Seller will provide work effort as set forth in Attachment 3, Statement of
     Work #2005-PC4-4 for the Advanced Deployable System (ADS) Aboard the
     Littoral Combat Ship (LCS) Development dated 22 February 2005 which is
     incorporated herein and made a part hereof by reference.

     All drawings, specifications or other documents referenced in this Purchase
     Order, but not attached are incorporated and made a part by this reference.

<PAGE>

4.   PERIOD OF PERFORMANCE AND/OR DELIVERY SCHEDULE

     Work under this Purchase Order shall commence on September 14, 2004
     (authorized via the Letter Contract) and continue through October 31, 2005
     or as amended by Buyer in accordance with Terms and Conditions herein.

     Articles, services and/or data shall be delivered in accordance with the
     delivery dates contained in the Statement of Work, Attachment 3 and the
     Integrated Master Plan (IMP) and Integrated Master Schedule (IMS).

     All articles, services and/or data shall be delivered as directed by the
     ADS LCS Program Manager, the SOW or other attachments to this Purchase
     Order.

     A.   Packing Slip

          Seller shall submit a packing slip with each shipment of supplies
          against this Purchase Order/Release. At a minimum, the packing slip
          shall contain the following information:

          1.   Purchase Order Number/Release Number

          2.   Itemized list of supplies within the shipment

          3.   List of back-order items remaining to be delivered

          4.   Date of shipment

5.   CONSIDERATION AND PAYMENT

     The total agreed price for the work identified in this Purchase Order is
     $[**]. Seller is not authorized to incur any costs, obligations, or
     liabilities, of any nature whatsoever for the amount and any such
     additional costs, obligations, or liabilities incurred or assumed by Seller
     shall be at his sole risk and account and the Buyer and/or the Government
     shall not be liable in any manner to pay or reimburse Seller on account
     thereof. Seller shall notify Buyer when the amount of costs incurred is
     within [**] of the above-cited ceiling.

     In the event of a termination or cancellation of this Purchase Order or
     part thereof, Buyer's sole obligation shall be to pay Seller for
     satisfactory services performed prior to the date of termination or
     cancellation. Such payment is subject, in the case of termination for
     material breach, to a setoff and/or payment of damages or losses incurred
     by Buyer as a result of any breach.

     This purchase order is incrementally funded with respect to both cost and
     fee in accordance with FAR 52.232-20 and 52.232-22. The amounts presently
     available and allotted to this purchase order for payment of cost and fee
     are as follows:

<TABLE>
<S>            <C>                       <C>     <C>
Line Item 001   Allocated to Cost        $[**]   Line Item 002 Not Separately Priced
                Allocated to Fixed Fee   $[**]
                                         -----
                   Total                 $[**]
</TABLE>

     Buyer shall make payments on account of fixed fee equal to the stated
     amount for work performed and submitted by Seller under FAR clauses
     52.216-7 entitled "Allowable Cost and Payment" and 52.216-8 entitled "Fixed
     Fee" of the attached FAR Supplemental Terms and Conditions for cost
     reimbursement type subcontracts, subject to withholding provisions of said
     clauses.

6.   INVOICING

     All invoice originals and one (1) copy shall be submitted to the following:

         Lockheed Martin Shared Services
         Accounts Payable

<PAGE>

         Attention: OHM Desk - MANPUR
         PO Box 33064
         Lakeland, FL 33807-3064

     INVOICES

     Each invoice submitted for payment shall indicate complete Purchase Order
     number and be set up in accordance with the line items specified in this
     Purchase Order and Schedule A.

     One (1) copy of each invoice and all correspondence pertaining to this
     Purchase Order shall be sent via e-mail to the Subcontract Administrator:
     Brenda Aanderud brenda.aanderud@lmco.com.

7.   INSPECTION AND ACCEPTANCE

     Inspection and acceptance criteria shall be as set forth in the SOW and
     Systems Engineering Management Plan (SEMP).

8.   TERMS AND CONDITIONS

     This Purchase Order is subject to the following terms and conditions:

     -    Lockheed Martin Corporation, CORPDOC 4 and 4A dated 10/03, Cost
          Reimbursement General Provisions and FAR Flowdowns for
          Subcontracts/Purchase Orders (All Agencies) for Non- Commercial Items
          under a U.S. Government Prime Contract.

     -    Proprietary Information Exchange Agreement No. MAN2004048.

9.   SPECIAL PROVISIONS

     The following special provisions shall apply to this Purchase Order:

     -    Sections B - J of this purchase order including reference attachments.

10.  ORDER OF PRECEDENCE

     In the event of an inconsistency in this Purchase Order, unless otherwise
     provided herein, the inconsistency shall be resolved by giving precedence
     in the following order.

     (a)  Body of the Purchase Order Section A Including Schedule A and CORPDOC
          4 & 4A

     (b)  Sections B - J of the Purchase Order

     (c)  Statement of Work and Contract Data Requirements List

     (d)  Specifications

     (e)  All Other Documents

11.  ACCEPTANCE

     This Purchase Order is the entire agreement between Buyer and Seller. It
     supersedes all prior agreements, oral or written and all other
     communications relating to the subject matter of this Purchase Order.

     Any terms contained in Seller's invoices, acknowledgments, shipping
     instructions or other forms that are inconsistent with or different from
     this Purchase Order, shall be void and of no effect.

     This Purchase Order is executed in duplicate originals as of the date
     specified on page one (1).

     Please sign and return this Purchase Order to Buyer within ten (10) working
     days after receipt.

<PAGE>

Lockheed Martin Maritime System &       Oceans Power Technologies, Inc.
Sensors                                 1590 Reed Rd.
                                        Pennington, NJ 08534

By: /s/ Brenda Aanderud                 By: /s/ Charles F. Dunleavy
    ---------------------------------       ------------------------------------
    Brenda Aanderud                     Title: C.F.O.
Title: Staff Subcontract                Date: 4/6/2005
       Administrator
Date: 3/27/05
<PAGE>

Lockheed Martin Manassas
9500 Godwin Drive Manassas, VA 20 -415
Telephone 703-367-2121

                                                                 LOCKHEED MARTIN

In Reply Refer To: LM05-ADSLCS031-BKA079

January 19, 2005

Ocean Power Technologies
1590 Reed Rd.
Pennington, NJ 08534

Attention: Ms. Debbie Montagna

Subject:   Letter Contract Definitization

Reference: a)   LM MS2 Letter #LM04-ADSLCS027-BKA075 dated December 22, 2004

           b)   OPT Proposal dated April 29, 2004 (with pricing
                update/correction provided 30-Apr-04 and 05-May-04), Revision
                dated August 4, 2004 and Update Provided on 11/15/04

           c)   LM MS2 Letter Contract #DM259735

Dear Ms. Montagna

This letter is to revise the offer presented in the reference a) letter. An
offer of $[**] is extended for the definitized subcontract based on OPT's
proposal update on 11/15/04.

Please indicate your acceptance of this offer by signing below and returning a
copy of this letter. Acceptance will also indicate confirmation that the fee
included in the updated proposal/offer does not exceed [**]. OPT is also
required to provide certified cost or pricing data in accordance with the
attached form F 630.

Please contact me at 703/367-3223 if you have any questions regarding this
information.

Sincerely,                              ACCEPTED AND AGREED TO:

                                        Ocean Power Technologies (OPT)

/s/ Brenda Aanderud                     /s/ Charles F. Dunleavy
-------------------------------------   ----------------------------------------
Brenda Aanderud                         By: Charles F. Dunleavy
Subcontract Administrator               Title: CFO
                                        Date: 20 January 2005

Attachment - Form F 630

<PAGE>

LOCKHEED MARTIN

       Certificate of Current Cost or Pricing Data--FAR-Covered Contracts

This is to certify that, to the best of my knowledge and belief, cost or pricing
data (as defined in section 2.101 of the Federal Acquisition Regulation (FAR)
and required under FAR subsection 15.403-4) submitted, either actually or by
specific identification in writing, to Lockheed Martin in support of

Cost proposal by Ocean Power Technologies, Inc., as

revised November 15, 2004 for ADS on LCS

are accurate, complete, and current as of   20     January    2005
                                           (day)   (month)   (year)

This certification includes the cost or pricing data supporting any advance
agreements and forward pricing rate agreements between the offeror and the
Government or Lockheed Martin that are part of the proposal.

                                        Firm Ocean Power Technologies, Inc.
                                        Name Charles F. Dunleavy

                                        Signature /s/ Charles F. Dunleavy
                                                  ------------------------------
                                        Title C.F.O.

Date of Execution 20 January 2005

*    Describe the proposal, quotation, request for price adjustment, or other
     submission involved, giving the appropriate identifying number (for
     example, RFP No. _____).

**   Insert the day, month, and year when price negotiations were concluded and
     price agreement was reached. Or, if applicable, an earlier date agreed upon
     between the parties that is as close as practicable to the date of
     agreement on price.

***  Insert the day, month, and year of signing, which should be as close as
     practicable to the date when price negotiations were concluded and the
     contract price was agreed to.

F 630 (03/04)                  Tab - Certificate of Current Cost of Pricing Data

<PAGE>

                                                   Post-Proposal Letter Contract

LOCKHEED MARTIN

Subcontractor: Ocean Power Technologies (OPT)  Date: 3/10/05
               1590 Reed Rd.
               Pennington, NJ 08534            Prime or Customer Contract
                                               No.: N00039-04-C-0035

Subject: LOCKHEED MARTIN CORPORATION- Maritime Systems & Sensors (MS2)

Modification 02 to Letter Contract No. DM259735:

Reference:   a)   MS2 Request for Proposal (RFP) No. 29-RA-042904 dated April 8,
                  2004 and All Amendments

             b)   OPT Proposal dated April 29, 2004 (with pricing
                  update/correction provided 30-Apr-04 and 05-May-04) and
                  Revision dated August 4, 2004

             c)   Letter Contract No. DM259735 dated 9/17/04

             d)   Confirmation of Negotiations dated January 19, 2005

     Refer to Letter Contract #DM259735 dated 9/17/04 and make the following
     addition, deletions, changes and modifications hereinafter set forth:

          -    Revise Paragraph 4 as follows: "The total Not-to-Exceed (NTE)
               price of this contract is $[**]."

          -    Revise Paragraph 5 as follows:

               "This contract is incrementally funded. Lockheed Martin's
               limitation of obligation to pay under this subcontract is $[**].
               The funds are expected to be adequate for performance of the Work
               until June 18, 2005.

     Except as hereby amended, all provisions of the letter contract, including
     modifications thereto, shall remain unmodified and in full force and effect
     and shall also apply in carrying out the provisions of this modification.

     This authorization is subject to your prompt acceptance. Please return a
     signed copy by FAX no later than cob, Tuesday, March 15, 2005, confirming
     your acceptance of the contents herein and acknowledging that the effort
     authorized has been initiated.

Contractor: OCEAN POWER TECHNOLOGIES    LOCKHEED MARTIN CORPORATION

By: /s/ Charles F. Dunleavy             By: /s/ Bruce Gaines
    ---------------------------------       ------------------------------------
Title: C.F.O.                           Title: Staff Subcontract Administrator
Date: 3/11/05                           Date: 3/10/05

F 860 (03/04)                                              Tab - Letter Contract

                                   Page 1 of 1
<PAGE>

Lockheed Martin Corporation
Maritime Systems & Sensors
9500 Godwin Drive
Manasaas, Va. 20110-4157

Modification 01
To Purchase Order No. DM259735

Date:      April 27, 2005

Seller:    Ocean Power Technologies
           1590 Reed Rd.
           Pennington, NJ 08534

Attention: Ms. Debbie Montagna

This modification is subject to the terms and conditions contained in the
original purchase order and subsequent modifications and the additional
instructions hereinafter set forth:

Articles/services and/or data provided hereunder will be used on Government
Contract Number N00039-04-C-0035.

This is a rated order certified for National Defense use, and seller shall
follow all requirements of the Defense Priorities and Allocations System
Regulation (15 CFR part 700). Seller accepts said rating unless rejected in
writing within 10 days if DO rating, or 5 days if DX rating from the date of
order receipt.

     DPAS Rating: DO-A7.

                               BODY OF ALTERATION

Refer to the above Purchase Order Number DM259735 and make the additions,
deletions, changes and/or modifications hereinafter set forth:

     1.   Refer to the PO Para 5 Consideration and Payment and add the following
          statement:

          "This PO is fully funded at the total price of $[**]."

     2.   Schedule A

          Delete the existing Schedule A dated March 24, 2005 and update with
          the revised Schedule A dated April 24,2005 - copy attached.

                                       1

<PAGE>

PO #DM259735, Modification 03
September 2, 2005

ACCEPTANCE

Except as hereby amended, all provisions of the purchase order, including
modifications thereto, shall remain unmodified and in full force and effect and
shall also apply in carrying out the provisions of this modification.

This modification is executed in duplicate originals as of the effective date of
Buyer's signature on last page.

This modification must be signed and returned to the buyer within ten (10)
working days after receipt.

BUYER:  Lockheed Martin Corporation
        Maritime Systems & Sensors
        9500 Godwin Drive
        Manassas, VA 20110-4157

        /s/ Bruce Gaines
        -------------------------------
BY:     Bruce Gaines
TITLE:  Staff Subcontract Administrator
DATE:   April 27, 2005

SELLER: Ocean Power Technologies
        1590 Reed Rd.
        Pennington, NJ 08534

BY:     /s/ Charles F. Dunleavy
        -------------------------------
TITLE:  CFO
DATE:   April 27, 2005

                                        2

<PAGE>

                     Purchase Order Number DM259735 - Mod 01
                                  SCHEDULE "A"
                              DATED APRIL 27, 2005

<TABLE>
<CAPTION>
                                         AUTHORIZED FUNDING
P.O.                               -----------------------------
LINE                                               FIXED   TOTAL        PERIOD OF       ESTIMATED   FIXED      TOTAL
ITEM   CLIN      DESCRIPTION       COST     COM     FEE     CPFF       PERFORMANCE     COST + COM    FEE    TARGET COST
----   ----   ------------------   -----   -----   -----   -----   -----------------   ----------   -----   -----------
<S>    <C>    <C>                  <C>     <C>     <C>     <C>     <C>                 <C>          <C>     <C>
001    0001   ADS LCS
              Technology
              Development Phase    $[**]            [**]   $[**]   9/14/04-10/31/05       $[**]     $[**]      $[**]

002    0002   Data for CLIN 0001     NSP     NSP     NSP     NSP   9/14/04-10/31/05         NSP       NSP        NSP

       Total Contract              $[**]   $[**]   $[**]   $[**]                          $[**]     $[**]      $[**]
              Total Authorized
              Funding - All Line

              Items =              $[**]
</TABLE>

CORPDOC 4(10/03)
                                        1
<PAGE>

Lockheed Martin Corporation
Maritime Systems & Sensors
9500 Godwin Drive
Manasaas, Va. 20110-4157

Modification 02
To Purchase Order No. DM259735

Date:      August 5, 2005

Seller:    Ocean Power Technologies
           1590 Reed Rd.
           Pennington, NJ 08534

Attention: Ms. Debbie Montagna

This modification is subject to the terms and conditions contained in the
original purchase order and subsequent modifications and the additional
instructions hereinafter set forth:

Articles/services and/or data provided hereunder will be used on Government
Contract Number N00039-04-C-0035.

This is a rated order certified for National Defense use, and seller shall
follow all requirements of the Defense Priorities and Allocations System
Regulation (15 CFR part 700). Seller accepts said rating unless rejected in
writing within 10 days if DO rating, or 5 days if DX rating from the date of
order receipt.

     DPAS Rating: DO-A7.

                               BODY OF ALTERATION

Refer to the above Purchase Order Number DM259735 and make the additions,
deletions, changes and/or modifications hereinafter set forth:

     1.   LINE IREM 001

          Incremental funding for Line Item 001 is increased by $[**] from $[**]
          to $[**].

<TABLE>
<S>                        <C>
Allocated to Costs         $[**]
Allocated to Fixed Fee     $[**]
Ttoal Authorized Funding   $[**]
</TABLE>

     2.   Schedule A

          Delete the existing Schedule A dated April 27, 2005 and update with
          the revised Schedule A dated August 5, 2005 - copy attached.

<PAGE>

PO #DM259735, Modification 03
September 2, 2005

ACCEPTANCE

Except as hereby amended, all provisions of the purchase order, including
modifications thereto, shall remain unmodified and in full force and effect and
shall also apply in carrying out the provisions of this modification.

This modification is executed in duplicate originals as of the effective date of
Buyer's signature on last page.

This modification must be signed and returned to the buyer within ten (10)
working days after receipt.

BUYER:  Lockheed Martin Corporation
        Maritime Systems & Sensors
        9500 Godwin Drive
        Manassas, VA 20110-4157

        /s/ Bruce Gaines
        -------------------------------
        Bruce Gaines
        Staff Subcontract Administrator

DATE:   August 5, 2005

SELLER: Ocean Power Technologies
        1590 Reed Rd.
        Pennington, NJ 08534

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

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

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

                                        2

<PAGE>

                     Purchase Order Number DM259735 - Mod 02
                                  SCHEDULE "A"
                              DATED AUGUST 5, 2005

<TABLE>
<CAPTION>
                                         AUTHORIZED FUNDING
                                   -----------------------------
P.O.
LINE                                               FIXED   TOTAL       PERIOD OF        ESTIMATED   FIXED      TOTAL
ITEM   CLIN       DESCRIPTION       COST    COM     FEE     CPFF      PERFORMANCE      COST + COM    FEE    TARGET COST
----   ----   ------------------   -----   -----   -----   -----   -----------------   ----------   -----   -----------
<S>    <C>    <C>                  <C>     <C>     <C>     <C>     <C>                 <C>          <C>     <C>
 001   0001   ADS LCS
              Technology
              Development Phase    $[**]            [**]   $[**]   9/14/04- 10/31/05      $[**]     $[**]      $[**]

 002   0002   Data for CLIN 0001    NSP     NSP     NSP     NSP     9/14/04-10/31/05       NSP       NSP        NSP

       Total Contract              $[**]   $[**]   $[**]   $[**]                          $[**]     $[**]      $[**]
              Total Authorized
              Funding - All Line
              Items =              $[**]
</TABLE>

                                        1

<PAGE>

Lockheed Martin Corporation
Maritime Systems & Sensors
9500 Godwin Drive
Manasaas, Va. 20110-4157

Modification 03
To Purchase Order No. DM259735

Date:      September 2, 2005

Seller:    Ocean Power Technologies
           1590 Reed Rd.
           Pennington, NJ 08534

Attention: Ms. Debbie Montagna

This modification is subject to the terms and conditions contained in the
original purchase order and subsequent modifications and the additional
instructions hereinafter set forth:

Articles/services and/or data provided hereunder will be used on Government
Contract Number N00039-04-C-0035.

This is a rated order certified for National Defense use, and seller shall
follow all requirements of the Defense Priorities and Allocations System
Regulation (15 CFR part 700). Seller accepts said rating unless rejected in
writing within 10 days if DO rating, or 5 days if DX rating from the date of
order receipt.

     DPAS Rating: DO-A7.

                               BODY OF ALTERATION

Refer to the above Purchase Order Number DM259735 and make the additions,
deletions, changes and/or modifications hereinafter set forth:

     1.   LINE IREM 001

          Incremental funding for Line Item 001 is increased by $[**] from $[**]
          to $[**].

     2.   Schedule A

          Delete the existing Schedule A dated August 5, 2005 and update with
          the revised Schedule A dated September 2, 2005 - copy attached.

<PAGE>

PO #DM259735, Modification 03
September 2, 2005

ACCEPTANCE

Except as hereby amended, all provisions of the purchase order, including
modifications thereto, shall remain unmodified and in full force and effect and
shall also apply in carrying out the provisions of this modification.

This modification is executed in duplicate originals as of the effective date of
Buyer's signature on last page.

This modification must be signed and returned to the buyer within ten (10)
working days after receipt.

BUYER:  Lockheed Martin Corporation
        Maritime Systems & Sensors
        9500 Godwin Drive
        Manassas, VA 20110-4157

        /s/ Bruce Gaines
        -------------------------------
        Bruce Gaines

TITLE:  Staff Subcontract Administrator

DATE:   September 2, 2005

SELLER: Ocean Power Technologies
        1590 Reed Rd.
        Pennington, NJ 08534

BY:
        -------------------------------
TITLE:
        -------------------------------

                                       2EX-10.1

 

Exhibit 10.1

COINMACH SERVICE CORP. 2004 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

     THIS AGREEMENT, entered into as of the Grant Date (as defined in paragraph 1), by and between
the Participant and Coinmach Service Corp. (the “Company”);

WITNESSETH THAT:

     WHEREAS, the Company maintains the Coinmach Service Corp. 2004 Long-Term Incentive Plan (the
“Plan”), which is incorporated into and forms a part of this Agreement, and the Participant has
been selected by the committee administering the Plan (the “Committee”) to receive a Restricted
Stock Award under the Plan;

     NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:

     1. Terms of Award. The following terms used in this Agreement shall have the meanings
set forth in this paragraph 1:

	(a)	 	The “Participant” is Stephen R. Kerrigan.
	 
	(b)	 	The “Grant Date” is November 3, 2006.
	 
	(c)	 	“Covered Shares” are shares of Class A Stock granted under this Agreement and subject to the
terms of this Agreement and the Plan. The number of “Covered Shares” awarded under this
Agreement is 35,000 shares.
	 
	(d)	 	8,750 Covered Shares1 (representing 25% of all Covered Shares awarded
under this Agreement) shall be “Time Vesting Shares.”
	 
	(e)	 	26,250 Covered Shares 2 (representing 75% of all Covered Shares awarded
under this Agreement) shall be “Performance Vesting Shares.” The number of Covered Shares
representing 2/3 of Participant’s Performance Vesting Shares shall be “Pool I Performance
Vesting Shares”, and the number of Covered Shares representing 1/3 of Participant’s
Performance Vesting Shares shall be “Pool II Performance Vesting Shares.”

Other terms used in this Agreement are defined pursuant to paragraph 14 or elsewhere in this
Agreement.

     2. Award. The Participant is hereby granted the number of Covered Shares set forth in
paragraph 1.

 

			
	1	 	25% of the Covered Shares awarded shall be
subject to time vesting.
	 
	2	 	75% of the Covered Shares awarded shall be
subject to performance vesting.

 

 

     3. Section 83(b) Election. The parties agree that the Fair Market Value of each
Covered Share as of the Grant Date is $10.00. The Participant, in his sole discretion, may make a
Section 83(b) Election with the IRS in the form of Exhibit A attached hereto. The
Participant understands that under applicable law such election must be filed with the IRS no later
than 30 days after any grant of the Covered Shares is to be effective. If the Participant files an
effective 83(b) Election, the excess of the fair market value of the Covered Shares (which the IRS
may assert is different from the Fair Market Value determined by the parties) covered by such
election shall be treated as ordinary income received by the Participant, and the Company or one of
its Subsidiaries shall withhold from Participant’s compensation all amounts required to be withheld
under applicable law. If the Participant does not file an 83(b) Election, future appreciation on
the Covered Shares will generally be taxable as ordinary income when such Covered Shares vest
pursuant to this Agreement. (See Exhibit A for additional information about the tax consequences.)
The foregoing discussion as well as the discussion in Exhibit A is based on Federal tax laws and
regulations presently in effect, which are subject to change, and the discussion does not purport
to be a complete description of the Federal income tax aspects of the program or grants under it.
The Participant may also be subject to state and local taxes in connection with the grant of
Covered Shares under the program. The Company suggests that the Participant consult with his
individual tax advisor to determine the applicability of the tax rules to the awards granted to him
in his personal circumstances.

     4. Dividends and Voting Rights. The Participant shall be entitled to receive any
dividends paid with respect to the Time Vesting Shares that become payable during the Restricted
Period; provided, however, that no dividends shall be payable to or for the benefit
of the Participant for Time Vesting Shares with respect to record dates occurring prior to the
Grant Date, or with respect to record dates occurring on or after the date, if any, on which the
Participant has forfeited those Time Vesting Shares. The Participant shall not be paid any
dividends with respect to the Performance Vesting Shares until the Participant has become vested in
such shares. At the time of vesting, the Participant shall receive a cash payment equal to the
aggregate dividends (without interest) that the Participant would have received if the Participant
had owned all of the Performance Vesting Shares in which the Participant vested for the period
beginning on the date of grant of those shares and ending on the date of vesting. No dividends
shall be paid to the Participant with respect to any Time Vesting Shares or any Performance Vesting
Shares that are forfeited by the Participant. The Participant shall be entitled to vote the
Covered Shares (whether Time Vesting Shares or Performance Vesting Shares) during the Restricted
Period to the same extent as would have been applicable to the Participant if the Participant was
then vested in the shares; provided, however, that the Participant shall not be
entitled to vote the shares with respect to record dates for such voting rights arising prior to
the Grant Date, or with respect to record dates occurring on or after the date, if any, on which
the Participant has forfeited those Covered Shares.

     5. Deposit of Covered Shares. Each certificate issued in respect of the Covered
Shares granted under this Agreement shall be registered in the name of the Participant and shall be
deposited in a bank designated by the Committee. During the Restricted Period, all certificates
evidencing the Restricted Stock will be imprinted with the

2

 

following legend: “The securities evidenced by this certificate are subject to the transfer
restrictions, forfeiture restrictions and other provisions of the Restricted Stock Agreement dated
November 3, 2006, between Coinmach Service Corp. and Stephen R. Kerrigan.” Notwithstanding the
foregoing, the Committee may, in its sole discretion, cause the Covered Shares to be held in
book-entry form on behalf of the Participant without the issuance of certificates.

     6. Transfer and Forfeiture of Shares.

	(a)	 	Time Vesting Shares. If the Date of Termination (as defined below) does not occur
during the Restricted Period with respect to any Installment of the Time Vesting Shares, then,
at the end of the Restricted Period for such shares, the Participant shall become vested in
those Time Vesting Shares, and shall own the shares free of all restrictions otherwise imposed
by this Agreement. With respect to all Time Vesting Shares, the “Restricted Period” shall
begin on the Grant Date. The “Restricted Period” with respect to each Installment of Time
Vesting Shares shown on the schedule shall end on the Vesting Date applicable to such
Installment (but only if the Date of Termination has not occurred before the Vesting Date):

	 	 	 	 	 
	 	 	 	 	VESTING
DATE

	 	 	 	 	APPLICABLE
TO

	INSTALLMENT	 	INSTALLMENT

	 	2,916	 	 	One-Year Anniversary of Grant Date

	 	2,916	 	 	Two-Year Anniversary of Grant Date

	 	2,918	 	 	Three-Year Anniversary of Grant Date

	(b)	 	Performance Vesting Shares. If the Date of Termination does not occur during the
Performance Period with respect to the Performance Vesting Shares, then, at the end of the
Performance Period for such shares, the Participant shall become vested in those Performance
Vesting Shares, and shall own the shares free of all restrictions otherwise imposed by this
Agreement, but only to the extent expressly provided by this paragraph 6. Except as otherwise
provided in this paragraph 6, if the Date of Termination occurs at or prior to the end of the
Performance Period, the Performance Vesting Shares shall be forfeited. With respect to all
Performance Vesting Shares, the “Performance Period” shall begin on the Grant Date and shall
end on March 31, 2009.

	 	(i)	 	Performance Goals. The vesting of Pool I Performance Vesting Shares
is not dependent on the satisfaction of the Performance Goal for Pool II Performance
Vesting Shares, and the vesting of Pool II Performance Vesting Shares is not dependent
on the satisfaction of the Performance Goal for Pool I Performance Vesting Shares.

	 	(A)	 	Pool I Performance Vesting Shares. The performance goal with
respect to Pool I Performance Vesting Shares shall be DCF of $48 million for the
fiscal year of the Company ending March 31, 2009.

3

 

	 	 	 	If the Performance Goal described in the preceding sentence is met as of the
end of the Performance Period, all Pool I Performance Vesting Shares shall
vest, and Participant shall own such Pool I Performance Vesting Shares free
of all restrictions otherwise imposed by this Agreement. Pool I Performance
Vesting Shares that have not vested at or prior to the end of the Performance
Period shall be forfeited.
	 
	 	(B)	 	Pool II Performance Vesting Shares. The Performance Goal with
respect to Pool II Performance Vesting Shares shall be Consolidated EBITDA of
$174 million for any four consecutive fiscal quarters beginning on or after
October 1, 2006 and ending on or prior to March 31, 2009. If the Performance
Goal described in the preceding sentence is met at any time during the
Performance Period, all Pool II Performance Vesting Shares shall vest, and the
Participant shall own such Pool II Performance Vesting Shares free of all
restrictions otherwise imposed by this Agreement. If the Performance Goal
described above is not met as of the end of the Performance Period, but
Consolidated EBITDA as of the end of the Performance Period is at least $165
million, an amount (expressed as a percentage) of Pool II Performance Vesting
Shares shall vest in accordance with the following schedule:

	 	 	 	 	 
	Consolidated EBITDA	 	 
	for the fiscal year of the Company ending	 	Vested Percentage of Pool II
	March 31, 2009	 	Performance Vesting Shares
	Less than $165 million
	 	 	0	%
	At least $165 million but less than $166 million
	 	 	25	%
	At least $166 million but less than $167 million
	 	 	30	%
	At least $167 million but less than $168 million
	 	 	35	%
	At least $168 million but less than $169 million
	 	 	40	%
	At least $169 million but less than $170 million
	 	 	50	%
	At least $170 million but less than $171 million
	 	 	60	%
	At least $171 million but less than $172 million
	 	 	75	%
	At least $172 million but less than $173 million
	 	 	85	%
	At least $173 million but less than $174 million
	 	 	95	%
	$174 million or greater
	 	 	100	%

	 	 	Pool II Performance Vesting Shares that have not vested by the end of the Performance
Period shall be forfeited.

	 	(C)	 	Satisfaction of Performance Goals. The determination as to
whether a Performance Goal with respect to Pool I Performance Shares and Pool II
Performance Shares shall have been met shall be made by the Board of Directors
following the review and/or audit, as applicable, by the Company’s independent
certified public

4

 

	 	 	 	accountants of the financial statements of the Company for the fiscal quarter
or fiscal year, as applicable, ending on the last day of the period during
which such Performance Goal is believed to have been met. Notwithstanding
any provision contained herein to the contrary, the Board of Directors shall
have the sole and absolute discretion to interpret the meaning of any
defined term contained herein used in the calculation of DCF and Consolidated
EBITDA, which interpretation shall be binding on Participant (whether or not
such interpretation is in accordance with GAAP or, for those term not defined
by GAAP, other commonly used definitions or measures). If and to the extent
Participant is a member on the Board of Directors at the time any such
determination described in this clause (C) is made, such Participant shall
abstain from taking part in such determination.

	(c)	 	Notwithstanding the foregoing provisions of this paragraph 6, the following provisions shall
apply to the Covered Shares, including both the Time Vesting Shares and the Performance
Vesting Shares:

	 	(i)	 	Change in Control. If the Participant’s Date of Termination does not
occur prior to a Change in Control, then as of the Change in Control, all Covered
Shares that have not previously vested shall vest and the Participant shall become the
owner of such shares free of all restrictions otherwise imposed by this Agreement.
	 
	 	(ii)	 	Death and Disability. If the Participant’s Date of Termination
occurs by reason of his death or Disability, then as of the Date of Termination, all
Covered Shares that have not previously vested shall vest and the Participant (or his
estate) shall become the owner of such shares free of all restrictions otherwise
imposed by this Agreement.
	 
	 	(iii)	 	Other Employment Termination. If the Participant’s Date of
Termination occurs for any reason other than the Participant’s death or Disability,
the Participant shall, as of a Date of Termination, forfeit the Covered Shares that
have not become vested as of that date.

	(d)	 	Transfer of Shares. Covered Shares may not be sold, assigned, transferred, pledged
or otherwise encumbered until the expiration of the Performance Period or, if earlier, until
the Participant is vested in the shares.

     7. Withholding. The grant and vesting of the Covered Shares under this Agreement are
subject to withholding of all applicable taxes. At the election of the Participant, and subject to
such rules and limitations as may be established by the Committee from time to time and subject to
any applicable loan commitments of the Company or its affiliates, such withholding obligations may
be satisfied through the surrender of shares of Class A common stock (i) which the Participant
already owns, or (ii) to which the Participant is otherwise entitled under the Plan;
provided, however, that

5

 

shares described in this clause (ii) may be used to satisfy not more than the Company’s
minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal
and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable
income).

     8. Heirs and Successors. This Agreement shall be binding upon, and inure to the
benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by
merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s
assets and business. If any rights of the Participant or benefits distributable to the Participant
under this Agreement have not been exercised or distributed, respectively, at the time of the
Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such
benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of
this Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or
beneficiaries designated by the Participant in a writing filed with the Committee in such form and
at such time as the Committee shall require. If a Participant fails to designate a beneficiary, or
if the Designated Beneficiary does not survive the Participant, any rights that would have been
exercisable by the Participant and any benefits distributable to the Participant shall be exercised
by or distributed to the legal representative of the estate of the Participant. If a Participant
designates a beneficiary and the Designated Beneficiary survives the Participant but dies before
the Designated Beneficiary’s exercise of all rights under this Agreement or before the complete
distribution of benefits to the Designated Beneficiary under this Agreement, then any rights that
would have been exercisable by the Designated Beneficiary shall be exercised by the legal
representative of the estate of the Designated Beneficiary, and any benefits distributable to the
Designated Beneficiary shall be distributed to the legal representative of the estate of the
Designated Beneficiary.

     9. Administration. The authority to manage and control the operation and
administration of this Agreement shall be vested in the Committee, and the Committee shall have all
powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of
the Agreement by the Committee and any decision made by it with respect to the Agreement is final
and binding.

     10. Plan Governs. Notwithstanding anything in this Agreement to the contrary, the
terms of this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained
by the Participant from the office of the Secretary of the Company.

     11. Fractional Shares. In lieu of issuing a fraction of a share pursuant to paragraph
5.2(f) of the Plan or otherwise, the Company will be entitled to pay to the Participant an amount
equal to the Fair Market Value of such fractional share.

     12. Amendment. This Agreement may be amended in accordance with the provisions of the
Plan, and may otherwise be amended by written agreement of the Participant and the Company without
the consent of any other person.

6

 

     13. Applicable Law. The provisions of this Agreement shall be construed in accordance
with the laws of the State of New York, without regard to the conflict of law provisions of any
jurisdiction.

     14. Definitions. For purposes of this Agreement, the terms used in this Agreement
shall be subject to the following:

	(a)	 	Board of Directors. “Board of Directors” means the Board of Directors of the
Company.
	 
	(b)	 	Capital Expenditures. “Capital Expenditures” means, for any period, without
duplication, the sum of:

	 	(i)	 	the aggregate amount of all expenditures of the Company for property, plant
and equipment (excluding any property, plant and equipment acquired in connection with
acquisitions, including advance location payments to location owners and excluding
expenditures relating to additions to net assets related to acquisitions of
businesses) that are recorded as fixed or capital assets made during such period
which, in accordance with GAAP, would be classified as capital expenditures, and
	 
	 	(ii)	 	the aggregate amount of all cash payments made during such period in respect
of any capitalized lease obligation allocable to the principal component thereof;

	 	 	provided that the term “Capital Expenditures” shall not include (A) expenditures made in
connection with the replacement, substitution or restoration of assets (I) to the extent
financed from insurance proceeds paid on account of the loss of or damage to the assets
being replaced or restored or (II) with awards of compensation arising from the taking by
eminent domain or condemnation of the assets being replaced; (B) the purchase price of
equipment that is purchased simultaneously with the trade-in of existing equipment to the
extent that the gross amount of such purchase price is reduced by the credit granted by the
seller of such equipment for the equipment being traded in at such time; (C) a capitalized
lease obligation paid in respect of equipment that is leased in substitution for, or as
replacement in connection with the trade-in of, existing similar equipment; (D) the
purchase of plant, property or equipment made within one year of the sale of any asset in
replacement of such asset to the extent purchased with the proceeds of such sale, and a
capitalized lease obligation paid in respect of such replaced asset; and (E) expenditures
for property, plant and equipment that are financed to the extent of such financing,
provided that all cash payments made during such period in respect of such financing and
allocable to the principal component thereof shall be treated as a Capital Expenditure for
such period.
	 
	(c)	 	Cause. The term “Cause” means (i) if the applicable Participant is party to an
effective employment agreement with the Company or any of its Subsidiaries, “Cause” shall have
the same meaning as such term is defined therein; (ii) if the

7

 

	 	 	applicable Participant is not a party to an effective employment agreement but is a party
to an effective equity award agreement pursuant to any stock incentive plan of the Company,
“Cause” shall have the same meaning as such term is defined therein; and (iii) if the
applicable Participant (A) commits an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment, (B) commits intentional,
wrongful damage to property of the Company or its affiliates, (C) fails to perform the
material duties of his position after receipt of a written warning from the Company, (D) is
convicted of a felony, (E) violates Company policy, or (F) intentionally and wrongfully
discloses confidential information of the Company or its affiliates that has been harmful
to or has adversely affected the Company or its affiliates. For purposes of this letter,
no act on the Participant’s part shall be considered “intentional” if it was due primarily
to an error in judgment or negligence, but shall be considered intentional only if done by
the Participant not in good faith and without reasonable belief that such action or
omission was in the best interests of the Company; provided, however, that
if the Participant’s employment is subject to an employment agreement that contains a
definition of “Cause” or “Termination for Cause,” then, notwithstanding the foregoing
provisions of this definition or the provisions of this Agreement, the definition of
“Cause” or “Termination for Cause” in such employment agreement, rather than the foregoing
definition in this Agreement, shall apply to the Participant.
	 
	(d)	 	Change in Control. “Change in Control” has the meaning ascribed to such term in the
Plan.
	 
	(e)	 	Consolidated EBITDA. The term “Consolidated EBITDA” means, for any period, the sum
(without duplication) of:

	 	(i)	 	Consolidated Net Income, and
	 
	 	(ii)	 	to the extent Consolidated Net Income has been reduced thereby (A) all income
taxes of the Company paid or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions of assets outside the ordinary
course of business), (B) consolidated interest expense, and (C) consolidated non-cash
charges less any non-cash items increasing Consolidated Net Income for such period,

	 	 	all as determined on a consolidated basis for the Company in accordance with GAAP. In
addition to and without limitation of the foregoing, for purposes of this definition,
“Consolidated EBITDA” shall be calculated after giving effect on a pro forma basis for the
applicable period of such calculation to any asset sales, acquisitions or other
dispositions occurring during such applicable period as if such asset sale, acquisition or
disposition occurred on the first day of such applicable period, and including any pro
forma expense and cost reductions calculated on a basis consistent with Regulation S-X
under the Securities Exchange Act of 1934, as amended.

8

 

	(f)	 	Consolidated Interest Expense. “Consolidated Interest Expense” means, for any
period, the aggregate of interest expense of the Company for such period on a consolidated
basis as determined in accordance with GAAP, excluding amortization or write-off of deferred
financing costs and debt issuance costs during such period and any premium or penalty paid in
connection with redeeming or retiring indebtedness of the Company and its Subsidiaries prior
to the stated maturity thereof pursuant to the agreements governing such indebtedness and
including, without duplication, (a) all amortization of original issue discount; (b) the
interest component of capitalized lease obligations paid, accrued and/or scheduled to be paid
or accrued during such period; (c) net cash costs under all interest rate swaps, caps, floors,
collars or similar obligations or agreements (including amortization of fees); (d) all
capitalized interest; and (e) the interest portion of any deferred payment obligations for
such period.
	 
	(g)	 	Consolidated Net Income. “Consolidated Net Income” means, for any period, the
aggregate net income (or loss) of the Company for such period on a consolidated basis,
determined in accordance with GAAP; provided that there shall be excluded therefrom (A)
after-tax gains and losses from asset sales or abandonments or reserves relating thereto, (B)
after-tax items classified as extraordinary or nonrecurring gains, (C) the net income (but not
loss) of any Subsidiary of the Company to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is restricted by a contract, operation
of law or otherwise, (D) any restoration to income of any material contingency reserve, except
to the extent that provision for such reserve was made out of Consolidated Net Income accrued,
(E) income or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were classified as
discontinued), (F) all gains and losses realized on or because of the purchase or other
acquisition by the Company of any securities of the Company, (G) amortization charges
resulting from purchase accounting adjustments, (H) in the case of a successor to the Company
by consolidation or merger or as a transferee of the Company’s assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets, (I) write
downs resulting from the impairment of intangible assets, (J) the amount of amortization or
write-off of deferred financing costs and debt issuance costs of Company during such period
and any premium or penalty paid in connection with redeeming or retiring indebtedness of the
Company prior to the stated maturity thereof pursuant to the agreements governing such
indebtedness, (K) costs paid to unwind interest rate swaps, caps, floors, collars or similar
obligations agreements, and (L) non-cash charges related to employee compensation.
	 
	(h)	 	Date of Termination. The term “Date of Termination” means the first day occurring on
or after the Grant Date on which the Participant is not employed by the Company or any
Subsidiary, regardless of the reason for the termination of employment; provided that
a termination of employment shall not be deemed to occur by reason of a transfer of the
Participant between the Company and a

9

 

	 	 	Subsidiary or between two Subsidiaries; and further provided that the Participant’s
employment shall not be considered terminated while the Participant is on a leave of
absence from the Company or a Subsidiary approved by the Participant’s employer. If the
Participant is employed by a Subsidiary and if, as a result of a sale or other transaction,
the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or
becomes an entity that is separate from the Company), and the Participant is not, at the
end of the 30-day period following the transaction, employed by the Company or an entity
that is then a Subsidiary, then the occurrence of such transaction shall be treated as the
Participant’s Date of Termination caused by the Participant being discharged by the
employer.
	 
	(i)	 	DCF. The term “DCF” means Consolidated EBITDA of the Company for the consecutive
twelve month period ending March 31, 2009 minus

	 	(i)	 	the sum, without duplication, of:

	 	(A)	 	Consolidated Interest Expense,
	 
	 	(B)	 	Capital Expenditures,
	 
	 	(C)	 	cash tax payments in respect of federal and state income taxes,
	 
	 	(D)	 	net changes in Working Capital and
	 
	 	(E)	 	extraordinary cash charges,

	 	 	 	plus
	 
	 	(ii)	 	the sum of:

	 	(A)	 	cash tax refunds in respect of federal and state income taxes and
	 
	 	(B)	 	extraordinary cash gains,

	 	 	 	in each case of the Company on a consolidated basis for or in such period.

	(j)	 	Disability. The Participant shall be considered to have a “Disability” during the
period in which the Participant is unable, by reason of a medically determinable physical or
mental impairment, to engage in any substantial gainful activity, which condition, in the
opinion of a physician selected by the Committee, is expected to have a duration of not less
than 120 days; provided, however, that if the Participant’s employment is
subject to an employment agreement that contains a definition of “Disability” or “Disabled,”
then, notwithstanding the foregoing provisions of this definition or the provisions of this
Agreement, the definition of “Disability” or “Disabled” in such employment agreement, rather
than the foregoing definition in this Agreement, shall apply to the Participant.

10

 

	(k)	 	GAAP. The term “GAAP” means generally accepted accounting principles in the United
States of America.
	 
	(l)	 	IRS. The term “IRS” means the Internal Revenue Service.
	 
	(m)	 	Plan Definitions. Except where the context clearly implies or indicates the
contrary, a word, term, or phrase used in the Plan is similarly used in this Agreement.
	 
	(n)	 	Section 83(b) Election. The term “Section 83(b) Election” means an election made with
the IRS under Section 83(b) of the Code and the regulations promulgated thereunder.
	 
	(o)	 	Working Capital. The term “Working Capital” means, at any date of determination, the
consolidated assets of the Company that are classified as current assets in accordance with
GAAP, less the consolidated liabilities of the Company which are classified as current
liabilities in accordance with GAAP.

     IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company has caused
these presents to be executed in its name and on its behalf, all as of the Grant Date.

	 	 	 	 	 
	 

	 	Participant
	 	 
	 
	 	 	 	 
	 

	 	/s/ Stephen R. Kerrigan	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	COINMACH SERVICE CORP.	 	 
	 
	 	 	 	 
	 

	 	/s/ Stephen R. Kerrigan	 	 
	 

	 	 	 	 
	 

	 	By: Stephen R. Kerrigan	 	 
	 

	 	Its: Chief Executive Officer and President	 	 

11

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