Document:

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                                                                    Exhibit 10.1

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

           ENGINEERING, PROCUREMENT AND CONSTRUCTION OF A WAVE ENERGY
                                   POWER PLANT

                                       AT

                              "PUNTA DEL PESCADOR"

                                (SANTONA, SPAIN)

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CONTENTS

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1.  DEFINITIONS............................................................    6

2.  OBJECT.................................................................   13

3.  SCOPE..................................................................   14

4.  DOCUMENTATION..........................................................   14

5.  INDUSTRIAL INTELLECTUAL PROPERTY.......................................   15

6.  INSPECTIONS AND TESTS..................................................   16

7.  ASSEMBLY AND INSTALLATION OF EQUIPMENT.................................   17

8.  COMMISSIONING OF THE PLANT.............................................   18

   8.1   PROTOCOL..........................................................   18

   8.2   COMMISSIONING PERIOD..............................................   18

9.  PROVISIONAL ACCEPTANCE.................................................   19

10. DEFINITIVE ACCEPTANCE..................................................   20

11. MODIFICATIONS OF THE WORKS.............................................   21

12. CALENDAR AND TIME FOR COMPLETION.......................................   22

   12.1  TIME FOR COMPLETION...............................................   22

   12.2  MONTHLY PROGRESS REPORTS..........................................   22

   12.3  MONITORING AND CONTROL MEETINGS...................................   23

13. TEMPORARY SUSPENSION OF WORK...........................................   23

   13.1  SUSPENSION BY THE CLIENT..........................................   23

   13.2  SUSPENSION BY COURT OR ADMINISTRATIVE AUTHORITY...................   24

   13.3  SUSPENSION BY THE CONTRACTOR......................................   24

   13.4  RECOMMENCEMENT OF WORK............................................   24

14. OTHER OBLIGATIONS OF THE CONTRACTOR....................................   25
</TABLE>

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   14.1  CONTRACTOR'S MANPOWER.............................................   25

   14.2  HEALTH AND SAFETY.................................................   26

   14.3  TRAINING..........................................................   27

   14.4  COMPLIANCE WITH THE LAW...........................................   27

   14.5  ENVIRONMENTAL PROTECTION..........................................   27

   14.6  EQUIPMENT AND MATERIALS...........................................   28

   14.7  REPLACEMENTS PARTS AND CONSUMABLES................................   28

15. REGULATIONS AND OFFICIAL PROVISIONS CONCERNING EQUIPMENT LICENCES AND
    PERMITS................................................................   28

16. INSURANCE

   16.1  CONTRACTOR'S INSURANCE............................................   29

   16.2  INSURANCE DOCUMENTS...............................................   32

17. SUBCONTRACTING.........................................................   32

18. CONTRACT PRICE.........................................................   33

19. TERMS OF PAYMENT AND BILLING...........................................   36

   19.1  SCHEDULE OF MILESTONE.............................................   36

   19.2  COMPLETION OF MILESTONE...........................................   36

   19.3  INVOICING.........................................................   36

20. PERFORMANCE BOND.......................................................   37

21. WARRANTIES.............................................................   38

   21.1  OWNERSHIP GUARANTEE...............................................   38

   21.2  QUALITY GUARANTEE.................................................   39

   21.3  REPAIR AND REPLACEMENT GUARANTEE..................................   39

   21.4  POWER OUTPUT GUARANTEE............................................   40
</TABLE>

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   21.5  ENERGY PRODUCTION GUARANTEE.......................................   40

   21.6  SPARE PARTS GUARANTEE.............................................   41

   21.7  LIMITATIONS ON GUARANTEES.........................................   41

22. CLIENT'S OBLIGATIONS...................................................   41

   22.1  ACCESS TO THE SITE AND PERMITS....................................   41

   22.2  INFORMATION.......................................................   41

   22.3  OTHER CLIENT OBLIGATIONS..........................................   41

23. LIABILITY..............................................................   42

24. FORCE MAJEURE..........................................................   43

25. CHANGES IN LEGISLATION.................................................   44

26. CLIENT'S AND CONTRACTOR'S REPRESENTATIVES, NOTICES.....................   44

27. ORGANISATION...........................................................   45

28. ASSIGNMENT.............................................................   46

28. TAXES AND EXPENSES.....................................................   46

   28.1. EXPENSES..........................................................   46

   28.2. TAXES.............................................................   46

29. CONFIDENTIALITY........................................................   47

30. TERMINATION OF THE CONTRACT............................................   49

31. DISPUTES...............................................................   50

32. CONTRACTUAL DOCUMENTS AND INTERPRETATION...............................   51

33. LANGUAGES..............................................................   51
</TABLE>

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ANNEXES

ANNEX I:    SCOPE OF AGREEMENT

ANNEX II:   SCHEDULE OF WORKS / CALENDAR

ANNEX III:  TECHNICAL SPECIFICATIONS OF EQUIPMENT

ANNEX IV:   MONTHLY REPORT - CONTENTS

ANNEX V:    SCHEDULE OF MILESTONE

ANNEX VI:   MODEL OF PROVISIONAL ACCEPTANCE CERTIFICATES

ANNEX VII:  MODEL OF DEFINITIVE ACCEPTANCE CERTIFICATE

ANNEX VIII: PERFORMANCE BOND

ANNEX IX:   TECHNICAL DOCUMENTATION

ANNEX X:    COMMISSIONING PROTOCOL

ANNEX XI:   LIST OF SUBCONTRACTORS

ANNEX XII:  LIST OF AUTHORIZATIONS AND PERMITS WHICH MUST BE OBTAINED BY THE
            CLIENT AND TIMELINE

ANNEX XIII: LOCATION OF THE PLANT

ANNEX XIV:  PREDICTED TECHNICAL PERFORMANCE

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Agreement for the Engineering, Procurement and Construction of a Wave Energy
Power Plant

Made and entered into in Madrid on July 27, 2006.

                                     BETWEEN

OF THE ONE PART,

IBERDROLA ENERGIAS MARINAS DE CANTABRIA, S.A., with registered offices in
Santander, Cantabria, calle Amos de Escalante, number 6, 2 B, represented by Mr.
Roberto Legaz Poignon with Spanish Identification Document number 72013299-T and
Mr. Rafael de Icaza de La Sota with Spanish Identification Document number
16.035.858-M, in their capacity as Directors, as accredited by means of the deed
of incorporation of the company signed on this date before the Notary of Madrid
Mr. Miguel Ruiz-Gallardon Garcia de la Rasilla (the "CLIENT").

AND, OF THE OTHE PART,

OCEAN POWER TECHNOLOGIES LIMITED, a company incorporated in England and Wales
Company No. 5225532) with its registered office at Warwick Innovation Centre,
Gallows Hill, Warwick CV34 6UW, United Kingdom, represented by Mr. Mark Draper,
with UK Passport number 029929083, in his capacity as Director of the company
(the "CONTRACTOR").

The CLIENT and the CONTRACTOR shall hereinafter be referred to collectively as
the "PARTIES", and individually as "PARTY".

                                     WHEREAS

I.   Whereas, IBERENOVA, OPT, SODERCAN and IDAE have entered in an agreement
     dated on July 2nd, 2004 in respect of a power plant harnessing Wave Energy
     in Cantabria at "Punta del Pescador", near Santona, Spain (the "SANTONA
     WAVE ENERGY AGREEMENT"). Through this agreement, the parties thereto wanted
     to assess the facility and the formalities as well as to confirm the
     viability of the project at the site ("PHASE 1") and set the rules for
     executing such a project of its viability and profitability were confirmed.

<PAGE>

II.  Whereas, TOTAL which was interested in participating in the Santona Wave
     Energy Agreement has joined the Santona Wave Energy Agreement by signing
     its modification on June 17th, 2005.

III. Whereas, in January 2006 the Parties have agreed that Phase 1 had been
     completed.

IV.  Whereas, Phase 2A of the Santona Wave Energy Project consists of the
     construction of a pilot plant of an initial power of one (01) 40 kW PB40ES
     PowerBuoy, its mooring system, the underwater substation and submarine
     cable both with capacity for energy evacuation of this PowerBuoy(TM) and
     other nine (9) 150kW PB150 PowerBuoys(TM) and all other ancillary equipment
     and services required to provide a complete installation of the
     PowerBuoy(TM) 1 x 40KW PB40ES as defined in Annex I.

V.   Whereas, the CLIENT resolved to sign this agreement with the CONTRACTOR,
     given that the latter declares to have the necessary skill, knowledge and
     experience for the required works to be executed in Phase 2A.

In virtue of the aforesaid, the Parties hereby execute this agreement for the
Engineering, Procurement and Construction of a Wave Energy Power Plant (the
"AGREEMENT"), which will be governed by the following,

                                     CLAUSES

1.   DEFINITIONS

1.1  For purposes of this Agreement, the following terms shall have the meaning
     set forth beside each of them (such meanings to be equally applicable to
     both the singular and plural forms of the terms defined).

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AGREEMENT                           Means this agreement together with all of
                                    its Annexes.

AGREED PRICE                        Means the compensation due by the CLIENT to
                                    the CONTRACTOR for the entire and
                                    satisfactory execution of the Works
                                    determined pursuant to Clause 18 of this
                                    Agreement that shall be paid to the
                                    CONTRACTOR according to the Schedule of
</TABLE>

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<TABLE>
<S>                                 <C>
                                    Milestones.

BUSINESS DAY                        Means any day that is not a Saturday, Sunday
                                    or holiday (whether a national, regional or
                                    local holiday) in Madrid and Cantabria.

CALENDAR                            Means the timeline for execution of the
                                    Works contained in Annex II.

CERTIFICATE OF COMPLETION OF        Means the certificate issued by the
COMMISSIONING                       Contractor's Representative which accredits
                                    that the Commissioning Period is finalized
                                    and the Plant is ready for Provisional
                                    Acceptance pursuant to Clause 9 of this
                                    Agreement.

CERTIFICATE OF COMPLETION OF        Means the certificate issued by the
INSTALLATION                        Contractor's Representative which accredits
                                    that the Plant is ready for commissioning.

CLIENT'S REPRESENTATIVE             Means the representative of the Client as
                                    designated in Clause 26 of this agreement.

COMMISSIONING PERIOD                Period commencing upon issue of the
                                    Certificate of Completion of Installation
                                    and finished at the signature of the
                                    Provisional Acceptance Certificate.

CONTRACTOR'S REPRESENTATIVE         Means the person appointed by the CONTRACTOR
                                    in this Agreement under Clause 27.1, who
                                    acts on behalf of the CONTRACTOR.

DAY                                 Means a calendar day.

DEFINITIVE ACCEPTANCE CERTIFICATE   Document to be signed by the Client and the
                                    Contractor after conclusion of Testing
                                    Period in accordance with Clause 10. A draft
                                    of this document is included in Annex VII.

EQUIPMENT                           Means the equipment and/or materials
                                    supplied by the
</TABLE>

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<TABLE>
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                                    CONTRACTOR and falling within the scope of
                                    this Agreement, as defined in Clause 3 and
                                    the related Annexes.

EURIBOR                             Means the interest rate applicable among the
                                    banks published in Brussels for the three
                                    months deposits in Euros as it is defined
                                    daily in the Telerate screen, page 248,
                                    11:00 morning time (central Europe time),
                                    the second banking day previous to the
                                    beginning of every period in which the
                                    Automatic Paying System is operative in
                                    Trans European Real Time TARGET. This rate
                                    shall be increased, as the case may be, with
                                    any costs, surcharges, taxes, etc, as duly
                                    supported by documents, which are referred
                                    to in the EURIBOR definition.

FINAL COMMISSIONING PROTOCOL        Means the Commissioning Protocol delivered
                                    by the CONTRACTOR to the CLIENT at least one
                                    month prior to the scheduled date for
                                    commencement of the commissioning.

FORCE MAJEURE                       Means any event or fact as described in
                                    Clause 24 of this Agreement.

IBERENOVA                           Means Iberdrola Energias Renovables II S.A.
                                    Sociedad Unipersonal, a company incorporated
                                    and validly existent under the laws of
                                    Spain; registered with the Madrid Commercial
                                    Registry, at Section 8, Page 285710; Tax
                                    Identification Number (C.I.F.) A-83028035,
                                    with registered office at Madrid, Calle
                                    Tomas Redondo, number 1.

IDAE                                Means Instituto para la Diversificacion y
                                    Ahorro de la Energia, S.A., public entity
                                    ascribed to the Ministry of
</TABLE>

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<TABLE>
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                                    Industry, Tourism and Commerce through the
                                    General Secretary of Energy, with domicile
                                    in Madrid, at Calle Madera number 8 and CIF
                                    number Q 2820009 E.

INDEPENDENT EXPERT                  Means the qualified specialist appointed by
                                    the School of Industrial Engineers of Madrid
                                    or the Institute of Mechanical Engineers or
                                    Electrical Engineers in London, U.K. upon
                                    request by either Party.

INSURANCE SCHEDULE                  Means the required policies that the
                                    CONTRACTOR must take out and maintain under
                                    this Agreement.

INTELLECTUAL AND INDUSTRIAL         Means all (i) trademarks, trade names,
PROPERTY                            Internet domain names, logos, symbols, all
                                    applications and registrations for the
                                    foregoing, and all goodwill associated
                                    therewith and symbolized thereby; (ii)
                                    patents, utility models, registrations,
                                    invention disclosures and applications
                                    therefore, including divisions,
                                    continuations, continuations-in-part and
                                    including renewals, extensions and reissues
                                    and all inventions and discoveries whether
                                    patentable or not; (iii) published and
                                    unpublished works of authorship, whether
                                    copyrightable or not (including databases
                                    and other compilations of information),
                                    Copyrights therein and thereto, and
                                    registrations and applications therefore,
                                    and all renewals, extensions, restorations
                                    and reversions thereof; and (iv) other
                                    industrial and intellectual property or
                                    proprietary rights; concerning the Plant and
                                    the PowerBuoy(TM) system.

KNOW HOW                            Means all the information, trade secrets,
                                    documents, technical data, technical
                                    knowledge, including processes, schematics,
                                    business methods, formulae, drawings,
                                    prototypes, models, designs, quality control
</TABLE>

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                                    systems, quality standards and
                                    specifications developed or acquired by the
                                    CONTRACTOR, presently or in the future,
                                    concerning the Plant and the PowerBuoy(TM)
                                    system, or its design, construction,
                                    commissioning, use, exploitation and
                                    assembling.

MAJOR DEFECTS                       Means such defects that could affect the
                                    production of energy by the Plant and/or the
                                    safety of the Plant and/or of the people
                                    working therein.

MILESTONE                           Means the relevant stages of progress of the
                                    Works as described under the Schedule of
                                    Milestones and Calendar.

MINOR DEFECTS                       Means such material defects that are not
                                    Major Defects.

NOTICE OF APPROVAL                  Means the document issued by the Client
                                    under Clause 19.2 (i) of this Agreement.

NOTICE OF COMPLETION                Means the communication sent by the
                                    Contractor to the Client under clause 19.2
                                    (i) which accredits the completion of a
                                    Milestone.

NOTICE OF PENDING WORKS             Means the document issued by the Client
                                    under Clause 19.2(ii) of this Agreement.

OPT                                 Means Ocean Power Technologies, Inc., a
                                    company incorporated and validly existent
                                    under the laws of New Jersey, USA; with
                                    registered office at 1590 Reed Road,
                                    Pennington, NJ, USA.

ORDER FOR CHANGE                    Means the document signed by both the Client
                                    and the Contractor for a given modification
                                    of the Works under clauses 11.1 or 11.2 of
                                    this Agreement.

PARTIES                             Means the Client and the Contractor jointly.
</TABLE>

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<TABLE>
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PARTY                               Means the Client or the Contractor, as the
                                    context may require.

PHASE 1                             Means Phase 1 of the Santona Wave Energy
                                    Project as defined in Recital 1 of this
                                    Agreement in which the parties to the
                                    Project have studied and decided about the
                                    viability of the Project at the Site.

PHASE 2A                            Means Phase 2A of the Santona Wave Energy
                                    Project as defined in Recital IV of this
                                    Agreement, consisting of the design,
                                    manufacture, factory tests, dispatch and
                                    unloading, ex works delivery, assembly and
                                    commissioning of the PowerBuoy(TM) 1 x 40kW
                                    PB40ES, its mooring system, the underwater
                                    substation and submarine cable both with
                                    capacity for energy evacuation of this
                                    PowerBuoy(TM) and other nine (9) 150kW PB150
                                    PowerBuoys(TM) and all other ancillary
                                    equipment and services required to provide a
                                    complete installation of the PowerBuoy(TM) 1
                                    x 40kW PB40ES. All as described in Annex 1.

PHASE 2B                            Means Phase 2B of the Santona Wave Energy
                                    Project consisting of the design,
                                    manufacture, factory tests, dispatch and
                                    unloading, ex-works delivery, assembly and
                                    commissioning of the nine PowerBuoys(TM) 9 x
                                    150kW PB150, their mooring systems,
                                    submarine cables and all other ancillary
                                    equipment and services required to provide a
                                    complete installation of the PowerBuoys(TM).

PLANT                               Means the wave power pilot plant
                                    PowerBuoy(TM) 1 x 40kW PB40ES, its mooring
                                    system as well as the underwater substation
                                    and submarine cable (both with capacity for
                                    energy evacuation of this PowerBuoy(TM) and
                                    other nine (9) 150kW PB150 PowerBuoys(TM).
</TABLE>

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POWERBUOY(TM)                       Means the Technology owned by the Contractor.

PRELIMINARY COMMISSIONING           Means the Commissioning Protocol attached to
PROTOCOL                            the Agreement as Annex X.

PROVISIONAL ACCEPTANCE              Document to be signed by the Client and the
CERTIFICATE OR PAC                  Contractor to put on record the satisfactory
                                    completion of the Commissioning Protocol,
                                    including all Minor Defects that the
                                    Contractor must remedy within the Testing
                                    Period. A draft of this Document is included
                                    in Annex VI.

SANTONA WAVE ENERGY AGREEMENT       Means the agreement signed on July 2, 2004
                                    by OPT, IBERENOVA, SODERCAN, and IDAE, and
                                    modified on June 17, 2005 to include TOTAL
                                    as a party.

SANTONA WAVE ENERGY PROJECT OR      Means the pilot project consisting of a
SWEP                                power plant harnessing wave energy with an
                                    initial installed capacity of 1.39 MW on the
                                    north coast of Spain based on the
                                    Technology.

SCHEDULE OF MILESTONES              Means the schedule describing the progress
                                    of the Works and the timeline for payment of
                                    the Agreed Price contained in Annex V.

SITE                                Means the place where the Plant will be
                                    installed located at the coast opposite the
                                    "Punta del Pescador" lighthouse in Santona,
                                    in the Cantabrian region in Spain, as
                                    specified in Annex XIII.

SODERCAN                            Means Sociedad para el Desarrollo Regional
                                    de Cantabria, S.A., a company incorporated
                                    and validly existent under the laws of Spain
                                    by virtue of its
</TABLE>

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<TABLE>
<S>                                 <C>
                                    incorporation deed granted on December 15,
                                    1984 before the Notary of Santander, Mr.
                                    Jose Antonio Olascoega, with number 1271 of
                                    his public protocol; registered with the
                                    Cantabria Commercial Registry, at Volume
                                    296, Book 101, Sheet 60 and Page S-1751; Tax
                                    Identification Number (C.I.F) A-3904457,
                                    with registered office at Santander, Avenida
                                    de Los Infantes, 32, "Quinta Labat".

SPV                                 Means the public limited company created by
                                    IBERENOVA, IDAE, OPT, SODERCAN and TOTAL for
                                    the construction and operation of the
                                    Santona Wave Project as agreed under the
                                    Santona Wave Energy Agreement.

SUBCONTRACTORS                      All firms or individuals contracted by the
                                    CONTRACTOR to do part of the Works
                                    contemplated in this Agreement.

TAXES                               Means any taxes, rates, special levies
                                    ("contribuciones especiales"), charges
                                    ("exacciones parafiscales") or any other
                                    encumbrance of tax nature, required by any
                                    administrative authority, including
                                    surcharges, interests and penalties.

TECHNICAL DOCUMENTATION             Means the documents, workshop plans,
                                    calculations and sketches listed in Annex IX
                                    of this Agreement.

TECHNOLOGY                          Means the technology for electricity
                                    generation harnessing the energy produced by
                                    the waves called PowerBuoy(TM) system owned
                                    by the CONTRACTOR. In particular, it means
                                    all the Know How and Intellectual and
                                    Industrial Property related to the
                                    PowerBuoy(TM) system, including the moorings
                                    and the
</TABLE>

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<TABLE>
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                                    underwater substation.

TESTING PERIOD                      Means [**] including [**], plus any
                                    extensions made hereunder. Period commencing
                                    upon signature of the Provisional Acceptance
                                    and finishing at the signature of the
                                    Definitive Acceptance Certificate.

TIME FOR COMPLETION                 Means the period of time for the
                                    Contractors' completing the assembly,
                                    installation and commissioning of the Plant
                                    according to this Agreement.

TOTAL                               Means Total Eolica S.A., a company
                                    incorporated and validly existent under the
                                    laws of Spain; registered with the La Coruna
                                    Commercial Registry, at Section 8, Page
                                    25547; Tax Identification Number (C.I.F)
                                    A-15745706, with registered office at
                                    Avenida Fernando de Casas Novoa, number 37,
                                    planta B, 3 degrees A.

WORKS                               Means all actions, work and services for the
                                    supply, construction and commissioning of
                                    the Plant described in Clause 3 of this
                                    Agreement.
</TABLE>

1.2  Other terms may be defined in other clauses of this Agreement.

2.   OBJECT

2.1  The object of this Agreement is the supply, construction and commissioning
     of the Plant, including the design, manufacture, factory tests, transport,
     dispatch and unloading, ex works delivery, civil works, assembly and
     commissioning and all other ancillary equipment and services required to
     provide a complete installation of the Plant, all as included in Phase 2A
     of the Santona Wave Energy Project and detailed in Annex I.

2.2  The CONTRACTOR undertakes to apply all reasonable efforts to complete the
     supply, construction and commissioning of the Plant within the Time for
     Completion as may be
<PAGE>

     adjusted according to the terms of this Agreement and the Calendar
     contained in Annex II.

2.3  The design of the equipment included in Phase 2A that will be used for
     Phase 2B will endeavour to comply also with technical requirements of Phase
     2B equipment.

2.4  The CONTRACTOR shall be responsible for transport of the Equipment to the
     Site and all related expenses, insurance and duties shall be for the
     account of the CONTRACTOR.

2.5  The Equipment supplied hereunder shall generally comply with the
     requirements set forth in Annex III.

2.6  In general, the Works shall be performed in accordance with the rules of
     good practice, with the utmost diligence, care and professionalism.

3.   SCOPE

3.1  The CONTRACTOR shall perform the Works and shall deliver the Equipment
     according to the Technical Documentation detailed in Annex IX.

3.2  The Parties expressly declare that this is an Turnkey Contract, which means
     that the CONTRACTOR will carry out all and any actions or services that may
     be necessary (although not expressly mentioned in the Agreement) for
     completion of the Works to meet the terms of stipulated herein and those
     attached in Annex II, and all applicable standards, regulations and codes,
     shall be deemed included within the scope of this Agreement, even though
     they may not have been expressly mentioned in this Agreement or Annexes
     hereto. Anything without which the Plant would not be in adequate condition
     for normal operation shall be deemed necessary.

3.3  The terminal points of the Plant are the following:

     -    Submarine cable: submarine cable at the entrance of the onshore
          substation or cable vault if required. Such onshore substation and/or
          cable vault to be supplied by the CLIENT, and no more than
          approximately [**] meters from high water level at the beach.

     -    SCADA System: up to and including the control panel, PLCs and monitor
          within the onshore substation.

<PAGE>

4. DOCUMENTATION

4.1  The CONTRACTOR shall deliver to the CLIENT the Technical Documentation
     listed in Annex IX, within the times and on the terms stipulated therein
     and according to this Clause.

4.2  Upon signing the Provisional Acceptance Certificate, the CONTRACTOR shall
     hand over the "as built" documents of the Equipment in accordance with
     Annex IX, and any other documentation as may be agreed between the Parties,
     all the documents generated during commissioning, including any
     modifications based on reasonable written comments made by the CLIENT and
     agreed by the CONTRACTOR on the Provisional Acceptance.

4.3  The CONTRACTOR shall keep at the disposal of the CLIENT a full set of the
     Technical Documentation by number, title, version and date of issue and all
     other documents required from the CONTRACTOR under this Agreement.

4.4  The CONTRACTOR shall bear all expenses related to the preparation of the
     Technical Documentation.

4.5  For the purposes of Clause 4.1 above, the CONTRACTOR shall deliver to the
     CLIENT a total of three (3) copies and a set on magnetic data carrier of
     the Technical Documentation, which shall be in Spanish or English. All
     technical translations shall be done by professional translators.

4.6  The CLIENT shall formally provide its approval or any reasonable comments
     to the Technical Documentation within [**] days of receiving the documents.
     If the CLIENT fails to respond without a reasonable justification within
     this period it shall be responsible for any damages or delays arising
     therefrom for the CONTRACTOR, who shall pursue with the Works that do not
     require such approval. The time limit for introducing any modifications in
     response to formal comments that may arise shall be agreed between the
     Parties, but may under no circumstances be more than a further [**] days.
     Approval, the insertion of modifications or lack of response shall not
     exempt the CONTRACTOR from its further obligations and liabilities under
     this Agreement.

5. INDUSTRIAL INTELLECTUAL PROPERTY

<PAGE>

5.1  The CONTRACTOR grants to the CLIENT, who accepts, free of charge, a
     non-exclusive and irrevocable license to use the Technology for (a) the
     construction and commissioning of the Plant by the CONTRACTOR; and (b) the
     future use and exploitation of the Plant subject to the terms of this
     Agreement. The CLIENT shall only use the Technology in connection with the
     Plant.

5.2  The CLIENT acknowledges and agrees that any and all rights to the
     Technology, whether copyrightable or patentable or not, are the exclusive
     property of the CONTRACTOR, or the CONTRACTOR has the right to use it and
     grant licenses, and this Agreement creates on the CLIENT no right on such
     Technology other than the license granted by this Agreement, and subject to
     the terms and restrictions contained hereunder.

5.3  The CONTRACTOR holds all Intellectual and Industrial Property over its own
     Technology.

5.4  The CLIENT, by virtue of this Agreement shall not acquire any rights over
     the trade marks, "know-how", business secrets, trade names, information,
     documentation or any other Intellectual and Industrial Property used or
     developed by the CONTRACTOR in relation to the Technology.

5.5  The CLIENT hereby assigns and agrees to assign to the CONTRACTOR entire
     right, title and interest in and to all inventions, improvements or
     discoveries (whether or not patentable) made, conceived or first reduced to
     practice by the CLIENT based on the Technology.

5.6  The owner of all Intellectual and Industrial Property and Know How over the
     Technology is and shall forever be the CONTRACTOR.

5.7  The CLIENT agrees to promptly disclose the inventions, improvements and
     discoveries specified hereinabove to the CONTRACTOR, and will assist in
     reasonable manner to obtain for the CONTRACTOR's own benefit patents
     thereon at the expense of CONTRACTOR. The CLIENT further agrees that the
     obligations and undertakings stated in this paragraph shall continue beyond
     the termination for any reason of this Agreement but if the CLIENT is
     called upon to render such assistance after such

<PAGE>

     termination, then it shall be entitled to a fair and reasonable fee in
     addition to reimbursement of any expenses incurred at the request of the
     CONTRACTOR.

6. INSPECTIONS AND TESTS

6.1  The CONTRACTOR shall allow the CLIENT to make such inspections, checks,
     tests and reports as the Client may consider necessary, during the
     manufacturing, assembly and testing phases, at the factories and workshops
     of both the Contractor and its suppliers and/or Subcontractors.

6.2  The CONTRACTOR will inform the CLIENT in writing with a prior notice of at
     least [**] Business Days, of the dates and places for inspections and tests
     and, particularly, of those that the CLIENT specifically requested.

6.3  The CLIENT must inform the CONTRACTOR at least [**] Business Days in
     advance of whether it will attend the inspections and tests. If the CLIENT
     is unable to attend, the Contractor will either proceed in his absence, or
     make reasonable effort to reschedule the test, in which case the CONTRACTOR
     may adjust the Calendar accordingly.

6.4  The CLIENT may establish minimum inspection requirements to check that the
     Equipment and/or Works conform to the applicable specifications to be
     agreed with the CONTRACTOR. Should the CLIENT confirm and the CONTRACTOR
     agree, during any inspection or test that the specifications or standards
     have not been met, the CLIENT may freely reject the Equipment and/or Work
     in question at no additional charge or expense and this shall not be deemed
     tantamount to acceptance by the CLIENT of any delay in the Time for
     Completion or alteration of the Agreed Price.

6.5  The inspections or tests by the CLIENT shall not release the CONTRACTOR
     from any of its obligations or liabilities under this Agreement nor shall
     they be deemed equivalent to acceptance of the Equipment thereof.

6.6  If any fault or defect is discovered during testing and/or inspection as
     contemplated in Clause 6.4, the CONTRACTOR shall be responsible for
     correcting the fault or defect prior to PAC.

<PAGE>

6.7  The CONTRACTOR shall confirm that the manufacturers of the Equipment comply
     with all the requirements of the Agreement and conform to good practices in
     design, engineering and manufacture.

7. ASSEMBLY AND INSTALLATION OF EQUIPMENT

7.1  Upon signature of this Agreement, the CONTRACTOR shall start each item of
     the Works according to the Calendar without the need for instruction from
     the CLIENT, except as outlined in Clause 7.2.

7.2  The Plant shall be installed at the Site once the CLIENT has given its
     written confirmation that the required permits and consents for
     installation have been obtained.

7.3  The CLIENT and the CONTRACTOR shall jointly inspect the Equipment
     immediately after its arrival to the dock at [**] or other reasonable place
     and issue a certificate signed by both, specifying the apparent condition
     of the Equipment and any actions that may be necessary to repair or replace
     forthwith any part damaged or lost during transport that may be detected
     during such inspection.

7.4  Inspections by the CLIENT shall not release the CONTRACTOR from any of its
     obligations and liabilities hereunder nor shall they imply acceptance of
     the Plant.

7.5  As soon as the CONTRACTOR considers the assembly and installation of the
     Plant complete, according to the terms of this Agreement, it shall issue a
     Certificate of Completion of Installation indicating that the Plant is
     ready for Commissioning.

8.   COMMISSIONING OF THE PLANT

8.1  PROTOCOL

During the commissioning of the Plant, the CLIENT shall appoint an overseer, who
shall check the correct application of the Commissioning Protocols. The
CONTRACTOR shall deliver the Final Commissioning Protocol to the CLIENT that
must contain at least the tests detailed in Annex X, at least [**] prior to the
scheduled date of commencement commissioning.

The CLIENT may request the CONTRACTOR [**], as may be [**] and [**]. Any [**]
that the CLIENT asks the CONTRACTOR [**].

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In Annex X is included a preliminary Commissioning Protocol.

Each of the actions included in the Commissioning Protocol carried out during
commissioning shall be recorded in the protocol or corresponding procedure,
dated and signed by the person effecting the action and the person responsible
for commissioning.

If any fault, failure or Major Defects, as defined in this Agreement are
detected in any of the Equipment, the CONTRACTOR shall be obliged to remedy the
problem during the Commissioning Period.

8.2  COMMISSIONING PERIOD

The proper functioning of the Plant shall be checked during this Commissioning
Period according to the Final Commissioning Protocol.

For finalising the Commissioning Period is required that the Plant will be in
operation for [**] producing energy measured at the electrical output from the
PowerBuoy.

Once the Commissioning Period is finalised the CONTRACTOR shall issue a
Certificate of Completion of Commissioning and shall notify the CLIENT
indicating that the Plant is ready for Provisional Acceptance.

9. PROVISIONAL ACCEPTANCE

9.1  Upon termination of the Commissioning Period, the CONTRACTOR shall notify
     the CLIENT in writing, indicating:

          a)   A date proposed by the CONTRACTOR for a joint visit with the
               CLIENT. The proposed date shall be at least [**] Business Days
               after the date of notification. If the proposed date is not
               convenient for the CLIENT, it may be postponed to a later date no
               more than [**] Business Days after the latest date indicated in
               the initial proposal.

          b)   The confirmation that the Commissioning Period has finalised
               satisfactorily.

          c)   The confirmation of delivery of all Technical Documentation under
               Clause 4.

<PAGE>

9.2  The Equipment, temporary installations and materials left over from the
     Works shall be removed by the CONTRACTOR after completing assembly, leaving
     the Site totally free and clear, as a prerequisite for signing of the
     corresponding PAC of the Plant.

9.3  During the joint visit, the Parties shall inspect the state of the
     Equipment and complete a check list, indicating any defects and/or
     irregularities detected and any pending Works. The CONTRACTOR shall remedy
     within the following [**] weeks at least those [**], after which the CLIENT
     and the CONTRACTOR shall proceed to do a new visit and complete a new check
     list with the [**] so the CLIENT could sign the PAC of the Plant and attach
     to it the list of pending matters.

9.4  If the Parties do not reach an agreement as to the existence and/or remedy
     of [**] and consequent obligation of issue of the PAC, any of them may
     entrust their divergence to an Independent Expert, who will decide on [**]
     days from its engagement and whose decision shall be final and binding for
     both Parties.

9.5  The Independent Expert will not be required and the PAC should be issued,
     if the competent authority from the industry regional department of
     Cantabria issues the definite start-up certificate to operate the Plant
     (acta de puesta en marcha definitiva).

9.6  The [**] of the Equipment shall be listed as [**] within the times agreed
     upon signing the PAC. If the [**] within the agreed times, the CLIENT may
     [**] itself or commission a third party to do so, for the [**] and without
     releasing the latter from its responsibilities.

9.7  If, for reasons beyond the control of the CONTRACTOR, it is not possible to
     effect the commissioning of the Plant, the Parties shall agree on how to
     proceed to obtain the PAC without jeopardizing the interests of the CLIENT.
     In any case, provided it is signed, the PAC would contain the corresponding
     reservations and the CONTRACTOR would undertake to do whatever has been
     established for the Commissioning Period as soon as the impeding obstacles
     have disappeared. This document shall indicate the effective date of
     beginning of the Testing Period for the purposes of the Definitive
     Acceptance of the Plant.

9.8  Upon signing the Provisional Acceptance Certificate ownership of the Plant
     and the Equipment object of this Agreement shall be transferred to the
     CLIENT. The

<PAGE>

     CONTRACTOR shall bear the risks of loss of or damage to the Plant and the
     Equipment up to the effective transfer of ownership, without prejudice to
     the other guarantees and liabilities of the CONTRACTOR hereunder. The
     Contractor will be responsible for the care and preservation of the Plant
     until its Provisional Acceptance.

10. DEFINITIVE ACCEPTANCE

10.1. Definitive Acceptance for the Plant shall be issued after the end of the
     Testing Period, provided that the pending [**] indicated in the PAC and any
     others detected during the Testing Period have been remedied and provided
     that the CONTRACTOR delivers the information required under Clauses 21.4
     and 21.5 to confirm the fulfillment of the guaranteed values included
     therein.

10.2. If the Parties do not reach an agreement as to the fulfillment of the
     above criteria and consequent obligation of issue of the DAC, any of them
     may entrust their divergence to an Independent Expert, who will decide on
     [**] days from its engagement and whose decision shall be final and binding
     for both Parties.

10.3. The CONTRACTOR shall deliver to the CLIENT an updated version of Annex XIV
     based on real data collected during the Testing Period. The CONTRACTOR
     shall deliver such information within [**] days following the Definitive
     Acceptance for the Plant.

11. MODIFICATIONS OF THE WORKS

11.1. MODIFICATIONS AT THE CLIENT'S REQUEST

11.1.1. The CLIENT may request the CONTRACTOR to undertake any type of changes
     or modifications of the Works subject to this clause.

11.1.2. Within the period of [**] Business Days of the reception of the CLIENT's
     request, the CONTRACTOR should prepare and provide the CLIENT with the
     following information:

     a)   A description of the necessary tasks in order to undertake the
          requested modifications;

     b)   The time period for its execution;

<PAGE>

     c)   The impact of these modifications, where appropriate, on the Calendar
          and the completion of the Milestone(s);

     d)   The consequent adjustment to the Agreed Price that will be required,
          if any.

11.1.3. Once both Parties agree in writing on all the above items, they will
     formalize the corresponding Order for Change that will be executed by the
     CONTRACTOR according to its terms.

11.1.4. When the CLIENT asks the CONTRACTOR for a change or modification of the
     Works and if the Parties do not reach an agreement as to any of the items
     of the Order for Change, any of them may entrust their divergence to an
     Independent Expert, who will decide on [**] days from its engagement and
     whose decision shall be final and binding for both Parties.

11.1.5. For the avoidance of doubt the Parties hereby acknowledge and accept
     that the changes or modifications to the Works shall not imply a reduction
     of more than [**]% of the scope of the Works as detained in Annex I.

11.2. MODIFICATIONS AT THE CONTRACTOR'S REQUEST

11.2.1. The CONTRACTOR may request the CLIENT to undertake any type of changes
     or modifications of the Works subject to this clause.

11.2.2. For such purposes, the CONTRACTOR will send the CLIENT a change proposal
     that will contain the items described in clause 11.1.2 a) to d) as well as
     an explanation of the need or convenience of the requested modification.

11.2.3. Once both Parties agree in writing on all the above items, they will
     formalize the corresponding Order for Change that will be executed by the
     CONTRACTOR according to its terms.

11.2.4. Should the change or modification requested not be approved by the
     CLIENT, the Works will be executed as initially forseen according to this
     Agreement. The lack of written agreement in a [**] days term will be
     considered as a rejection of the modification requested by the CONTRACTOR.

12. CALENDAR AND TIME FOR COMPLETION

<PAGE>

12.1 TIME FOR COMPLETION

The CONTRACTOR estimates that the assembly, installation and commissioning of
the Plant shall be completed within the Time for Completion according to the
Calendar.

Any changes to the Calendar that affect the Time for Completion must be approved
in writing by both the CONTRACTOR and the CLIENT, except as otherwise provided
under this Agreement.

The Parties accept and agreed that the Time for Completion is an estimation
prepared on the assumption that each Milestone will be performed at a given date
and time of the year, and that any delays in the performance of Works, Force
Majeure, obtaining of licences or supply of Equipment shall have an impact on
the following stages of the Calendar and on the whole Time for Completion which
may be more proportional to referred delay.

12.2 MONTHLY PROGRESS REPORTS

The CONTRACTOR shall submit monthly progress reports covering all aspects of the
Works. The scope of this report is described in Annex IV hereto.

12.3 MONITORING AND CONTROL MEETINGS

The CONTRACTOR's Representative shall hold weekly meetings with the CLIENT's
Representative (or the engineer appointed by the CLIENT to oversee the Works
done by the CONTRACTOR) to monitor and control the progress of the Works. These
meetings may be attended by the representatives of other suppliers or
Subcontractors. The CLIENT's Representative may attend accompanied by a
specialist, acting as the CLIENT's advisor. The CONTRACTOR's and CLIENT's
Representatives may agree that such weekly meetings may be held by telephone.

13. TEMPORARY SUSPENSION OF WORK

13.1 SUSPENSION BY THE CLIENT

The CLIENT may [**] order the CONTRACTOR to suspend all or part of the Works.
Any such orders shall be made in writing, indicating the part of the Works that
is to be suspended, the effective date of suspension and the expected date for
resuming Works. If the CLIENT orders the suspension of the Works on the grounds
of non-fulfillment by the CONTRACTOR of its obligations under this Agreement,
the latter shall not be entitled to any increase in the Agreed

<PAGE>

Price, nor shall the Time for Completion be increased, and the CLIENT shall be
entitled to financial compensation for the expenses incurred as a result of this
situation, subject to documentary evidence of those expenses and the CLIENT
shall be obliged to act diligently in order to mimimise such costs. If the
CLIENT order suspension of the Works without it being due to non-fulfillment by
the CONTRACTOR of its obligations under this Agreement, the CLIENT shall
reimburse the CONTRACTOR for any expenses incurred as a result of the
suspension, subject to documentary evidence thereof, and the CONTRACTOR shall be
obliged to act diligently in order to mimimise such costs and the Time for
Completion shall be extended in accordance with the duration of the suspension.

If the suspension required by the CLIENT lasts for more than four months, the
CONTRACTOR may request the CLIENT's permission to proceed. Such request is made
by written notice. If the permission is not granted within thirty (30) days, the
CONTRACTOR may by further written notice to the CLIENT terminate the Agreement.

13.2 SUSPENSION BY COURT OR ADMINISTRATIVE AUTHORITY

In the event of suspension, halting or total or partial cessation of the Work on
the Plant ordered by any judicial or administrative authority, or by either of
the Parties following instructions from any judicial or administrative
authority, the consequences of the delay, in financial terms and in the Calendar
and the Time for Completion, shall be borne by the Party responsible for the
obligation whose non-fulfillment or incorrect fulfillment gave rise to the court
or administrative action. If this suspension, halting or cessation is not
founded on the actions or omissions of either Party, the Completion Period shall
be extended by a period of time equal to the duration of the situation or such
longer time as may be reasonable in the circumstances and the Parties shall
agree on a fair solution regarding the effects on the contractual obligations of
each Party during the suspension. The CONTRACTOR undertakes to act diligently to
protect and maintain the Works if it has commenced, to avoid any loss or damage.

If the suspension ordered by any court or administrative authority is founded on
actions for which both Parties are responsible, the costs incurred thereby shall
be borne by both Parties in equal proportions.

<PAGE>

If the suspension ordered by any judicial or administrative authority, or by
either of the Parties following instruction from any judicial or administrative
authority, is prolonged for more than 4 months either Party may terminate this
Agreement.

13.3 SUSPENSION BY THE CONTRACTOR

The CONTRACTOR may totally or partially suspend the Works when the CLIENT is in
delay of its payment obligations under this Agreement and does not cure such
delay within the thirty (30) days following written demand from the CONTRACTOR
for such purpose. The CONTRACTOR undertakes to act diligently to protect and
maintain the Works if it has commenced, to avoid any loss or damage.

If any given suspension lasts for more than 60 (sixty) days, the CONTRACTOR may
terminate this Agreement by written notice to the CLIENT.

13.4 RECOMMENCEMENT OF WORK

When the CONTRACTOR receives instructions to resume the Works on the Plant after
any suspension contemplated in the preceding paragraphs, the CONTRACTOR shall
examine the Work affected by the suspension, remedying any defect or loss
produced during the suspension and informing the CLIENT thereof upon
recommencement of the Works. The costs that the CONTRACTOR incurs from examining
and remedying the Works will be added to the Agreed Price save if suspension was
due to non fulfillment by the CONTRACTOR or if the suspension is ordered by
court or administrative authority and the CONTRACTOR is deemed responsible for
this suspension.

14. OTHER OBLIGATIONS OF THE CONTRACTOR

14.1 CONTRACTOR'S MANPOWER

The Contractor should employ necessary, sufficient and suitable personnel for
the execution of the Works, and will be liable for the performance of such
personnel with regard to the work. Any personnel hired by the Contractor and,
where appropriate, by its Subcontractors, should have sufficient qualifications,
preparation and experience for the execution of the Works object of this
Agreement. The Contractor will be in charge of hiring all labour and their
payment.

There shall be no employment relationship whatsoever between the CONTRACTOR's
employees and the CLIENT. The CLIENT shall not be liable, not even collaterally,
for the

<PAGE>

employer's obligations of the CONTRACTOR, which shall be solely answerable to
any public authority, courts and its employees.

Consequently, the CONTRACTOR shall be exclusively liable for all the legal
requirements concerning these employees. In particular, all and any
contributions payable for its employees in strict compliance of the applicable
laws and regulations in Spain, compensation for accidents and other charges
established in the prevailing labour laws shall be payable by the CONTRACTOR.

The CONTRACTOR undertakes to prove, on the simple request by the CLIENT that it
complies strictly at all times with the prevailing labour and social security
laws and regulations.

The CONTRACTOR shall be obliged to provide, for its own account, all the means,
tools and instruments required for the Works.

The CONTRACTOR's Representative shall be responsible for the discipline,
organization, management, oversight and control of the CONTRACTOR's employees,
as well as for the oversight of the suppliers and Subcontractors and shall see
that the Works are done in adequate technical and safety conditions, informing
the CLIENT's representative of any irregularities or incidents that may occur.

14.2 HEALTH AND SAFETY

The CONTRACTOR shall comply with all prevailing administrative provisions
regarding health and safety during performance of the Works. The CONTRACTOR
shall see that its employees heed the prevailing legal provisions on health and
safety at work. The CONTRACTOR shall be exclusively liable for any fines or
other penalties that may be imposed for infringement of health and safety legal
provisions affecting the Works.

The expenses relating to the foregoing (fees, insurance and third-party
liability) shall be for the account of the CONTRACTOR, except those relating to
consultants, which shall be payable by the CLIENT.

If the CONTRACTOR is forced to replace any of the persons with legal functions
on this matter, it shall give the CLIENT prior notice, indicating the reasons
for such replacement, the curriculum of the proposed substitute and legal
authorization to perform the corresponding duties, and the CLIENT shall
authorize such substitution, if appropriate, within no more than [**] days.

<PAGE>

The Agreed Price set herein shall under no circumstances be raised by virtue of
the equipment, ancillary means, materials and working hours of the employees of
the CONTRACTOR or its Subcontractors, as the case may be, needed to secure
strict fulfillment of the Health and Safety Plan.

The CONTRACTOR shall send the CLIENT a copy of the health and safety plan for
installation of the Equipment and provide to the CLIENT the information on the
compliance with the labour risks prevention, in particular on who will perform
the legal functions on labour risks prevention and health and safety, [**]
before commencement of the installation of the Equipment.

The CLIENT may at any time carry out the inspections that it considers necessary
in order to check that the CONTRACTOR is complying with health and safety
requirements. The CLIENT will also have the ability to request the CONTRACTOR to
stop the Works if they are being carried out in dangerous and unhealthy
conditions that are in violation of the laws and regulations in force until such
problems are resolved.

The CONTRACTOR assumes full and total responsibility for the safety and health
of its workers and of the Subcontractors it may engage.

The CONTRACTOR shall maintain, at its own expense, all marking lights, fences
and safety measures considered necessary at the Site.

14.3 TRAINING

The CONTRACTOR shall provide the option to the CLIENT of adequate training in
the operation of the Equipment, for up to [**] people named by the CLIENT, at a
total cost of EUR. (E[**]) in addition to the Agreed Price. These people
shall have to sign a confidentiality commitment in similar terms to the ones
contained in Clause 29 as condition to receiving any such training. The training
programme, dates and place shall be agreed with the CLIENT.

14.4 COMPLIANCE WITH THE LAW

The CONTRACTOR shall comply with and require all persons, firms or companies
directly or indirectly employed or contracted by the CONTRACTOR for the Works to
comply with and strictly abide by the laws applicable to the execution of the
Works.

In pursuance of the Tax Act, no. 58/2003 of 17 December, s. 43.1.f), the
CONTRACTOR undertakes to provide the CLIENT with a specific certificate
indicating that it is up to date with

<PAGE>

the payment of its tax obligations, issued in the terms and in accordance with
the requirements stipulated therein and in the corresponding statutory
instruments.

14.5 ENVIRONMENTAL PROTECTION

The CONTRACTOR shall be responsible throughout the Works for continuous cleaning
of the roads, platforms and surrounding area of the Plant and the periodical
removal of any debris left over from installation of the Equipment.

The CONTRACTOR shall comply with the Environmental Impact Declaration or
equivalent assessment issued by Spanish authorities, if applicable, as well as
with the Environmental Supervision Plan ("Plan de Vigilancia Ambiental")
throughout the duration of the Works. The CONTRACTOR shall be responsible for
paying any fines that may be levied by the competent authorities when breaching
obligations in this regard. The CONTRACTOR shall be liable towards the CLIENT
for all damages caused to the environment by the CONTRACTOR and/or its
Subcontractors during the performance of the Works. It shall also be liable for
removing from the Site all toxic and hazard substances and waste generated by
the CONTRACTOR and its Subcontractors during the Works.

14.6 EQUIPMENT AND MATERIALS

The CONTRACTOR shall provide all the Equipment necessary to complete the Works
as described in Annex 1. All the Equipment shall, when brought on to the Site,
be exclusively used for the execution of the Works.

The CONTRACTOR shall be responsible for the care and security of the Equipment
until the transfer of ownership according to Clause 9.8.

All Equipments to be used in the Works shall be of the respective character,
quality or kind, and in any event shall be merchantable, new and of first class
being consistent with good utility practice. In addition, all such Equipments
shall be free from defects for their intended purposes.

14.7 REPLACEMENTS PARTS AND CONSUMABLES

The Contractor shall provide all parts, consumables, equipment and tools which
are necessary for the commissioning of the Plant during the Commencement Period.

<PAGE>

15. REGULATIONS AND OFFICIAL PROVISIONS CONCERNING EQUIPMENT, LICENCES AND
PERMITS.

15.1 The Equipment shall conform to the Regulations and Official Provisions in
     force when commissioning of the Plant is completed, including the design,
     building, mounting and installation of said Equipment, although the Agreed
     Price shall be adjusted to take account of any changes in legislation
     becoming effective between the date of signature of this Agreement and the
     date of completion of such commissioning.

15.2 On request by the CLIENT, the CONTRACTOR shall send the appropriate
     documents and certificates indicating conformity of the Equipment with such
     regulations and official provisions.

15.3 The CONTRACTOR shall provide such information as may be necessary for the
     CLIENT to prepare the required documents to obtain licences, permissions
     and authorizations required to build and operate the Plant, which shall be
     applied for by the CLIENT. The CLIENT shall file in the necessary
     applications in a well-ordered and diligent manner, without incurring
     unreasonable delays.

15.4 The CLIENT shall obtain and pay the costs, including all guarantees and
     bonds that may be required for, of all permissions, licences, registrations
     at public registries required from any local, regional and/or State
     authority for installation and operation on the Site of the Plant.

15.5 All guarantees and bonds required by those public authorities or any other
     official body in connection with the industrial plan of the CONTRACTOR
     shall be for the account of the CLIENT.

16. INSURANCE

16.1 CONTRACTOR'S INSURANCE

The CONTRACTOR shall take out and keep in full force and effect the insurance
cover specified below, as such coverage may reasonably be obtained in the
insurance marketplace, contracted with Insurers and authorized to operate in
Spain under applicable law, presenting the Insurance Certificates (together with
the relevant insurance contracts/policies) within one (1) month of commencing
the Works under this Agreement.
<PAGE>

     A)   LIABILITY INSURANCE

          General operating liability insurance, covering damage to property and
          persons and consequential damage caused to third parties through
          performance of the Work.

          The cover shall be complete, including:

          a.   General Liability,

          b.   Employers Liability (Patronal Liability),

          c.   Marine Liability (including damages to vessels and others),

          with a combined ceiling of no less than E5,000,000 per loss.

     B)   CONTRACTORS'/INSTALLERS' ALL RISKS INSURANCE

          On receiving notification to begin the Works the CONTRACTOR shall take
          out and keep in full force and effect a CONTRACTORS'/Installers' All
          Risks policy naming, as Additional Assured, the CLIENT and covering
          all the Works and Equipment relating to the Agreement (including
          provisional buildings and temporary site offices not included
          therein), and building equipment, tools, implements, parts and
          temporary storage.

          The coverage shall be taken out against "All Risks" of physical damage
          and losses, and including the cost of mounting and dismounting, caused
          by events not expressly excluded in the policy terms. Assessment and
          settlement shall be at Replacement-as-New Value, fully covering the
          total cost of the Supply and including also, but by no means limited
          to, the following supplementary cover:

     -    Perils of Nature (flooding, storm, etc.);

     -    Clearing and Cleaning expenses;

     -    Extraordinary Expenses (overtime and extra costs of repairs and urgent
          remittances);

     -    Temporary storage;

     -    Strikes, riots and civil commotions (SRCC);

     -    Pre-existing Assets;

     -    Waiver of early cancellation;

<PAGE>

     -    This policy shall be kept in force with the same cover from the time
          of notice to begin the Works or such other date as may be agreed
          between THE CLIENT and THE CONTRACTOR, up to the PAC of the Plant.

          The CONTRACTOR shall see that its Subcontractors keep insurance
          policies in force with the same terms of cover and subrogation as
          those required of the CONTRACTOR hereunder. The Subcontractors'
          policies shall include a waiver of the rights of subrogation in any
          claims against the CLIENT.

     C)   CARGO INSURANCE

          The CONTRACTOR shall take out and keep in full force and effect as
          from receiving notice to begin the Works or such other date as may be
          agreed between the CLIENT and the CONTRACTOR, up to the date of the
          PAC, an All Risks Cargo Insurance (Institute Cargo Clauses (A) and
          Institute Strike Clauses) to cover any losses or damages produced
          after leaving the original installations, during transit and
          intermediate stops and up to arrival at the destination, including
          loading and unloading. The sum insured shall be equal to and not in
          excess of the cost of the supplies, including the cost of freight and
          insurance.

     D)   OTHER INSURANCE

          (i)  Industrial Accidents. Such industrial accident insurance or
               social security cover, including disability or invalidity for
               work, as may be necessary under the applicable labour laws or
               agreements between the CONTRACTOR and its employees.

          (ii) Motor Vehicle Road Insurance. Insurance of motor vehicles,
               including both own and/or rented vehicles, in pursuance of the
               applicable legislation.

          (iii) Other mandatory insurance.

16.2 INSURANCE DOCUMENTS

All insurance contracts required under Clause 16.1 shall include the following:

     (a)  Waiver of Insurer's/Reinsurer's recourse of subrogation, if available,
          against the CLIENT, Financial Institution (if any), Contractors and
          Subcontractors, and their

<PAGE>

          Agents, Employees or Executives for their respective interests
          (Contractors Installers All risk and Cargo Insurance).

     (b)  All insurance required of the CONTRACTOR shall be considered primary
          in the absence of any other insurance, and shall act first, not
          contributing jointly with other insurance or self-insurance contracts
          that the CLIENT may have.

     (c)  The stipulation that, when there are numerous assured, any
          invalidating actions causing loss of the right to compensation
          produced through the action or omission of any one of them shall not
          jeopardize the right to compensation of the remaining Assured.

     (d)  All the policies shall contain a clause stipulating that they may only
          be cancelled, not renewed, invalidated or substantially modified after
          giving the CLIENT at least thirty (30) days' notice.

All deductibles applicable to the insurance required of the CONTRACTOR shall be
for the account of the CONTRACTOR.

The CONTRACTOR shall provide to the CLIENT the certificates or the copies of the
insurance policies taken by the CONTRACTOR in accordance with the requirements
above.

The required coverages hereunder shall in no way affect, or are they intended as
a limitation of CONTRACTOR's liability with respect to its performance of the
Work under this Agreement.

17.  SUBCONTRACTING

17.1. The CONTRACTOR may subcontract part of the Works hereunder to any of the
     firms and companies listed in Annex XI hereto, promptly notifying the
     CLIENT. Should the CONTRACTOR wish to modify the existing list or contract
     a Major Subcontractor not included therein (for the purposes of this
     Agreement a Major Subcontractor shall be a supplier, whose work contents or
     total value exceeds E[**]), it shall submit a written request to the CLIENT
     for written approval; the CLIENT reserves the right to turn down the choice
     of any Major Subcontractor for a justified reason that it must communicate
     to the CONTRACTOR within the [**] days following its request. If the CLIENT
     does not indicate its objection within [**] days, the CONTRACTOR may
     proceed as indicated in its original notification.

<PAGE>

     Under no circumstances may the CONTRACTOR subcontract the tasks of testing
     and commissioning or the Works management.

17.2. In the event of Subcontracting as indicated above, the CONTRACTOR
     undertakes to include a clause in the contracts it signs with its
     Subcontractors whereby they will waive any action against the CLIENT
     deriving from this Agreement or the Subcontracting Contract, or any
     subrogation in claims of the CONTRACTOR against the CLIENT.

17.3. In any case, the CONTRACTOR shall be responsible in the terms of Art. 1596
     and 1597 of the Civil Code for the performance of the Works by the
     Subcontractors and their employees.

17.4. Subcontracting shall not release the CONTRACTOR from any obligation or
     liability to the CLIENT hereunder. The CONTRACTOR shall always be liable
     for the performance of this Agreement.

17.5. Thus, notwithstanding any Subcontracting, THE CONTRACTOR shall be fully
     answerable to THE CLIENT for all work, services, materials, designs,
     documents and for the actions, defaults and negligence of each
     Subcontractor and its agents or employees, as if they had been performed or
     committed by the CONTRACTOR or its agents or employees. Nor shall the
     inclusion of a Subcontractor on the list set out in Annex XI or the
     approval of a Subcontractor by the CLIENT, or the Subcontracting made by
     the CONTRACTOR release the latter from any liability hereunder.

17.6. For the purposes contemplated in the Tax Act 58/2003 of 17 December, s.
     43.1.f), the CONTRACTOR undertakes to submit to the CLIENT a specific
     certificate indicating that the Subcontractors are up to date with the
     payment of their tax obligations, issued on the terms and with the
     requisites stipulated therein and in the corresponding statutory
     instruments.

18.  CONTRACT PRICE

18.1. The Agreed Price to be paid by the CLIENT to the CONTRACTOR for the Works
     as detailed in Annex II, there including all the parts, Equipments and
     Materials is Two Million and Six Hundred Sixty Two Thousand Five Hundred
     Eighty Three Euros (E2.662.583,00), excluding Value Added Tax (VAT).

<PAGE>

18.2. The Agreed Price also includes all national and local taxes, duties,
     whatsoever customs expenses, etc. relating to the Plant, except for Value
     Added Tax (VAT), or such other tax as may substitute VAT in the future,
     which shall be supported by the CLIENT.

18.3. The breakdown of the Agreed Price is the following:

<TABLE>
<CAPTION>
                                               COST (E)     % of Total
                                             ------------   ----------
<S>                                          <C>            <C>
1 PowerBuoy PB40ES                                   [**]      [**]
1 Underwater Substation                              [**]      [**]
1 Mooring system                                     [**]      [**]
SCADA System                                         [**]      [**]
Submarine cable and electrical connections           [**]      [**]
Deployment cost                                      [**]      [**]
PowerBuoy 1 xPB40                                    [**]
Underwater substation                                [**]
Submarine cable                                      [**]
Mooring system                                       [**]
Taxes/Import Duties                                  [**]      [**]
Letters of Credit                                    [**]      [**]
Site Survey work                                     [**]      [**]
ADCP (Acoustic Doppler Current Profiler)             [**]      [**]
Insurance costs                                      [**]      [**]
TOTAL                                        2.662.583,00       100%
</TABLE>

18.4. The Parties agree and accept that the Agreed Price was calculated on the
     basis of an estimation of the [**]. The Parties further agree that [**]
     will be supplied as required for the Works [**].

<PAGE>

18.5. In the event of any [**], the Parties agree as follows:

     (i)  The [**] shall bear any and all [**] duly supported and in written
          documents, up to a maximum amount of [**] euros (E[**]).

     (ii) The [**] shall bear any and all [**] in excess of [**] euros (E[**]),
          provided that if any of the concepts individually included in the
          table above [**] in excess of [**]% of the above indicated prices the
          CONTRACTOR will require CLIENT's prior written approval before the
          purchase of the Equipment, contracting the services or incurring in
          any expense not contemplated in the initial budget. The CONTRACTOR
          will give the CLIENT all the necessary information to support the
          reasons of the [**]. If the CLIENT does not give its approval to such
          [**], the CONTRACTOR may (a) [**] and pursue the Works, (b) look for
          other supplier to purchase the relevant Equipment or contracting the
          services or (c) terminate the Agreement.

18.6 In the event the costs do not reach the Agreed Price, the [**] will pay
     [**]. It will be agreed between the Parties how the money [**].

18.7 In order to enable the CLIENT to control the cost and expenses incurred by
     the CONTRACTOR regarding the different concepts of the table above the
     CONTRACTOR shall report the [**], to the CLIENT, on a monthly basis by
     delivery of the relevant documents supporting those [**] as well as [**].
     This monthly report will include also the [**].

18.8 Except for the [**] that will be constructed [**], the CONTRACTOR shall aim
     to purchase all the equipment to [**] or whose price was not competitive or
     whose quality was not acceptable. In this case the CONTRACTOR will require
     the Client written approval before the purchase of the Equipment. The
     CONTRACTOR will give the Client all necessary information to support the
     reasons of the subcontractor selection. The CONTRACTOR will keep the CLIENT
     informed about its contacts with [**] and the CLIENT will collaborate with
     the CONTRACTOR [**] and conditions so to allow the development of the Works
     according to the Calendar.

19.  TERMS OF PAYMENT AND BILLING

<PAGE>

19.1 SCHEDULE OF MILESTONE

The CONTRACTOR shall invoice the Agreed Price according to the Schedule of
Milestones that is attached hereto as Annex V. All payments shall be made at
[**] days invoice date, by cheque or bank transfer.

19.2 COMPLETION OF MILESTONE

Once the CONTRACTOR considers that a Milestone has been completed, it will
inform the CLIENT in writing (the "NOTICE OF COMPLETION"). Such notification
must be accompanied by the required elements to document completion of the
Milestone according to Annex V.

The CLIENT will have [**] Business Days from the date of Notice of Completion to
inspect the Works and confirm that the Milestone has been duly completed, in
which term it must serve the CONTRACTOR with one of the following notices:

     (i)  Notice of Approval: The CLIENT will confirm that the Milestone has
          been duly completed;

     (ii) Notice of Pending Works: The CLIENT will inform the CONTRACTOR of what
          actions to achieve the Milestone must be taken by the CONTRACTOR in
          order for the relevant Notice of Approval to be issued.

Failure of the CLIENT to send written notice as detailed in (i) or (ii) above
within the [**] Business Days following the Notice of Completion by the
Contractor will be deemed to be a Notice of Approval for all purposes under this
Agreement.

19.3 INVOICING

     The CONTRACTOR shall send the relevant invoice to the CLIENT once a Notice
     of Approval has been issued (or once a Notice of Approval is deemed to have
     been issued according to Clause 19.2).

20.  PERFORMANCE BOND/LETTER OF CREDIT

20.1 The CONTRACTOR shall deliver to the CLIENT a letter or credit of first
     requirement issued by a top ranking bank [**] against the payment of that
     same amount by the CLIENT to secure the performance of the Works (the
     "PERFORMANCE BOND"), as attached in Annex VIII. This Performance Bond shall
     be valid and effective without any

<PAGE>

     obligation by the Client to return it until the earlier of (i) date of
     signature of the PAC and payment of any liabilities deriving from this
     Agreement or (ii) the termination of this Agreement according to Clause 30.

20.2 The CONTRACTOR shall grant a letter of credit of the first requirement
     issued by a top ranking bank [**] against payment of the same amount upon
     performance of Milestone number 2. This letter of credit shall secure the
     supply of the equipment covered by that Milestone and shall be valid and
     effective until the earlier of (i) delivery of the respective equipment or
     (ii) termination of the Agreement.

20.3 The CONTRACTOR shall grant a letter of credit of the first requirement
     issued by a top ranking bank [**] against payment of the same amount upon
     performance of Milestone number 3. This letter of credit shall secure the
     supply of the equipment covered by that Milestone and shall be valid and
     effective until the earlier of (i) delivery of the respective equipment or
     (ii) termination of the Agreement.

20.4 The CONTRACTOR shall grant a letter of credit of the first requirement
     issued by a top ranking bank [**] against payment of the same amount upon
     performance of Milestone number 4. This letter of credit shall secure the
     supply of the equipment covered by that Milestone and shall be valid and
     effective until the earlier of (i) delivery of the respective equipment or
     (ii) termination of the Agreement.

20.5 The CONTRACTOR shall grant a letter of credit of the first requirement
     issued by a top ranking bank [**] against payment of the same amount upon
     performance of Milestone number 6. This letter of credit shall secure the
     supply of the equipment covered by that Milestone and shall be valid and
     effective until the earlier of (i) delivery of the respective equipment or
     (ii) termination of the Agreement.

20.6 In the event of total or partial enforcement of the Performance Bond, the
     CONTRACTOR shall restore the Performance Bond to its original value within
     no more than [**] calendar days after such enforcement. Otherwise, without
     prejudice to any other actions that may correspond to it by law, the CLIENT
     shall be entitled to suspend any payment it may have pending hereunder or
     any contracts made by virtue hereof.

21.  WARRANTIES

<PAGE>

The CONTRACTOR offers the following guarantees effective as from the PAC of the
Plant:

The remedies set forth is this Clause 21 are the sole and exclusive remedy of
the CLIENT with respect to the breach of the stipulated guarantees.

21.1 OWNERSHIP GUARANTEE

The CONTRACTOR represents and warrants that at the date of signature of the PAC:

     (i)  the Equipment comprising the Plant is fully and exclusively owned by
          the CONTRACTOR;

     (ii) the Equipment comprising the Plant is transferred to the CLIENT
          according to this Agreement free from charges, encumbrances,
          constraints on transfer or third-party rights; and

     (iii) the CONTRACTOR is authorised to transfer their full and exclusive
          ownership to the CLIENT.

This ownership guarantee shall be valid and enforceable against third party
claims throughout the limitation period established in the applicable law.

In the event of default, invalidity or uncertainty of these guarantees, the
CONTRACTOR shall defend the validity of the sale of the Equipment and hold the
CLIENT harmless from damages of whatsoever nature, including costs and expenses.

If there is any lien or encumbrance on any of the Equipment and it is not
imputable to the CLIENT, the CONTRACTOR must, as soon as possible, replace or
cancel that attachment, lien or encumbrance at its cost.

The CONTRACTOR represents and warrants to the CLIENT that all creations, plans,
drawings, specifications, documents, procedures, methods, products or inventions
supplied, prepared or made by the CONTRACTOR hereunder and the use of any of
them does not infringe any third-party rights. In the event of any claim or
action by a third party alleging infringement of any intellectual or industrial
property right, the CLIENT must notify the CONTRACTOR promptly and the
CONTRACTOR will carry out all the negotiations to settle the claim. At the
request of the CONTRACTOR, the CLIENT will provide all reasonable assistance to
the CONTRACTOR against the claim of the third party. In such case, the
CONTRACTOR shall hold the CLIENT harmless from all damages (including costs and
expenses) that may be produced and shall obtain

<PAGE>

for the CLIENT the right to use, or continue using, the Equipment. Delayed
performance of the Works due to this clause shall not release the CONTRACTOR
from any liabilities for delays or entitle it to raise the Agreed Price.

21.2 QUALITY GUARANTEE

The CONTRACTOR guarantees that the components of the Equipment comprising the
Plant shall comply with the standards required for normal operation of the Plant
during the term of the O&M Agreement.

If there is a breach of this Guarantee, the CONTRACTOR shall have to repair or
replace, [**] any such component on its account, [**], if required, after the
achievement of [**] that shall be borne by the CLIENT.

21.3 REPAIR AND REPLACEMENT GUARANTEE

The CONTRACTOR shall, during a period of [**] beginning with [**], except for
the [**] for which the Parties will endeavour to obtain a [**] guarantee in
which case the CONTRACTOR shall grant an equivalent guarantee to the CLIENT,
repair or replace, [**] all failures or defects in the Equipment comprising the
Plant elements found to have a faulty design, quality or operation as soon as
possible without any cost to the CLIENT. The cost of materials, labour and, in
general, all expenses incurred in total repair shall be for the account of the
CONTRACTOR, except the cost of retrieval from the Site and redeployment of
defective items, if required, after the achievement of [**] that shall be borne
by the CLIENT.

If the CONTRACTOR does not repair or replace in a reasonable period of time, the
CLIENT shall notify the CONTRACTOR, indicating a reasonable deadline for making
the repair or replacement. If the CONTRACTOR continues not fulfilling its
obligation after that time, the CLIENT shall be entitled to carry out the repair
for the account of the CONTRACTOR, which will be responsible for the direct
damage caused by this delay.

Correct and adequate repair by the CLIENT in the above circumstances shall not
release the CONTRACTOR from all its liabilities.

21.4 POWER OUTPUT GUARANTEE

The CONTRACTOR guarantees fulfillment of a Power Output of at least [**]% of
that predicted (according to the Theoretical Power Table contained in table 1 of
Annex XIV) during the Testing

<PAGE>

Period given the measured energy levels. Wave energy levels will be collected
and recorded for at least [**]% of the Testing Period by the dedicated [**] unit
at or near the Site, or, if the [**] fails to collect the required data for the
project, by extrapolating data from publicly available sources (e.g. RPE 2914,
2915, or Bilbao buoy), the latter being subject to approval by the CLIENT.
PowerBuoy output levels will be recorded for at least [**]% of the Testing
Period by the [**]. PowerBuoy output power, as measured with the meter
equipment. The proposed meter equipment with its auxiliary transformers would
have accuracy compliant with the [**] and have bi-directional measurement
capability with Ethernet communications. A [**] or equivalent meter shall be
installed at the low tension wire at the output from the PowerBuoy, will be
compared against the predicted level which is calculated using the collected
wave energy levels and the Theoretical Power Table contained in table 1 of Annex
XIV.

In the event of breach of this guarantee that results in the delay of the [**]
beyond the date included in Clause 30, the remedies set forth in Clause 30 shall
apply.

21.5 ENERGY PRODUCTION GUARANTEE

The CONTRACTOR guarantees fulfillment of an Energy Production of at least [**]%
of that predicted according to the Theoretical Power Table contained in table 1
of Annex XIV using the [**] in the method described in Clause 21.4.

In the event of breach of this guarantee that results in the delay of the [**]
beyond the date included in Clause 30, the remedies set forth in Clause 30 shall
apply.

21.6 SPARE PARTS GUARANTEE

The CONTRACTOR guarantees the existence of spare parts [**] for any component of
the Equipment and undertakes to offer the CLIENT their availability for supply
during the term of the Testing Period until [**] is achieved or this Agreement
is terminated.

21.7 LIMITATIONS ON GUARANTEES

The CONTRACTOR does not guarantee the consequences arising from the CLIENT's
failure to observe the instructions contained in the operating and maintenance
manuals, unless it is the CONTRACTOR that is responsible for the operation and
maintenance of the Plant, nor does it guarantee the consequences of normal wear
and tear or corrosion, from external phenomena, from abnormal or negligent use,
nor those arising from any repairs or modifications made

<PAGE>

without prior approval of the CONTRACTOR, except when they have been made by
virtue of default by the CONTRACTOR of its obligation to repair within the times
established in Clause 21.3.

22.  CLIENT'S OBLIGATIONS

The CLIENT shall, without prejudice to the other obligations stipulated in this
Agreement, comply with the obligations established in this Clause.

22.1 ACCESS TO THE SITE AND PERMITS

The CLIENT shall ensure that the CONTRACTOR has full, unconditional and free
access to and within the Site, allowing the CONTRACTOR undisturbed and
unhindered access to each part of the Plant, at all times and without prior
notice, and obtaining all permissions and licenses that might be required, in
due time, for the purpose of fulfilling the CONTRACTOR's obligations under this
Agreement.

The CLIENT shall apply for all permits, consents and licenses required to
install and operate the Plant as listed in Annex XII. The CLIENT shall apply
simultaneously for the granting of an authorisation by the coastal authority for
the occupation of the necessary coastal public domain for temporary testing (the
"TEMPORARY PERMIT") as well as for all permits needed for electricity production
(including but not limited to the authorisations of installation and operation
of the Plant (including connection facilities) and the coastal concession to
occupy the necessary public domain in a long term basis with fixed -not
moveable- infrastructures) for Phase 2 A and 2 B (the "FULL PERMIT").

22.2 INFORMATION

The CLIENT shall facilitate, in terms envisaged in this Contract, any
information and documentation necessary for the undertaking of the various
activities and shall notify any situation the CLIENT knows that could alter the
normal execution of the Agreement.

22.3 OTHER CLIENT OBLIGATIONS

The CLIENT shall be responsible for the following (either directly or by causing
the performance by the relevant parties to the Santona Wave Energy Agreement):

<PAGE>

     a)   Procurement and installation of the cable vault and onshore cable to
          connect the cable vault to the onshore substation, if required.

     b)   Procurement and installation (and payment) of the onshore substation
          equipment including termination of onshore cable from the cable vault
          to onshore substation.

     c)   Grid connection from onshore substation to the local utility grid.

     d)   Land purchase costs and/or any wayleave or easement payments.

     e)   Upgrade of the onshore [**] transmission line to make it suitable for
          a 1.39 MW generation facility.

     f)   All site connections for electric ties, telephone and [**].

     g)   Expeditious approval of major Subcontractors according to Clause 17.

23.  LIABILITY

23.1 Each Party shall be liable for those direct damages that it causes to the
     other Party as a consequence of default of its obligations under this
     Agreement. The Parties expressly agree that the so-called indirect losses
     or indirect damages, including loss of profit, loss of production and
     consequential loss, shall not be enforceable.

23.2 In any event, the CONTRACTOR's liability to the CLIENT under this Agreement
     shall be limited to a maximum amount equal to the Agreed Price and the
     CLIENT's liability to the CONTRACTOR under this Agreement shall be limited
     to a maximum amount equal to the Agreed Price increased by interest at
     EURIBOR at 3 months plus 2%.

23.3 The CONTRACTOR shall hold the CLIENT harmless from all and any claims that
     may derive from default by the CONTRACTOR of its obligations under this
     Agreement regarding occupational hazard prevention or the environment,
     taxes or safety and hygiene.

23.4 The CONTRACTOR shall be solely liable for fulfillment of all legal
     obligations, concerning employment, social security, safety and hygiene at
     work, occupational hazard prevention to its employees and Subcontractors.

23.5 The Parties likewise agree that any compensation that one of the Parties
     receives as beneficiary from any insurance policy, will be deducted from
     the corresponding claim for

<PAGE>

     damages or, inn case such a compensation maintains the Party in question
     harmless regarding the damages suffered, it will prevent such Party from
     claiming damages.

24.  FORCE MAJEURE

24.1 The Parties shall be released from their obligations hereunder when
     performance is made impossible or unreasonably cumbersome due to an event
     or fact external to the Parties, unforeseeable and unavoidable and beyond
     their control ("Acts of God or Force Majeure"), provided that: (i) the Acts
     of God or Force Majeure are not entirely or partially the result of a
     default, omission or negligence by the Party claiming exoneration, or, in
     the case of the CONTRACTOR, by one of its Subcontractors; (ii) the Party
     claiming exoneration shall notify the other Party of the act of God or
     force majeure as soon as possible; and (iii) the Party claiming exoneration
     continuously makes every reasonable endeavour to minimise the effects of
     that cause of force majeure, keeping any delay in the Works and limiting
     damages to the Plant to a minimum. For the purpose of this Contract, Acts
     of God or Force Majeure shall be deemed to include the following
     situations, in addition to those contemplated in the Spanish Civil Code,
     Art. 1105:

     a)   Those natural phenomena with catastrophic effects (for example,
          earthquakes, heavy storms, tidal waves, floods (whether large or
          small), volcanic eruptions, movements of the earth, coastal storms and
          the like, or Torrential rain, snow or ice making access to the Site
          impossible or very difficult.

     b)   Riot, civil commotion, strikes, lockouts or other industrial disputes,
          save when only the employees of the CONTRACTOR or its Subcontractor
          are affected.

     c)   Landslide, flooding, fire, electric discharge, charge induced by
          electric discharge, explosions.

     d)   Revolt, or popular uprising, acts of war, Actions or omissions by the
          government or governmental agency (national, autonomous or local) or
          public authorities or their representatives.

     e)   Acts of terrorism or sabotage.

24.2 In the event of delay caused by force majeure, the deadlines stipulated in
     the Calendar shall be extended for a time equal to the duration of the
     cause of force majeure, or if it is

<PAGE>

     not possible to restore normal circumstances immediately upon cessation of
     the cause of force majeure, for whatever time may be reasonably necessary,
     as previously agreed between the Parties, which shall be obliged to fulfill
     all other obligations not affected by the circumstance in question. The
     costs incurred in repair, replacement or adjustment of elements damaged
     through causes of force majeure shall be borne by the Party bearing the
     risk of the elements in question at the time of the force majeure. Either
     Party may terminate this Agreement if Works are suspended for acts of God
     or force majeure for an uninterrupted period of more than six (6) months.
     All Works completed shall be settled upon termination by the Contract.

25.  CHANGES IN LEGISLATION

25.1 If any binding legislation is passed or amended after execution of this
     Contract and up to Commissioning of the Plant, the CONTRACTOR shall make
     the necessary technical changes at each of the affected Equipment and
     Materials at a competitive price, as agreed with the CLIENT. This
     modification of the Agreed Price and Calendar shall only be required if (i)
     the changes in question require substantial modifications to the design or
     performance of the Works; and (ii) the CONTRACTOR has notified the CLIENT
     of the existence of the change and sent a quote within [**] months
     following entry into force of the legal provision containing said change.

25.2 The Parties agree that a reduction in the number of working hours shall
     under no circumstances be considered a change in legislation for the
     purposes of this Agreement, in which case the CONTRACTOR shall assign such
     manpower to the works as may be necessary to fulfil the agreement within
     the Agreed Price and Time for Completion.

26.  CLIENT'S AND CONTRACTOR'S REPRESENTATIVES. NOTICES

26.1 Mrs. Cristina Heredero Bueno is named representative of the CLIENT.

26.2 Mr. Mark Draper is named representative of the CONTRACTOR.

26.3 The CONTRACTOR's representative shall coordinate the tasks of the overall
     project, being responsible, among others, for the following:

     a)   Acting as liaison with the CLIENT's representative.
<PAGE>

     b)   Checking the validity of the documentation delivered to the CLIENT, to
          ensure fulfillment of the objectives pursued under the Contract.

     c)   Sending the CLIENT all contractual communications and monthly reports
          on performance of the Works as from the date of signature of this
          Agreement.

26.4 The CLIENT's representative shall be responsible, among others, for the
     following:

     a)   Acting as liaison with the CONTRACTOR's representative transmitting
          the CLIENT's instructions and receiving notification from the
          CONTRACTOR.

     b)   Monitoring and checking the correct development and execution of the
          Works.

26.5 The Parties indicate the following addresses and contracts for all Notices
     to be made hereunder:

     THE CONTRACTOR                        THE CLIENT
     Address: Warwick Innovation Centre    Address: Tomas Redondo, 1 28033
     Gallows Hill, Warwick                 Madrid, Spain
     CV34 6 UW, UK
     Telephone: +44 1926 623371            Telephone: +34 91 784 2598
     Fax: +44 1926 408190                  Fax: +34 91 784 3704
     Contact: Mark Draper                  Contact: Cristina Heredero Bueno

26.6 All notices and other communications between the representatives shall be
     made in writing by a means allowing evidence of receipt. This
     notwithstanding, notification by fax or e-mail shall be considered validly
     made provided the other Party acknowledges receipt. In the event of
     unforeseen circumstances during performance of the Agreement, the CLIENT
     shall be informed within no more than twenty-four (24) hours, firstly by
     telephone and subsequently by any of the above-mentioned means.

27.  ORGANISATION

     Within [**] days after the date of signature of this Agreement, the
     CONTRACTOR shall submit to the CLIENT for approval an organisation chart
     indicating the name of individuals responsible for the Works. The number,
     field of expertise and professional qualifications of these people shall be
     adequate for performance of this Agreement.

<PAGE>

     After approval of this organisation, no changes may be made to the project
     manager, the site manager or the accident prevention officer without
     written authorisation from the CLIENT, such authorization cannot be
     unreasonably withheld. Should it become obvious that the existing
     organisation is not adequate or sufficient to guarantee fulfilment of its
     obligations, the CONTRACTOR shall, upon indication by the CLIENT, address
     the problem and if necessary make any changes in its organisation.

     The organisation shall be headed by the person nominated by the
     CONTRACTOR's Representative as its representative for dealings with the
     CLIENT throughout the duration of the Work.

28.  ASSIGNMENT

28.1 No Party may assign its rights and obligations hereunder to a third party,
     without prior written authorisation from the other Party. This
     authorisation shall not be necessary, mere notification being sufficient,
     for transfers within its group of companies, as defined in the Commercial
     Code Art. 42.

28.2 The CLIENT may assign all or part of its rights hereunder to any financial
     institution without written authorisation from the CONTRACTOR, as surety
     for payment of the financing obtained by the CLIENT, on one occasion or by
     virtue of several successive contracts.

29.  TAXES AND EXPENSES

29.1 EXPENSES

     Each Party shall pay the costs and expenses (including fees of agents,
     representatives, advisers) incurred in the preparation, negotiation and
     fulfillment of this Contract.

29.2 TAXES

29.2.1 The [**] undertakes to pay all taxes, rates, surcharges, contributions,
     excise tax, customs duties and, in general, all and any state or local
     direct or indirect tax levied under the Spanish tax laws on the
     manufacture, supply, service, sale, installation or whatsoever other
     services provided by the CONTRACTOR hereunder. The [**] shall also pay all
     taxes, rates, duties and, in general, all and any tax or expense deriving
     from the importing of goods or services made directly with the CONTRACTOR
     for inclusion in its Supply.

<PAGE>

29.2.2 The [**] undertakes to pay the VAT, or whatsoever other indirect tax of a
     similar nature that may be established to substitute VAT during the
     effective term of this contract, levied on the deliveries of goods and
     provision of services by the CONTRACTOR to the CLIENT as a result of the
     Works contemplated herein. The [**] shall also pay all taxes, charges,
     rate, encumbrances or royalties incurred in connection with the
     authorisations, permissions or licences to be obtained by the CLIENT and
     the Taxes on building, installation and Works.

29.2.3 With a view to optimising the tax charge levied on the deliveries of
     goods and services hereunder, each Party undertakes to provide the other,
     in due time and form, with any documents that may be necessary or
     recommendable to guarantee the best rating of the payments to be made. In
     particular, with regard to the provision of services, for the possible
     application of double taxation agreements on income tax, a certificate will
     be required, issued by the tax authorities in the corresponding country,
     confirming the residence of the provider of the service for tax purposes.

30.  CONFIDENTIALITY

30.1 Either Party must obtain written approval from the other Party before
     publishing notices, announcements or photographs of whatsoever nature
     concerning the Works or the Plant object of this Agreement, except where
     disclosures are required by law, regulation, stock exchange rules or the
     like. Such authorisation should not be unreasonably withheld.

30.2 The Parties undertake to maintain the utmost confidentiality in respect of,
     the negotiations among them prior to and during the effective period
     hereof, the documents exchanged in connection with those negotiations and
     any information whatsoever received as a result thereof.

30.3 All Technology, Technical Documentation, commercial terms of this
     Agreement, technical information, trade secrets or Know-How revealed
     hereunder, and their very existence (hereinafter "CONFIDENTIAL
     INFORMATION") shall be kept strictly confidential and shall not be
     disclosed by the receiving Party, unless with the prior written consent of
     the Party to which it belongs, which consent shall not be withheld if
     disclosure is required under applicable law.

<PAGE>

30.4 The Confidential Information shall be treated confidentially by the Parties
     and shall not be disclosed by the party receiving it or put to any use
     other than that contemplated herein without the prior consent of the Party
     to which it belongs. In this regard, the CLIENT hereby agree that unless
     CONTRACTOR has granted written permission, it will not build, or have any
     third party build, either directly or indirectly though a company
     controlled thereby, any wave power stations that are based on the
     Technology. This obligation will be in force during [**] years from the
     date hereof unless the CONTRACTOR or its successors or assignees (i) cease
     doing business on a permanent basis, as a result of bankruptcy,
     liquidation, close-up or other causes or (ii) are restrained for any other
     reasons to authorise the use of such Technology.

30.5 In relation to the above-mentioned obligations, the Parties undertake to,
     in particular, adopt such measures as may be necessary to prevent third
     parties from gaining unauthorised access to the Confidential Information
     and to limit access to the Confidential Information to authorised employees
     who need it to be able to fulfill the Agreement, binding such employees to
     the same confidentiality obligations.

30.6 This confidentiality obligation shall not be applicable to any information
     accessible to the public other than through default of the confidentiality
     obligation by the receiving Party; or that has been published prior to the
     date of this Agreement; or that the receiving Party already had and which
     is not subject to any confidentiality agreement between the Parties,
     provided that the other Party has been duly informed at the time of its
     communication; or that is received through third parties without
     restrictions and does not imply default of the Agreement; or that is
     independently developed by the receiving Party.

30.7 The Parties agree that any company of the group of companies of each of the
     Parties, and any employee and consultant of such companies, will be
     considered as third party for the purposes of the confidentiality
     obligations above-stated. Therefore, disclose of the Confidential
     Information to third parties before-mentioned will require the approval of
     the CONTRACTOR.

<PAGE>

30.8 Upon termination of this Agreement, the CLIENT will exercise reasonable
     efforts to return all Confidential Information received in tangible form
     and all copies thereof to the CONTRACTOR, except for the Technical
     Documentation.

31.  TERMINATION OF THE CONTRACT

31.1 TERMINATION BY THE CLIENT:

     The CLIENT may termination this Agreement if:

(i)  The CONTRACTOR interrupts the execution of the Works, without a justified
     cause for a term greater than one hundred eighty (180) days.

     In this event, the CLIENT will grant the CONTRACTOR a term of thirty (30)
     days for remedying the breach of the Agreement. If the CONTRACTOR does not
     remedy the relevant breach within the thirty (30) days term, the CLIENT
     shall be entitled to terminate the Agreement by written notice to the
     CONTRACTOR and to enforce the Performance Bond provided by the CONTRACTOR.

(ii) The Definitive Acceptance of the Plant is not achieved on December 31, 2009
     for reasonable attributable to the CONTRACTOR. The Parties agree that if
     there is a delay in the licensing of the Plant in relation to the foreseen
     dates (Works License is forecast to be obtained on August 1, 2007) for the
     obtaining of the permits as contained in the Calendar, this date shall be
     delayed in accordance.

     In this event, the CLIENT shall be entitled to terminate the Agreement by
     written notice to the CONTRACTOR and the CONTRACTOR shall not be entitled
     to the payment of the non achieved Milestones. The CLIENT shall immediately
     return the Performance Bond provided by the CONTRACTOR.

(iii) In addition to the above any of the Parties may terminate this Agreement
     upon a very serious and repeated breach by the other Party of a major
     obligation of this Agreement that was notified to the defaulting Party and
     was not remedied within 30 days from the above mentioned notification.

31.2 TERMINATION BY THE CONTRACTOR:

     The CONTRACTOR may terminate this Agreement if:

<PAGE>

(i)  The CLIENT delays any payments for a term greater than sixty (60) days
     after the date that a payment should have been made under this Agreement
     and the payment has been requested in writing to the CLIENT. In this event,
     the CONTRACTOR will grant the CLIENT a term of thirty (30) days for
     remedying the breach of the Agreement. If the CLIENT does not remedy the
     relevant breach within the thirty (30) days term, the CONTRACTOR shall be
     entitled to terminate the Agreement by written notice to the CLIENT without
     prejudice to its right to claim for interest any amounts due at EURIBOR at
     3 months plus 2%.

     For clarification purposes, if the CONTRACTOR has suspended the Agreement
     according to clause 13.3 and the suspension has lasted more than sixty (60)
     days, it may immediately terminate this Agreement by written notice to
     CLIENT and claim interest on the amounts due at EURIBOR at 3 months plus
     2%.

(ii) The Definitive Acceptance of the Plant is not achieved on December 31, 2009
     for reasons attributable to the CLIENT.

     In this event, the CONTRACTOR shall be entitled to terminate the Agreement
     by written notice to the CLIENT. The CLIENT must immediately return the
     Performance Bond provided by the CONTRACTOR.

(iii) In addition to the above any of the Parties may terminate this Agreement
     upon a very serious and repeated breach by the other Party of a major
     obligation of this Agreement that was notified to the defaulting Party and
     was not remedied within 30 days from the above mentioned modification.

31.3 EFFECTS OF TERMINATION

     Upon termination of this Agreement based on any of the foregoing causes,
     the CONTRACTOR shall transfer ownership of the Equipment delivered or
     installed to the CLIENT if that has not already occurred, together with
     their warranties from the suppliers, and the CLIENT must immediately pay
     the CONTRACTOR all invoices pending payment, as well as the value of the
     Works and Equipment supplied, delivered or installed prior to termination,
     not yet invoiced.

<PAGE>

     No further remedies, actions, penalties or damages shall be available to
     the Parties apart from the ones specified in this Clause for each cause for
     termination.

31.4 SURVIVABILITY OF CONFIDENTIALITY

     The confidentiality obligations will survive this Agreement in the event of
     termination according to clause 29.4.

32.  DISPUTES

32.1 Any disputes between the Parties in connection with this Contract and, in
     particular, concerning its interpretation, validity, compliance and
     termination (including the validity and compliance with this Clause) shall
     be submitted to arbitration, that shall be settled by a bench of three
     arbitrators following the rules about Conciliation and Arbitration of the
     International Chamber of Commerce.

32.2 The arbitration board will be nominated by the President of the
     International Chamber of Commerce.

32.3 The seat of arbitration shall be Madrid (Spain). The parties agree that the
     language of the arbitration, including oral hearings, written evidence and
     correspondence, shall be Spanish/English.

32.4 The arbitration award must be pronounced by the bench of arbitrators before
     six months from the moment the last of the arbitrors accepted his office.
     This time limit could only be extended by agreement between the parties
     notified to the arbitrors before the closing date.

32.5 The parties enter into a mutual engagement to serve the arbitral award as
     soon as it is notified to them.

32.6 This Contract shall be governed by the laws of Spain.

33.  CONTRACTUAL DOCUMENTS AND INTERPRETATION

33.1 The Parties by mutual agreement will attempt to resolve the questions and
     differences that arise from interpretation of this Contract and from
     performance of the activities subject hereto.

<PAGE>

33.2 To resolve any differences that may arise between the body of this Contract
     and its Annexes, the body of this Contract will always prevail. The
     differences that may arise between documents comprising this Contract will
     be resolved giving priority to each of those documents in accordance with
     the following order of priority:

          1.   The body of the Contract;

          2.   The Annexes to the Contract

34   LANGUAGES

     All documentation and correspondence that has to be prepared by the Parties
     will be drafted in English. Any documents required by the Spanish
     authorities shall be written in Spanish, unless accepted in English.

     IN WITNESS WHEREOF, this Agreement is signed in two originals, both to the
     same effect, at the place and date first above mentioned.

     /s/ Raphael de Ilata                  [signed illegible]
     -------------------------------       -------------------------------------
     THE CLIENT                            THE CONTRACTOR

<PAGE>

                                     ANNEX I

                                 SCOPE OF SUPPLY

<PAGE>

                                     ANNEX I
                                 SCOPE OF SUPPLY

EQUIPMENT AND SERVICES PROVIDED

1.0 BACKGROUND

The objective of the Santona Wave Energy Project (SWEP) is to install and
operate a 1.39 MW pilot wave powered electrical generating system located off
the northern coast of Spain. The SWEP project consists of several phases. Phase
1 (now complete) consisted of project scoping, planning and design. Phase 2A
consists of design modification, fabrication, and installation of a 40 kW
capacity PowerBuoy. Further phases will consist of design modification,
construction, and installation of multiple, PB-150 PowerBuoys.

2.0 SCOPE

This document describes the scope of supply that will be provided by Ocean Power
Technonologies, Ltd., (OPT) for Phase 2A of the SWEP Project. Key areas of work
are summarized as follows:

Project Management

Site Work
[**]

Design Adaptation for Chosen Site
[**]

Material Procurement, Manufacture, Assembly and Test
[**]

Site Preparation
[**]

Installation
[**]

Commissioning

3.0 WORK DESCRIPTION

3.1 PROJECT MANAGEMENT

OPT shall provide project management for the complete project. Key
responsibilities of the project management function are [**]. The project
management function shall also be responsible for the [**].

3.2 SITE WORK

<PAGE>

3.2.1 [**]

A [**] of the [**] for the PB40ES shall be conducted. Additional detailed
surveys shall be conducted to determine [**] to the seabed.

3.2.2 [**]

Necessary [**] shall be conducted to [**] in order to determine required [**].

3.2.3 [**]

An [**] will be deployed at the site in order to measure the [**] to the
PowerBuoy system. OPT will carry-out [**] of wave date from the [**].

3.3  DESIGN ADAPTATION FOR CHOSEN SITE

3.3.1 [**]

[**]
A final [**] with locations of [**] shall be prepared.

3.3.2 [**]

3.3.2.1 [**]

The [**] design shall be modified for the [**] according to the [**] and [**]
(see 3.2.1 and 3.2.2). [**] at the [**] conditions with appropriate [**] shall
be used for [**] and [**].

3.3.2.2 [**]

[**] of the [**] shall be produced containing any [**].

3.3.2.3 [**]

[**] of the [**] shall be produced containing any [**].

3.4 PROCUREMENT, MANUFACTURE, TRANSPORTATION, ASSEMBLY AND TEST

3.4.1 [**]

[**] shall be prepared and provided to [**]. The selection of [**] shall be
evaluated on a number of factors including [**]. For companies [**] shall be
considered in the [**] comparison. [**] for various elements of the project
shall be [**], and put [**] with specific terms issued for [**].

3.4.2 [**]

OPT shall supply a [**] PowerBuoy including the following equipment:

     [**]

3.4.2.1 [**]

OPT shall provide [**], and [**] for the [**] to selected [**]. OPT may elect to
[**].

The structure consists primarily of [**]. The [**] is a [**]. The [**] is [**].

The [**] section is made up of a [**].

<PAGE>

The [**] is designed with [**] for a three point mooring system, and a feature
for termination of the [**].

The entire buoy structure is painted with [**].

[**] of the fabrication and assembly process will be performed by a combination
of [**].

The [**] work is expected to be carried out by building [**], and these sections
can [**].

3.4.2.2 [**]

The [**] Buoy contains [**] that converts the linear motion of the [**] into
electrical power in the form of [**]. A [**] utilizing [**] the linear motion of
the float into rotary power. A [**] transforms rotary mechanical power into
electrical power. A series of [**], and [**] devices produces power [**].

[**] are mounted in the [**] and connect to the [**]. In addition to providing
the mechanical connection to the [**], the [**].

[**] direct the flow of [**] from the [**] to the [**], and [**] and [**] and
equipment over [**] within specified levels.

[**] are mechanically mounted and coupled to [**] from the [**], producing [**].

Electrical power from the generator is [**] by [**]. The resulting [**] is
stored in [**], and [**].

[**] will manufacture and supply the system components. [**] will be subject to
test and inspection as necessary [**].

The [**] and [**] equipment is [**] designed to be [**] the [**] buoy structure.
This [**] and [**] assembly shall be [**] for insertion into the buoy.

3.4.3 [**]

[**] shall [**] for the [**] Buoy amenable to the specific seabed conditions.
The system shall include:

     [**]

System [**].

[**] are installed to [**]. These [**] are built for the [**] with appropriate
[**]. The [**] buoy will be [**] using [**], each connected to an [**]. The [**]
buoys shall be [**].

[**] shall be prepared and [**] shall perform [**] prior to [**].

3.4.4 [**]

A [**] System shall be supplied for the PowerBuoy System. The system
incorporates the following items and features:

     [**]

<PAGE>

OPT shall supply the [**] system including the [**] and [**] to and from the
[**] and [**] will build, test, install and commission the necessary [**] and
[**]. Critical components will be subject [**].

[**] shall integrate the [**] system with the [**]. The [**] system shall be
tested with the [**] system prior to [**].

3.4.5 [**]

The [**] is an [**]. The [**] consists of several major components:

[**] will build, test, install and commission the necessary [**] will furnish
necessary [**]. Critical components will be subject to [**]. The [**] shall be
assembled and tested [**].

3.4.6 [**]

The [**] is a [**] with the following features:

     [**]

The [**] is also a [**] with the following features:

     [**]

[**] shall be [**] based on their capabilities to meet [**]. The [**] shall be
tested and inspected at the [**] as necessary prior to the [**].

The [**] will be fabricated into an [**].

3.4.7 [**]

A specific site shall be selected as a [**]. This location will be in close
proximity to the [**], have proper facilities for final assembly work required,
and located [**].

[**] will ship equipment for the [**]. Several examples are as follows:

          [**]

3.4.8 [**]

The [**] consists of [**] including:

     [**]

The [**] shall be assembled into a [**] will be required as part of the assembly
process. The [**] will be accomplished with the use of equipment, such as [**].
Afterwards, the buoy [**] shall be [**] tested. After [**], the [**] shall be
[**]. At this point, the equipment shall be declared [**] Santona, Spain.

3.5 SITE PREPARATION

3.5.1 [**]

[**] for equipment placement shall be [**]. Any required [**] such as [**], and
like equipment used for installation shall be completed by the [**].

<PAGE>

3.5.2 [**]

Required [**] shall occur during this phase and shall be carried out by the
[**].

3.5.3 [**]

The [**] shall be responsible to [**] that are supplied by the [**] and make the
necessary [**] between [**].

3.6 [**]

3.6.1 [**] shall be prepared and given to [**]. The selection of [**] shall be
evaluated on a number of factors including [**] will have the necessary [**] for
various elements of the project shall be [**], [**] with [**].

[**] shall work with the [**] to develop and review detailed [**]. These plans
shall include [**], and/or [**] shall observe and provide a quality control
function during the [**] during all phases. The [**] will be accurately [**] to
have a detailed record of the [**], during all [**].

3.6.2 [**]

The [**] shall be [**] according to the [**] by the [**]. The [**] will commence
with transport of the [**] from the [**]. The [**] will be [**], and [**] shall
be inspected according to the [**]. Any prescribed system tests shall be carried
out at that point.

3.6.3 [**]

The [**] shall be prepared for its [**] by [**]. The [**] shall be appropriately
prepared for an efficient [**] in accordance with the [**].

The [**] shall be [**] and secured by the [**]. The [**] of the route wilt be
[**] by the [**]. The [**] wilt be [**]. The [**] and [**] values shall not be
violated.

The [**] shall be inspected for conformity to the requirements.

3.6.4 [**]

The [**] shall commence with [**]. The [**] shall install the [**] according to
the plans. Necessary inspections shall be made, and the [**] shall certify work
is performed to the requirements.

3.6.5 [**]

After the [**] system have been installed, the [**] shall be deployed. The
deployment will commence with [**]. The [**] shall be connected into the [**]
according to requirements. Inspections shall be made of the [**] equipment.

3.6.6 [**]

The [**] shall be responsible for the [**] with the exception of the [**].

3.6.7 [**]

[**] personnel and a [**] shall install the [**], and make the necessary
interface connections.

<PAGE>

3.7 [**]

A [**] procedure developed [**] shall be carried out [**] and its [**]. The [**]
process shall be carried out in steps. The [**] unit then shall be brought [**]
using a [**] ensuring safety to equipment and personnel. See Annex XII.
<PAGE>

                                    ANNEX II

                           SCHEDULE OF WORKS/CALENDAR

<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
                                      [**]

<PAGE>

                                    Annex III

                      TECHNICAL SPECIFICATIONS OF EQUIPMENT

-    [**]

<PAGE>

          Confidential Materials omitted and filed separately with the

                       Securities and Exchange Commission.

                                      [**]

<PAGE>

                                    ANNEX IV

                             MONTHLY REPORT CONTENTS

<PAGE>

                                    ANNEX IV
                             MONTHLY REPORT CONTENTS

1.   INTRODUCTION

2.   MANAGEMENT, MONITORING AND CONTROL

     2.1  Equipment manufacture

     2.2  Storing of materials

     2.3  Mounting of Equipment

     2.4  Miscellaneous

3.   ESTIMATED ACTIVITIES FOR NEXT MONTH

4.   PROGRAMME

     4.1  Advanced

     4.2  Deviations

     4.3  Updates

5.   [**]

6.   HEALTH AND SAFETY

7.   QUALITY CONTROL

8.   PHOTOGRAPHIC REPORT

<PAGE>

                                     ANNEX V

                             SCHEDULE OF MILESTONES

<PAGE>

                                     ANNEX V
                             SCHEDULE OF MILESTONES

<TABLE>
<CAPTION>
                                      % OF
                                    CONTRACT   AMOUNT
NO.    MILESTONE    FORECAST DATE     PRICE     (KC)    EVIDENCE OF COMPLETION
---   -----------   -------------   --------   ------   ----------------------
<S>   <C>           <C>             <C>        <C>      <C>
 1    [**]               [**]         [**]      [**]    [**]
 2    [**]               [**]         [**]      [**]    [**]
 3    [**]               [**]         [**]      [**]    [**]
 4    [**]               [**]         [**]      [**]    [**]
 5    [**]               [**]         [**]      [**]    [**]
 6    [**]               [**]         [**]      [**]    [**]
 7    [**]               [**]         [**]      [**]    [**]
 8    [**]               [**]         [**]      [**]    [**]
 9    [**]               [**]         [**]      [**]    [**]
 10   [**]               [**]         [**]      [**]    [**]
 11   [**]               [**]         [**]      [**]    [**]
 12   [**]               [**]         [**]      [**]    [**]
 13   [**]               [**]         [**]      [**]    [**]
 14   [**]               [**]         [**]      [**]    [**]
 15   [**]               [**]         [**]      [**]    [**]
 16   [**]               [**]         [**]      [**]    [**]
 17   [**]               [**]         [**]      [**]    [**]
         SUBTOTAL                     100%      [**]
</TABLE>

<PAGE>

                                    ANNEX VI

                   MODEL OF PROVISIONAL ACCEPTANCE CERTIFICATE

<PAGE>

                                    ANNEX VI
                   MODEL OF PROVISIONAL ACCEPTANCE CERTIFICATE

(TITLE OF CONTRACT)

PLANT PROVISIONAL ACCEPTANCE CERTIFICATE

     NOTIFICATION No. __________________

     DATE ___________

     As of _____________(date), (THE SUPPLIER) delivers and ___________, S.A.
provisionally receives all the Equipment _____ of the ___________ Plant, in
accordance with the terms of the Contract made between ___________, S.A. and
___________, S.A. on __________________________________________.

(THE SUPPLIER)

ANNEX: (List of Jobs Pending). The Parties agree that the jobs pending and
included in this list must be remedied during the Testing Period.

<PAGE>

                                    ANNEX VII

                   MODEL OF DEFINITIVE ACCEPTANCE CERTIFICATE

<PAGE>

                                    ANNEX VII
                   MODEL OF DEFINITIVE ACCEPTANCE CERTIFICATE

(TITLE OF CONTRACT)

PLANT DEFINITIVE ACCEPTANCE CERTIFICATE

     NOTIFICATION No. __________________

     DATE ___________

     As of __________ (date), (THE SUPPLIER) delivers and ____________, S.A.
definitively receives all the Equipment of the ____________ Plant, in accordance
with the terms of the Contract made between ____________, S.A. and ____________,
S.A. on ____________.

(THE SUPPLIER) ____________________, S.A.

<PAGE>

                                   ANNEX VIII

                       PERFORMANCE BOND / LETTER OF CREDIT

THE DRAFT FOR THE LETTER OF CREDIT WILL BE SENT BY THE CONTRACTOR WITHIN 30 DAYS
          FROM SIGNATURE OF THIS AGREEMENT FOR APPROVAL BY THE CLIENT.

<PAGE>

                                    ANNEX IX

                             TECHNICAL DOCUMENTATION

<PAGE>

                                    ANNEX IX
                             TECHNICAL DOCUMENTATION

1. GENERAL

Periodic report of project advance

2. BASIC ENGINEERING

General system overview
PB40ES operation philosophy (including operating modes description)
General arrangement drawings
Electrical single-line diagram
Control and protection system configuration schemes
Electrical protection equipment definition
[**]
Engineering, manufacture, assembly and commissioning planning
Quality Assurance Plan
Inspection programs for main equipment
Plot of [**] versus [**]
Guaranteed values table
Procedure indicating how and where to measure the guaranteed values

3. DETAILED ENGINEERING

General assembly drawing of the PB40ES [**]
Single line diagram [**]
SCADA system architectural diagram
Underwater substation pod (USP) requirement specification
Submarine cable specification
Buoy farm protection fault protection scheme
Protection interconnection diagram
SCADA interconnection diagram
General system overview
General assembly of the underwater substation pod (USP)
Legalization documentation of the equipment [**]
General assembly drawings of the [**] underwater cable fixings
Connection to dry land cable terminals drawings
Main equipment awarding of the order documentation
Electrical schemes of the USP equipment [**]
Electrical interconnection schemes of the whole system
Mooring system calculations
Short circuit calculations
Voltage losses calculations
Selectivity studies
USP earthing drawings
Transformer curves; no load losses, intensities, etc.

4. MANUFACTURE

Periodic manufacture advance reports
Certificate of transformer tests

5. ASSEMBLY

Periodic assembly advance reports

<PAGE>

6. COMMISSIONING

General description
Procedures and protocols
Operation and Maintenance (O&M) Manuals (including [**], and Electrical
protection equipment adjustment protocol)
Quality final dossier

<PAGE>

                                     ANNEX X

                              COMISSIONING PROTOCOL

<PAGE>

                                     ANNEX X
                             COMMISSIONING PROTOCOL

COMMISSIONING PLAN

1.0 SCOPE

This document sets forth the outline for the Commissioning Plan of the SWEP2A
program. It is intended to provide a basis for a detailed test plan that will be
generated during the program, as required by the EPC Agreement.

This document forms a part of the "Engineering, Procurement, and Construction of
a Wave Energy Power Plan at Punta Del Pescador" Agreement (EPC Agreement). This
document is not intended to be stand alone. Terms included in this document
shall take the defined meaning from the EPC Agreement.

2.0 REFERENCED DOCUMENTS

The following documents form a part of this document to the extent they are
referenced. In the event of a conflict between this document and those
referenced, the referenced document shall prevail.

     2.1 CONTRACTOR DOCUMENTS

     [**]

     2.2 CLIENT DOCUMENTS

None

3.0 COMMISSIONING TEST PLAN OUTLINE

     3.1 GENERAL OVERVIEW

The Commissioning phase of the SWEP 2A program will consist of a [**]. The
result of a successful review of test results is the Certificate of Completion
of Commissioning and an issuance of the Preliminary Acceptance Certificate
(PAC).

Commissioning shall be accomplished in order to determine compliance against the
SWEP Phase 2A Wave Power Station Requirement Specification. In accordance with
this specification, requirements require testing, demonstration, inspection, or
analysis for determination of compliance. When the compliance phase begins, the
Contractor will conduct testing and demonstrations for requirements that require
these determination methods. Evidence of compliance for requirements requiring
inspection or analysis will be reviewed in the Test Results stage, as discussed
below.

     3.2 TEST PLANNING

<PAGE>

The Contractor shall plan for the verification of requirements requiring testing
or demonstration in the Commissioning Test Plan. The Commissioning Test Plan
shall document, in sufficient detail, the conduct of the testing and shall
include Test Procedures for those tests that require them. Procedures generated
shall include:

     1)   Specific Descriptions of

          a)   Test Setup

          b)   Instrumentation

          c)   Test Data to be extracted

          d)   Pass/Fail Requirements

          e)   Personnel Requirments

          f)   Anticipated duration of the test

          g)   Requirements flow

     2)   Clear directions for execution of the test

     3)   Ability to repeat test and duplicate test results

     4)   Test Data Sheets for test results recording and witness signatures

     3.3 TEST EXECUTION

Once the Commissioning Test Plan is completed and the [**], the Contractor may
begin the [**]. The testing shall follow the test plan and may be witnessed by
the Client, in accordance with the terms of the EPC agreement.

All test results shall be recorded and signed by the witnessing parties.

     3.4 TEST RESULTS

Once the testing is completed, a Test Report shall be generated. The test report
shall include the following information:

     1)   Summary of Testing

     2)   Analysis of Results

     3)   Any Corrective Actions required

     4)   Requests for Deviations of requirements, if required

     5)   Copies of all test data sheets

     6)   Analysis, or reference to analysis documents

     7)   Inspection reports, or reference to inspection documents

     8)   Summary compliance matrix

     3.5 REVIEW OF RESULTS

<PAGE>
Once the Test Report is generated and supplied to the Client, a review of the
results will take place. This review will result in a signed copy of the
Certificate of Completion of Commissioning and a Preliminary Acceptance
Certificate, or an action plan to meet these milestones.

     3.6 TESTS TO BE INCLUDED

[**]

<PAGE>

                                    ANNEX XI

                             LIST OF SUBCONTRACTORS

<PAGE>

                                    ANNEX XI
                        LIST OF POTENTIAL SUBCONTRACTORS

<TABLE>
<CAPTION>
         SUBCONTRACTOR           LOCATION                COMPONENTS
         -------------           --------   ------------------------------------
<S>                              <C>        <C>
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
</TABLE>

<PAGE>

<TABLE>
<S>                              <C>        <C>
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
[**]                               [**]     [**]
</TABLE>

<PAGE>

                                    ANNEX XII

          LIST OF AUTHORIZATIONS AND PERMITS WHICH MUST BE OBTAINED BY
                             THE CLIENT AND TIMELINE
<PAGE>

                                    ANNEX XII

                   LIST OF AUTHORIZATIONS AND PERMITS REQUIRED

<TABLE>
<CAPTION>
SPANISH             ENGLISH             ORGANO QUE TRAMITA   FOR WHAT?
-------             -------             ------------------   ---------
<S>                 <C>                 <C>                  <C>
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
[**]                [**]                [**]                 [**]
</TABLE>

<PAGE>

                                   ANNEX XIII

                              LOCATION OF THE PLANT

<PAGE>

          Confidential materials omitted and filed separately with the

                       Securities and Exchange Commission.

                                      [**]

<PAGE>

                                    ANNEX XIV

                         PREDICTED TECHNICAL PERFORMANCE

The following table (Table 1) is used to calculate the predicted performance
based on measured wave data:

TABLE 1: THEORETICAL POWER TABLE FOR THE PB40ES POWERBUOY

                                      [**]

In order to use this table [**]. Wave data measured includes: [**]. The table
assumes [**]

For each measurement interval [**]

For example, a measurement of: [**].

As a second example, [**].

[**].

<PAGE>

PROBABILITY DISTRIBUTION OF WAVEHEIGHTS. SANTONA

                                      [**]

FIGURE 1 [**]

[**]

The following table outlines the average seasonal output of the PB40ES
PowerBuoy:

TABLE 2 SEASONAL AVERAGE OUTPUT OF PB40ES POWERBUOY IN THE WAVE CLIMATE PROVIDED
BY [**] (DATA SHOWN IN TABLE 3.)

<TABLE>
<CAPTION>
         AVAILABLE ENERGY(1)   EXPECTED AVAILABILITY     PREDICTED ENERGY
SEASON          (MWH)                 FACTOR           PRODUCTION(1) (MWH)
------   -------------------   ---------------------   -------------------
<S>      <C>                   <C>                     <C>
WINTER          [**]                   [**]                    [**]
SPRING          [**]                   [**]                    [**]
SUMMER          [**]                   [**]                    [**]
AUTUMN          [**]                   [**]                    [**]

ANNUAL          [**]                   [**]                    [**]
</TABLE>

----------
(1)  Based on the wave data in table 3

<PAGE>

TABLE 3 [**] [**], PROVIDED TO OPT ON [**]

<TABLE>
<CAPTION>
       [**]    0.5     1     1.5     2     2.5     3     3.5     4     4.5     5     5.5     6     6.5
       ----   ----   ----   ----   ----   ----   ----   ----   ----   ----   ----   ----   ----   ----
<S>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
[**]
       3      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       4      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       5      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       6      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       7      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       8      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       9      [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       10     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       11     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       12     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       13     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       14     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       15     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
       16     [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]
</TABLE>

The average wave power at the site, calculated from the above [**].

This leads to a wave-to-wire efficiency of [**] (This is also called "[**]").

Please note that this [**].

<PAGE>

                                     O.P.T.
                         OCEAN POWER TECHNOLOGIES, INC.

                           SANTONA WAVE ENERGY PROJECT

                  BUOY FARM PROTECTION FAULT PROTECTION SCHEME

                                DOCUMENT NO: [**]

<TABLE>
<S>             <C>              <C>      <C>                   <C>               <C>
PROGRAM:        SWEP

DOCUMENT:       Buoy Farm Protection Relay Scheme Description   REVISION #        0

RELEASE DATE:   March 14, 2006                                  LATEST MODIFIED   March 14, 2006
                                                                DATE

AUTHOR(S):      ______________   TITLE:   ___________________   SIGNATURE:        ________________________

                                                                SIGNATURE:        ________________________

APPROVAL:       [**]             TITLE:   Director Electrical   SIGNATURE:        ________________________
                                          Engineering
</TABLE>

                                REVISION SUMMARY

<TABLE>
<S>           <C>                <C>     <C>              <C>      <C>
NAME/TITLE:   ________________   DATE:   ______________   NOTES:   _____________________
NAME/TITLE:   ________________   DATE:   ______________   NOTES:   _____________________
NAME/TITLE:   ________________   DATE:   ______________   NOTES:   _____________________
NAME/TITLE:   ________________   DATE:   ______________   NOTES:   _____________________
NAME/TITLE:   ________________   DATE:   ______________   NOTES:   _____________________
</TABLE>

[**]

<PAGE>

INTRODUCTION

[**]

Protective relaying for this project follows the general relaying concepts to
provide the following:

     1.   Reliability - to meet system needs that dependably handle trouble

     2.   Selectivity - provide maximum continuity of service, isolate trouble
          spots and allow balance of system to operate

     3.   Speed - remove fault and minimize damage

     4.   Simplicity - minimum amount of equipment to provide maximum protection

     5.   Economy - minimum cost for maximum protection

REFERENCES

SWEP One Line [**]

SWEP Protection Interconnection Diagram [**]

HIGH LEVEL REQUIREMENTS

The basic premises used for the relay scheme are as follows:

     1.   [**]

     2.   [**]

     3.   [**]

PROTECTION DESCRIPTION

[**]

[**] the [**] in the event that the [**] is damaged or develops an internal
fault. Relay operation will [**] the [**] and [**] from the [**] as well as [**]
the relay will not operate.

[**]

[**] provides [**] for the [**]. As indicated on the drawing, [**] have [**]
adding to the overall protection scheme. The [**] relay offers [**]. The relay
[**] on [**] when the [**], preventing [**]. Since the relay is of a [**] it
will be capable of providing [**] and [**] on the [**] of the [**]. Relay will
also provide [**] for the [**].

[**]

[**] are shown in this [**] is an [**] relay, an [**] that operates when the
[**] and a [**].

<PAGE>

The [**] relay is designed to [**] in the event that the [**] that would be
detrimental to the [**] and could potentially cause [**] from the [**].
Conversely the [**] would [**] from the [**] in the event that the [**] in the
system [**].

The [**] relay is placed into the system to [**]. This is required in the event
that the [**]. The possibility exists that there may be [**]. The [**] needs the
utility as a means for [**] and the [**] as long as the utility is [**]. Should
the [**] become [**] from the [**], the [**] supplied by the [**] will not have
a [**] and will not [**]. The [**] relay provides a simple and effective method
to [**] and [**] from the utility. The [**] is set to [**]. Since this should
not occur under normal conditions, [**].

[**]

Since the electrical equipment will be located in a submersible enclosure, it is
necessary to [**] relaying provides a high speed method to detect a [**]. The
[**] overlaps the [**] providing addition protection. As previously stated, the
[**] will [**] on [**] giving additional reliability for the system.

[**]

Each [**] located in the submersible enclosure is [**]. Each [**] is equipped
with a [**] will be [**] and also [**].

[**]

The [**]. The [**] will convert the [**]. The [**] is then converted to [**]
that will be [**]. The [**] has [**]. Additionally the [**] ahead of the [**]
will also act to as a [**].<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                    Exhibit 10.2

          Confidential Materials omitted and filed separately with the

         Securities and Exchange Commission. Asterisks denote omissions.

<TABLE>
<S>                                       <C>                                   <C>                               <C>
            AWARD/CONTRACT                1.   THIS CONTRACT IS A RATED ORDER   RATING                            PAGE OF PAGES
                                               UNDER DPAS (15 CFR 350)          DO-C9(U)                            1   |   14

2.   CONTRACT (PROC. INST. IDENT.) NO.    3.   EFFECTIVE DATE                 4.   REQUISITION/PURCHASE REQUEST/PROJECT NO.
     N00014-05-C-0384                          SEE BLOCK 20.C.                     05PR09436-00

     ISSUED BY                            CODE N00014        6.   ADMINISTERED BY (if other than item 5)          CODE S3915A
     OFFICE OF NAVAL RESEARCH                                     DCM Philadelphia
     ONR 254 Brian Murphy (703)696-0030                           PO Box 11427
     E-mail: brian_murphy@onr.navy.mil                            700 Robbins Avenue, Bldg. 4A
     875 North Randolph St. Suite 1425                            Philadelphia, PA 19111-0427
     Arlington VA 22203-1995

7.   NAME AND ADDRESS OF CONTRACTOR (No., street, city, country, State and ZIP Code)   8.   DELIVERY
                                                                                       [ ] FOB ORIGIN   [ ] OTHER (see below)
     Ocean Power Technologies, Inc.
     1590 Reed Road                                                                    9.   DISCOUNT FOR PROMPT PAYMENT
     Pennington, NJ 08534                                                              N.A.

                                                                                       10. SUBMIT INVOICES       ITEM
                                                                                       (4 copies unless          See Section G.
                                                                                       otherwise specified) TO
CODE 043P7                                     FACILITY CODE                           THE ADDRESS SHOWN IN:

11.  SHIP TO/MARK FOR                     CODE N00014        12.  PAYMENT WILL BE MADE BY                         CODE HQ0337
     OFFICE OF NAVAL RESEARCH                                     DFAS COLUMBUS CENTER DFAS
     Attn: Code 334, Paula Furman                                 CO NORTH ENTITLEMENT OPERATIONS
     875 North Randolph St. Suite 1425                            PO BOX 182266
     Arlington VA 22203-1995                                      COLUMBUS, OH 43218-2266

13.  AUTHORITY FOR USING OTHER THAN FULL AND OPEN            14.  ACCOUNTING AND APPROPRIATION DATA
     COMPETITION
     [ ] 10U.S.C.2304(c)( )  [ ] 41U.S.C.253(C)( )                SEE ATTACHED FINANCIAL ACCOUNTING DATA (FAD) SHEET(S)

     15A. ITEM NO.           15B. SUPPLIES/SERVICES          15C. QUANTITY   15D. UNIT   15E. UNIT PRICE   15F. AMOUNT

                See Section B of Schedules

                                                                     15G. TOTAL AMOUNT OF CONTRACT   See Section B. of Schedule

                                                     16. TABLE OF CONTENTS

                                                                                                                         PAGE(S
(X)   SEC.                                         PAGE(S)   (X)   SEC.                   DESCRIPTION                      (X)
---   ----                                         -------   ---   ----                   -----------                    ------
                   PART I - THE SCHEDULE                                         PART II - CONTRACT CLAUSES
(X)     A  SOLICITATION/CONCTRACT FORM                2      (X)   I    CONTRACT CLAUSES                                  7-14
(X)     B  SUPPLIES OR SERVICES AND PRICES/COSTS      2           PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
(X)     C  DESCRIPTION/SPECS./WORK STATEMENT          2      (X)   J    LIST OF ATTACHMENTS                                14
(X)     D  PACKAGING AND MARKING                      2                  PART IV - REPRESENTATIONS AND INSTRUCTIONS
(X)     E  INSPECTION AND ACCEPTANCE                  2      (X)   K    REPRESENTATIONS, CERTIFICATIONS                    14
(X)     F  DELIVERIES OR PERFORMANCE                  3                 AND OTHER STATEMENTS OF
(X)     G  CONTRACT ADMINISTRATION DATA              3-5                OFFERORS
(X)     H  SPECIAL CONTRACT REQUIREMENTS             6-7     [ ]   L    INSTRS., CONDS., AND NOTICES TO
                                                                        OFFERORS
                                                             [ ]   M    EVALUATION FACTORS FOR AWARD

                             CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE

17.  [ ] CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is    18.  [ ] AWARD (Contractor is not required to sign this
     required to sign this document and return 2 copies to        document.) Your offer on Solicitation Number ______,
     issuing office.) Contractor agrees to furnish and            including the addition or changes made by you which
     deliver all items or perform all the services set            additions or changes are set forth in full above,
     forth or otherwise identified above and on any               is hereby accepted as to items listed above and on
     continuation sheets for the consideration stated             any continuation sheets. This award consummates the
     herein. The rights and obligations of the parties to         contract which consists of the following documents:
     this contract shall be subject to and governed by the        (a) the Government's solicitation and your offer,
     following documents: (a) this award/contract, (b) the        and (b) this award/contract. No further document is
     solicitation, if an, and (c) such provisions,                necessary.
     representations, certifications, and specifications,
     as are attached or incorporated by reference herein.
     (Attachments are listed herein.)

19A. NAME AND TITLE OF SIGNER (Type or print)                20A. NAME OF CONTRACTING OFFICER
     Charles F. Dunleavy                                          R. Brian Bradley
     C.F.O.                                                       Contracting Officer

19B. NAME OF CONTRACTOR                   19C. DATE SIGNED   20B. UNITES STATES OF AMERICA                     20C. DATE SIGNED

BY /s/ Charles F. Dunleavy                20 Sept 2005       BY /s/ R. Brian Bradley                           SEP 20 2005
   ------------------------------------                         --------------------------------------------
   (Signature of person authorized to sign)                     (Signature of Contracting Officer)

NSN 7540-01-152-8069                                      26-  107                                 STANDARD FORM 26 (REV. 4-85)
PREVIOUS EDITION UNUSABLE                                                                                     Prescribed by GSA
                                                                                                        FAR (48 CFR) 53.214 (a)
</TABLE>
<PAGE>

SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS

<TABLE>
<CAPTION>
                                                                                 TOTAL
                                                        ESTIMATED   FIXED   ESTIMATED COST
ITEM NO.                SUPPLIES/SERVICES                  COST      FEE      & FIXED FEE
--------   ------------------------------------------   ---------   -----   ---------------
<S>        <C>                                          <C>         <C>     <C>
0001       The Contractor shall furnish the necessary     $[**]     $[**]      $2,799,405
           personnel and facilities to conduct the
           research effort as described in Section C
           and provide reports and data in accordance
           with Exhibit A.

000101     ACRN: AA
           $2,799,405

TOTAL ESTIMATED CONTRACT CONSIDERATION:                   $[**]     $[**]      $2,799,405
</TABLE>

SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT

1. The research effort to be performed hereunder shall be subject to the
requirements and standards contained in Exhibit A and the following
paragraph(s).

2. The Contractor shall conduct the research effort under CLIN 0001, submitted
under Topic Number N95-074, in accordance with Attachment Number 1, entitled
"Statement of Work".

SECTION D - PACKAGING AND MARKING

Preservation, packaging, packing and marking of all deliverable contract line
items shall conform to normal commercial packing standards to assure safe
delivery at destination.

All reports, briefs, technical documents, etc. submitted to the Government under
this contract should contain the following legend:

                            SBIR or STTR DATA RIGHTS

     Topic Number: __________________________________

     Contract No.: __________________________________

     Contractor Name: _______________________________

     Contractor Address: ____________________________

The Government's rights to use, modify, reproduce, release, perform, display, or
disclose technical data or computer software marked with this legend are
restricted as provided in paragraph (b)(4) of DFARS 252-227-7018, Rights in
Noncommercial Technical Data and Computer Software--Small Business Innovative
Research (SBIR) Program.

SECTION E - INSPECTION AND ACCEPTANCE

Inspection and acceptance of the final delivery under this contract will be
accomplished by the Program Officer designated in Section F of this contract,
who shall have thirty (30) days after contractual delivery for acceptance.

Contract Number: N00014-05-C-0384

<PAGE>

SECTION F - DELIVERIES OR PERFORMANCE

1. The research effort performed under CLIN 0001 shall be conducted from date of
contract award through 31 March 2007.

2. Distribution, consignment and marking instructions for all contract line
items shall be in accordance with Enclosure Number 1 of Exhibit A. The address
for the cognizant Program Officer is as follows:

          Program Officer
          Office of Naval Research
          875 North Randolph St. Suite 1425
          Arlington, Virginia 22203-1995
          Attn: Paula Furman Code: 334
          Ref: Contract N00014-05-C-0384

SECTION G - CONTRACT ADMINISTRATION DATA (02/14/05)

1.   PAYMENT AND INVOICE INSTRUCTIONS (COST REIMBURSEMENT)

     1.1  SUBMISSION OF INVOICES

PAYMENT AND INVOICE INSTRUCTIONS (COST TYPE)

The Office of Naval Research will utilize the new DoD Wide Area Workflow Receipt
and Acceptance (WAWF) system. This web based system located at
https://wawf.eb.mil provides the technology for government contractors and
authorized Department of Defense (DoD) personnel to generate, capture and
process receipt and payment-related documentation in a paperless environment.
Invoices for supplies/services rendered under this contract shall be submitted
electronically through WAWF. Submission of hard copy DD250/Invoice/Public
Vouchers (SF1034) will no longer be accepted for payment.

It is recommended that the person in your company designated as the Central
Contractor Registration (CCR) Electronic Business (EB) Point of Contact and
anyone responsible for the submission of invoices, use the online training
system for WAWF at http://wawftraining.com. The Vendor, Group Administrator
(GAM), and sections marked with an asterisk in the training system should be
reviewed. Vendor Quick Reference Guides are also available at
http://www.acquisition.navy.mil/navyaos/content/view/full/3521/). The most
useful guides are "Getting Started for Vendors", "WAWF Vendor Guide", and
"Creating a Cost Voucher Invoice."

The designated CCR EB point of contact is responsible for activating the
company's CAGE code on WAWF by calling 1-866-618-5988. Once the company is
activated, the CCR EB will self-register on the WAWF and follow the instructions
for a group administrator. After the company is set-up on WAWF, any additional
persons responsible for submitting invoices must self-register at the WAWF
HTTPS://WAWF.EB.MIL.

The following required information should automatically fill-in via WAWF; if it
does not fill-in, include the following:

Issue By DODAAC: N00014 Admin DODAAC: [Use the 6 character "ADMINISTERED BY"
CODE as listed on page one of the award document]

Pay DODAAC: [Use the 6 character "PAYMENT WILL BE MADE BY" CODE as listed on
page one of the award document]

Contract Number: N00014-05-C-0384

<PAGE>

Fill-in the following additional information:

DCAA Auditor DODAAC: [Look up via the AUDIT OFFICE LOCATOR at
http://www.dcaa.mil. If you encounter any problems finding your cognizant audit
office, write to dcaaweb@dcaa.mil or call ONR's DCAA liaison at (703)696-2603]
Service Approver DODAAC: N00014

The following additional information may need to be filled in:

LPO DODAAC: N00014 (Note - this line is required only when the "PAYMENT WILL BE
MADE BY" DODAAC begins with an 'N')

After self-registering and logging on to the WAWF system, click on the plus sign
next to the word "Vendor" and then click on the "Create New Document" link.
Enter the contract number, cage code, and Pay DODAAC (above) and hit submit.
Select the "Cost Voucher" invoice type within WAWF-RA. This type of invoice
fulfills any requirement for submission of the Material Inspection and Receiving
Report, DD Form 250. Back up documentation, 5MB limit, can be included and
attached to the invoice in WAWF under the "Misc Info" tab. Fill-in all
applicable information under each tab.

Take special care when you enter Line Item information - the Line Item tab is
where you will detail your request for payment and material/services that were
provided based upon the contract. Be sure to fill in the following two
informational items exactly as they appear in the contract:

Item Number: If the contract schedule has more than one ACRN listed as sub items
under the applicable Contract Line Item Number (CLIN), use the 6 character
separately identified Sub Line Item Number (SLIN) (e.g. - 0001AA) or
Informational SLIN (e.g. - 000101), otherwise use the 4 character CLIN (e.g. -
0001).

ACRN: Fill-in the applicable 2 alpha character ACRN that is associated with the
SLIN or CLIN. (Note - DO NOT INVOICE FOR MORE THAN IS STILL AVAILABLE UNDER ANY
ACRN).

Special Payment Instructions for CLIN/SLINs with Multiple ACRNs/Lines of
Accounting: (Note - since WAWF does not accept the use of multiple ACRNs for any
single CLIN or SLIN on one invoice; multiple invoices may have to be used - use
the WAWF "Line Item" "Description" area to note the use of multiple invoices).
For all invoices submitted against CLINs with multiple Accounting Classification
Reference Numbers (ACRNs), the billing shall be paid from the earliest Fiscal
Year (FY) appropriation first. Fiscal Year is determined from the 3rdcharacter
in the "Appropriation (Critical)" part (Block 6B) of the Line of Accounting on
the Financial Accounting Data Sheet of the contract (e.g., 1741319 for FY 2004
and 1751319 for FY 2005). In the event there are multiple ACRNs with the same FY
of appropriation, billings shall be proportionally billed to all ACRNs for that
FY in the same ratio that the ACRNs are obligated.

After all required information is included, click on the "Submit" button under
the "Header" tab.

Helpful Note: Shipment Number format should be three alpha and 4 numeric (e.g.,
SER0001).

Note: The contractor shall submit invoices for payment per contract terms and
the Government shall process invoices for payment per contract terms.

If you have any questions regarding the WAWF, please contact the DoN WAWF
Assistance Line at 1-866-618-5988.

Contract Number: N00014-05-C-0384

<PAGE>

     1.2  PAYMENT OF ALLOWABLE COSTS AND FIXED FEE

     As consideration for the proper performance of the work and services
required under this contract, the Contractor shall be paid as follows:

     (a) Costs, as provided for under the contract clause entitled "Allowable
Cost and Payment," shall not exceed the amount set forth as "Estimated Cost" in
Section B, and is subject to the contract clause entitled "Limitation of Cost"
or "Limitation of Funds" whichever is applicable.

     (b) A fixed fee, in the amount set forth as 'Fixed Fee' in Section B, in
accordance with the contract clause FAR 52.216-8 "Fixed Fee", shall be paid upon
completion of the work and services required under this contract and upon final
acceptance by the Contracting Officer. However, the Contractor, shall bill on
each voucher the amount of the fee bearing the same percentage to the total
fixed fee as the amount of cost billed bears to the total estimated cost not to
exceed the amount set forth as "Fixed Fee" in Section B. The total fixed fee
billed, shall not exceed the total fixed fee specified in Section B and is
subject to the contract clause entitled "Limitation of Cost" or "Limitation of
Funds" whichever applies.

     (c) In accordance with FAR 52.216-8, and in order to protect the
Government's interest, the Contractor is hereby directed to withhold 10% of the
fixed fee amount as set forth in Section B or until a reserve is set aside in
the amount of $100,000, whichever is less. The Administrative Contracting
Officer shall release 75% of the fixed fee reserve upon acceptance of the final
deliverables identified in Section F of this contract. The remainder 25% of the
fixed fee reserve will be released after completion of any final audits,
submission of the final patent and royalty reports and if the contractor is not
delinquent in submitting final vouchers for prior years' settlements.

2.   PROCURING OFFICE REPRESENTATIVES

     (a) In order to expedite administration of this contract, the
Administrative Contracting Officer should direct inquiries to the appropriate
office listed below. Please do not direct routine inquiries to the person listed
in Item 20A on Standard Form 26.

     Contract Negotiator - Brian K. Murphy, ONR 0254, (703) 696-0030, DSN
426-0030, E-Mail Address: brian_murphy@onr.navy.mil

     Inspection and Acceptance - Dr. Paula Furman, (703) 588-1077, DSN 425-1077,
E-Mail Address: Paula_Furman@onr.navy.mil

     Security Matters - Ms. Sheila Neal, ONR 43, (703) 696-8177, DSN 426-8177

     Patent Matters - Mr. Tom McDonnell, ONR 00CC, (703) 696-4000, DSN 426-4000.

     (b) The Administrative Contracting Officer will forward invention
disclosures and reports directly to Corporate Counsel (Code 00CC), Office of
Naval Research, Department of the Navy, 875 North Randolph St. Suite 1425,
Arlington, VA 22203-1995. The Corporate Counsel will return the reports along
with a recommendation to the Administrative Contracting Officer. The Corporate
Counsel will represent the Contracting Officer with regard to invention
reporting matters arising under this contract.

3.   TYPE OF CONTRACT

This is a cost-plus-fixed-fee completion contract.

Contract Number: N00014-05-C-0384

<PAGE>

SECTION H - SPECIAL CONTRACT REQUIREMENTS

1.   ONR 5252.235-9714 REPORT PREPARATION (FEB 2002)

Scientific or technical reports prepared by the Contractor and deliverable under
the terms of this contract will be prepared in accordance with format
requirements contained in ANSI/NISO Z39.18-1995, Scientific and Technical
Reports: Elements, Organization, and Design.

[NOTE: All NISO American National Standards are available as free, downloadable
PDF(s) at http://www.niso.org/standards/index.html. NISO standards can also be
purchased in hardcopy form from NISO Press Fulfillment, P. O. Box 451, Annapolis
Junction, MD 20701-0451 USA. Telephone U.S. and Canada: (877) 736-6476; Outside
the U.S. and Canada: 301-362-6904; Fax: 301-206-9789.]

2.   INVENTION DISCLOSURES AND REPORTS

The Contractor shall submit all invention disclosures and reports required by
the Patent Rights clause of this contract to the Administrative Contracting
Officer (ACO). The ACO (Refer to Block 6 of the SF Form 26 for POC information)
will forward invention disclosures and reports directly to Corporate Counsel
(Code 00CC), Office of Naval Research, Department of the Navy, Arlington, VA
22203. Corporate Counsel will return the reports along with a recommendation to
the ACO. Corporate Counsel represents the Contracting Officer regarding
invention reporting matters arising under this contract.

3.   ELECTRONIC SUBMISSION OF INTERIM AND FINAL REPORTS

     In addition to the complete hard copy of the fourth status report (which
should be at the end of the first year) and the Final Report, the contractor
shall provide a NONPROPRIETARY summary of these reports directly to the Navy
SBIR/STTR Web Welcome page at www.navysbir.com. To submit these reports, select
Submission, then select Submit a Phase I or II Summary Report, then select Begin
Submission Process. Enter your firm name and the password used to submit
proposals to the DoD Proposal Submission website. Select Summary Report and Add
a New Report. Follow the remaining instructions given on the submission website.

     ONR 5252.242-9718 TECHNICAL DIRECTION (FEB 2002)

     (a) Performance of the work hereunder is subject to the technical direction
of the Program Officer/COR designated in this contract, or duly authorized
representative. For the purposes of this clause, technical direction includes
the following:

          (1) Direction to the Contractor which shifts work emphasis between
work areas or tasks, requires pursuit of certain lines of inquiry, fills in
details or otherwise serves to accomplish the objectives described in the
statement of work;

          (2) Guidelines to the Contractor which assist in the interpretation of
drawings, specifications or technical portions of the work description.

     (b) Technical direction must be within the general scope of work stated in
the contract. Technical direction may not be used to:

          (1)  Assign additional work under the contract;

          (2)  Direct a change as defined in the contract clause entitled
               "Changes";

Contract Number: N00014-05-C-0384

<PAGE>

          (3)  Increase or decrease the estimated contract cost, the fixed fee,
               or the time required for contract performance;

          (4)  Change any of the terms, conditions or specifications of the
               contract.

     (c) The only individual authorized to in any way amend or modify any of the
terms of this contract shall be the Contracting Officer. When, in the opinion of
the Contractor, any technical direction calls for effort outside the scope of
the contract or inconsistent with this special provision, the Contractor shall
notify the Contracting Officer in writing within ten working days after its
receipt. The Contractor shall not proceed with the work affected by the
technical direction until the Contractor is notified by the Contracting Officer
that the technical direction is within the scope of the contract.

     (d) Nothing in the foregoing paragraphs may be construed to excuse the
Contractor from performing that portion of the work statement which is not
affected by the disputed technical direction.

     ONR 5252.237-9705 KEY PERSONNEL (DEC 88)

     (a) The Contractor agrees to assign to the contract tasks those persons
whose resumes were submitted with its proposal and who are necessary to fulfill
the requirements of the contract as "key personnel". No substitutions may be
made except in accordance with this clause.

     (b) The Contractor understands that during the first ninety (90) days of
the contract performance period, no personnel substitutions will be permitted
unless these substitutions are unavoidable because of the incumbent's sudden
illness, death or termination of employment. In any of these events, the
Contractor shall promptly notify the Contracting Officer and provide the
information described in paragraph (c) below. After the initial ninety (90) day
period the Contractor must submit to the Contracting Officer all proposed
substitutions, in writing, at least (30) days in advance ( (45) days if security
clearance must be obtained) of any proposed substitution and provide the
information required by paragraph (c) below.

     (c) Any request for substitution must include a detailed explanation of the
circumstances necessitating the proposed substitution, a resume for the proposed
substitute, and any other information requested by the Contracting Officer. Any
proposed substitute must have qualifications equal to or superior to the
qualifications of the incumbent. The Contracting Officer or his/her authorized
representative will evaluate such requests and promptly notify the Contractor in
writing of his/her approval or disapproval thereof.

     (d) In the event that any of the identified key personnel cease to perform
under the contract and the substitute is disapproved, the contract may be
immediately terminated in accordance with the Termination clause of the
contract.

The following are identified as key personnel: [**]

SECTION I - CONTRACT CLAUSES

Cost-Plus-Fixed Fee (SBIR-STTR phase I/II) (August 29, 2005)

*    Applies when contract action exceeds $10,000

**   Applies when contract action exceeds $100,000

+    Applies when contract action exceeds $500,000

++   Applies when contract action exceeds $500,000 and subcontracting
     possibilities exist. Small Business Exempt.

x    (DD 250)

Contract Number: N00014-05-C-0384

<PAGE>

All clauses in the Section (A) Tables are required clauses and are applicable,
or are applicable at the specified thresholds as designated in accordance with
the legend listed above.

(A)  FAR 52.252-02 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)

This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available. Also, the full text of a clause may
be accessed electronically at this address: http://www.arnet.gov/far/

I.   FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CLAUSES:

<TABLE>
<S>  <C>                  <C>
**   FAR 52.202-1         Definitions (JUL 2004)
**   FAR 52.203-3         Gratuities (APR 1984)
**   FAR 52.203-5         Covenant Against Contingent Fees (APR 1984)
**   FAR 52.203-6         Restrictions on Subcontractor Sales to the Government (JUL
                          1995)
**   FAR 52.203-7         Anti-Kickback Procedures (JUL 1995)
**   FAR 52.203-8         Cancellation, Rescission, and Recovery of Funds for
                          Illegal or Improper Activity (JAN 1997)
**   FAR 52.203-10        Price or Fee Adjustment for Illegal or Improper Activity
                          (JAN 1997)
**   FAR 52.203-12        Limitation on Payments to Influence Certain Federal
                          Transactions (JUN 2003)
**   FAR 52.204-4         Printing/Copying Double-Sided on Recycled Paper (AUG
                          2000)
     FAR 52.204-7         Central Contractor Registration (OCT 2003)
     FAR 52.211-15        Defense Priority and Allocation Requirements (SEP 1990)
**   FAR 52.215-2         Audit and Records - Negotiation (JUN 1999) and Alternate II
                          (APR 1998) (Alternate II is only applicable with cost
                          reimbursement contracts with State and local Governments,
                          educational institutions, and other non-profit
                          organizations.)
     FAR 52.215-8         Order of Precedence - Uniform Contract Format (OCT 1997)
+    FAR 52.215-10        Price Reduction for the Defective Cost or Pricing Data (OCT
                          1997) (The provisions of this Clause have been waived by a
                          joint Determination and Findings for the prime contractor
                          only.  The clause is applicable to subcontracts over
                          $550,000.)
+    FAR 52.215-12        Subcontractor Cost or Pricing Data (OCT 1997)
                          (Applicable to subcontracts over $550,000 only)
**   FAR 52.215-14        Integrity of Unit Prices (OCT 1997) and Alternate I (OCT
                          1997) (Alternate I is applicable if the action is
                          contracted under Other Than Full and Open Competition)
+    FAR 52.215-15        Pension Adjustments and Asset Reversions (OCT 2004)
     FAR 52.215-17        Waiver of Facilities Capital Cost of Money (OCT 1997)
+    FAR 52.215-18        Reversion or Adjustment of Plans for Postretirement
                          Benefits (PRB) Other than Pensions (JUL 2005)
</TABLE>

Contract Number: N00014-05-C-0384

<PAGE>

<TABLE>
<S>  <C>                  <C>
+    FAR 52.215-19        Notification of Ownership Changes (OCT 1997)
                          (Applicable when Cost or Pricing Data is required)
     FAR 52.216-7         Allowable Cost and Payment (DEC 2002)
     FAR 52.216-8         Fixed Fee (MAR 1997)
**   FAR 52.219-4         Notice of Price Evaluation Preference for HUB zone
                          Small Business Concerns (JUL 2005)
     FAR 52.219-6         Notice of Total Small Business Set-Aside (JUN 2003)
**   FAR 52.219-8         Utilization of Small Business Concerns (MAY 2004)
++   FAR 52.219-9         Small Business Subcontracting Plan (JUL 2005)
**   FAR 52.219-14        Limitations on Subcontracting (DEC 1996)
++   FAR 52.219-16        Liquidated Damages - Subcontracting Plan (JAN 1999)
     FAR 52.222-1         Notice to the Government of Labor Disputes (FEB 1997)
**   FAR 52.222-2         Payment for Overtime Premiums (JUL 1990) (Note: The word
                          "zero" is inserted in the blank space indicated by an
                          asterisk)
     FAR 52.222-3         Convict Labor (JUN 2003) (Reserved when FAR
                          52.222-20 Walsh Healy Public Contracts Act is
                          applicable)
**   FAR 52.222-4         Contract Work Hours and Safety Standards Act
                          -Overtime Compensation (JUL 2005)
     FAR 52.222-21        Prohibition of Segregated Facilities (FEB 1999)
     FAR 52.222-26        Equal Opportunity (APR 2002)
*    FAR 52.222-35        Equal Opportunity for Special Disabled Veterans,
                          Veterans of the Vietnam Era, and Other Eligible
                          Veterans (DEC 2001)
*    FAR 52.222-36        Affirmative Action for Workers with Disabilities (JUN
                          1998)
*    FAR 52.222-37        Employment Reports on Special Disabled Veterans,
                          Veterans of the Vietnam Era, and Other Eligible Veterans
                          (DEC 2001)
**   FAR 52.223-14        Toxic Chemical Release Reporting (AUG 2003)
     FAR 52.225-13        Restrictions on Certain Foreign Purchases (MAR 2005)
     FAR 52.225-16        Sanctioned European Union Country Services (FEB 2000)
**   FAR 52.227-1         Authorization and Consent (JUL 1995) and Alternate I (APR
                          1984)
**   FAR 52.227-2         Notice and Assistance Regarding Patent and Copyright
                          Infringement (AUG 1996)
     FAR 52.227-20        Rights in Data - SBIR Program (MAR 1994)
     FAR 52.228-7         Insurance Liability to Third Persons (MAR 1996) (Further
                          to paragraph (a)(3), unless otherwise stated in this
                          contract, types and limits of insurance required are as
                          stated in FAR 28.307-2)
     FAR 52.232-9         Limitation on Withholding of Payments (APR 1984)
**   FAR 52.232-17        Interest (JUN 1996)
     FAR 52.232-23        Assignment of Claims (JAN 1986) and Alternate I (APR 1984)
</TABLE>

Contract Number: N00014-05-C-0384

<PAGE>

<TABLE>
<S>  <C>                  <C>
     FAR 52.232-25        Prompt Payment (OCT 2003) and Alternate I (FEB 2002) (The
                          words "the 30th day" are inserted in lieu of "the 7th day"
                          at (a)(5)(i).  [When Alternate I is applicable (a)(5)(i)
                          does do not apply] [USE ALTERNATE I WHEN AWARDING A COST
                          REIMBURSEMENT CONTRACT FOR SERVICES]
     FAR 52.232-33        Payment by Electronic Funds Transfer - Central
                          Contractor Registration (OCT 2003)
     FAR 52.233-1         Disputes (JULY 2002)
     FAR 52.233-3         Protest After Award (AUG 1996) and Alternate I (JUN 1985)
     FAR 52.242-1         Notice of Intent to Disallow Costs (APR 1984)
 +   FAR 52.242-3         Penalties for Unallowable Costs (MAY 2001)
     FAR 52.242-4         Certification of Final Indirect Costs (JAN 1997)
**   FAR 52.242-13        Bankruptcy (JUL 1995)
     FAR 52.242-15        Stop Work Order (AUG 1989) and Alternate I (APR 1984)
     FAR 52.243-2         Changes -- Cost-Reimbursement (Aug. 1987) and
                          Alternate V (APR 1984)
     FAR 52.244-2         Subcontracts (MAY 2005) and Alternate I (AUG 1998)
**   FAR 52.244-5         Competition in Subcontracting (DEC 1996)
     FAR 52.244-6         Subcontracts for Commercial Items and Commercial
                          Components (DEC 2004)
     FAR 52.245-5         Government Property (Cost-Reimbursement,
                          Time-and-Materials, or Labor-Hour Contracts) (May 2004)
                          and ALT I (JUN 2003) (As modified by DoD Class Deviation
                          99-00008 dated 13 July 1999) (ALT I is applicable if the
                          contractor is a nonprofit organization whose primary
                          purpose is the conduct of scientific research)
     FAR 52.246-9         Inspection of Research and Development (Short Form) (Apr
                          1984)
     FAR 52.246-23        Limitation of Liability (FEB 1997)
**   FAR 52.247-64        Preference for Privately Owned U.S. Flag Commercial
                          Vessels (APR 2003)
     FAR 52.249-6         Termination (Cost-Reimbursement) (May 2004)
     FAR 52.249-14        Excusable Delays (APR 1984)
     FAR 52.251-1         Government Supply Sources (APR 1984)
     FAR 52.253-1         Computer Generated Forms (JAN 1991)
</TABLE>

II.  DEPARTMENT OF DEFENSE FAR SUPPLEMENTAL (DFARS) (48 CFR CHAPTER 2) CLAUSES:

<TABLE>
<S>  <C>                  <C>
**   DFARS 252.203-7001   Prohibition On Persons Convicted of Fraud or Other
                          Defense-Contract-Related Felonies (DEC 2004)
     DFARS 252.204-7003   Control of Government Work Product (APR 1992)
     DFARS 252.204-7004   Alternate A (NOV 2003)
**   DFARS 252.209-7004   Subcontracting with Firms That Are Owned or Controlled
                          by the Government of a Terrorist Country (MAR 1998)
+    DFARS 252.215-7000   Pricing Adjustments (DEC 1991)
</TABLE>

Contract Number: N00014-05-C-0384

<PAGE>

<TABLE>
<S>  <C>                  <C>
++   DFARS 252.219-7003   Small, Small Disadvantaged and Women-owned Small Business
                          Subcontracting Plan (DoD Contracts) (APR 1996)
     DFARS 252.225-7004   Reporting of Contract Performance Outside the United
                          States (JUN 2005)
**   DFARS 252.225-7012   Preference for Certain Domestic (JUN 2004)
     DFARS 252.225-7031   Secondary Arab Boycott of Israel (JUN 2005)
     DFARS 252.227-7016   Rights In Bid Or Proposal Information (JUN 1995)
     DFARS 252-227-7017   Identification And Assertion Of Use, Release, Or
                          Disclosure Restrictions (JUN 1995)
     DFARS 252.227-7018   Rights In Noncommercial Technical Data And
                          Computer Software--Small Business Innovation
                          Research (SBIR) Program (JUN 1995)
     DFARS 252.227-7019   Validation Of Asserted Restrictions -- Computer
                          Software (JUN 1995)
     DFARS 252.227-7025   Limitations on the Use or Disclosure of
                          Government-Furnished Information Marked with Restrictive
                          Legends (JUN 1995)
     DFARS 252.227-7028   Technical Data or Computer Software Previously
                          Delivered to the Government (JUN 1995)
     DFARS 252.227-7030   Technical Data - Withholding of Payment (MAR 2000)
     DFARS 252.227-7037   Validation of Restrictive Markings on Technical Data (SEP
                          1999)
     DFARS 252.231-7000   Supplemental Cost Principles (DEC 1991)
     DFARS 252.232-7003   Electronic Submissions of Payment Requests (JAN 2004)
     DFARS 252.235-7002   Animal Welfare (DEC 1991)
     DFARS 252.235-7011   Final Scientific or Technical Report (NOV 2004)
     DFARS 252.242-7000   Post-Award Conference (DEC 1991)
**   DFARS 252.243-7002   Requests for Equitable Adjustment (MAR 1998)
     DFARS 252.245-7001   Reports of Government Property (MAY 1994)
X    DFARS 252.246-7000   Material Inspection and Receiving Report (MAR 2003)
**   DFARS 252.247-7023   Transportation of Supplies by Sea (MAY 2002)
     DFARS 252.247-7024   Notification of Transportation of Supplies by Sea (MAR 2000)
                          (Applicable when the Contractor has made a negative response
                          to the inquiry in the representation at DFARS 252.247-7022.)
     DFARS 252.251-7000   Ordering from Government Supply Sources (NOV 2004)
</TABLE>

(B)  ADDITIONAL FAR AND DFARS CLAUSES

     This contract incorporates one or more clauses by reference as indicated by
the mark of (X), with the same force and effect as if they were given in full
text. Upon request, the Contracting Officer will make their full text available.
Also, the full text of a clause may be accessed electronically at this address:
http://www.arnet.gov/far/

Contract Number: N00014-05-C-0384

<PAGE>

<TABLE>
<S>  <C>                  <C>
     FAR 52.204-2         Security Requirements (AUG 1996) (Applicable if contract
                          will generate or require access to classified information
                          and DD Form 254, Contract Security Classification
                          Specification, is issued to the contractor)
X    FAR 52.209-6         Protecting the Government's Interest when Subcontracting
                          with Contractors Debarred, Suspended, or Proposed for
                          Debarment (JAN 2005) (Applicable to contracts exceeding
                          $25,000 in value.)
     FAR 52.215-16        Facilities Capital Cost of Money (Jun 2003) (Applicable in
                          solicitations expected to result in contracts that are
                          subject to the cost principles for contracts with
                          commercial organizations)
X    FAR 52.215-17        Waiver of Facilities Capital Cost of Money (Use if
                          FAR52.215-16 is not applicable)
X    FAR 52.215-21        Requirements for Cost or Pricing Data or Information Other
                          Than Cost or Pricing Data  Modifications (OCT 1997)
                          (Applicable if cost or pricing data or information other
                          than cost or pricing data will be required for
                          modifications)
     FAR 52.217-9         Option to Extend the Term of the Contract (MAR 2000) (In
                          paragraph (a), insert "period of time" and "number of
                          days"; and in paragraph (c), insert "month and years")
                          (Applicable if contract contains line item(s) for
                          option(s))
     FAR 52.219-3         Notice of Total HUB Zone Set-Aside (JAN 1999)
     FAR 52.222-20        Walsh Healy Public Contracts Act (DEC 1996) (Applicable if
                          the contract includes deliverable materials, supplies,
                          articles or equipment in an amount that exceeds or may
                          exceed $10,000)
X    FAR 52.223-5         Pollution Prevention and Right-to-Know Information (AUG
                          2003) (Applicable if contract provides for performance, in
                          whole or in part, on a Federal facility)
X    FAR 52.223-6         Drug-Free Workplace (MAY 2001) (Applies when contract
                          action exceeds $100,000 or at any value when the contract
                          is awarded to an individual)
     FAR 52.227-10        Filing of Patent Applications -- Classified Subject Matter
                          (APR 1984)
X    FAR 52.227-11        Patent Rights -- Retention by the Contractor (Short Form)
                          (Jun 1997)(Applicable if contractor is a small business or
                          a non profit organization.
X    FAR 52.232-20        Limitation of Cost (APR 1984) (Applicable only when
                          contract action is fully funded)
     FAR 52.232-22        Limitation of Funds (APR 1984) (Applicable only when
                          contract action is incrementally funded)
     FAR 52.239-1         Privacy or Security Safeguards (AUG 1996) (Applicable to
                          contracts for information technology which require
                          security of information technology, and/or are for the
                          design, development, or operation of a system of records
                          using commercial information technology services or
                          support services.)
</TABLE>

Contract Number: N00014-05-C-0384

<PAGE>

<TABLE>
<S>  <C>                  <C>
     FAR 52.245-18        Special Test Equipment (FEB 1993) Applicable when it is
                          anticipated that the contractor will acquire or fabricate
                          special test equipment but the exact identification of the
                          equipment is not known)
     FAR 52.246-08        Inspection of Research and Development - Cost
                          Reimbursement (MAY 2001) (Use instead of FAR 52.246-09
                          (Inspection of Research and Development - Short Form) (APR
                          84) when the primary objective of the contract is the
                          delivery of end items other than designs, drawings and
                          reports.)
     DFARS 252.203-7002   Display of DoD Hotline Poster (DEC 1991) (Applicable only
                          when contract action exceeds $5 million or when any
                          modification increases contract amount to more than $5
                          million)
     DFARS 252.204-7000   Disclosure of Information (DEC 1991) (Applies when
                          Contractor will have access to or generate unclassified
                          information that may be sensitive and inappropriate for
                          release to the public)
     DFARS 252.204-7005   Oral Attestation of Security Responsibilities (NOV 2001)
                          (Applicable if FAR 52.204-2, Security Requirements Applies)
X    DFARS 252.205-7000   Provision of Information to Cooperative Agreement Holders
                          (DEC 1991) (Applicable only when contract action exceeds
                          $1,000,000 or when any modification increases total
                          contract amount to more than $1,000,000)
     DFARS 252.211-7003   Item Identification and Valuation (JUN 2005) (Applicable
                          if the contract includes deliverable items (1) with a unit
                          cost of $5000 or more or (2) that will be serially managed
                          or controlled inventory.)
X    DFARS 252.215-7002   Cost Estimating System requirements (OCT 1998) (Applicable
                          only to contract actions awarded on the basis of certified
                          cost or pricing data)
     DFARS 252.223-7004   Drug-Free Work Force (SEP 1988) (Applicable (a) if
                          contract involves access to classified information: or (b)
                          when the Contracting Officer determines that the clause is
                          necessary for reasons of national security or for the
                          purpose of protecting the health or safety of performance
                          of the contract.
     DFARS 252.223-7006   Prohibition on Storage and Disposal of Toxic and Hazardous
                          Materials (APR 1993) (Applicable if work requires, may
                          require, or permits contractor performance on a DoD
                          installation)
     DFARS 252.225-7001   Buy American Act and Balance of Payments Program (JUN
                          2005) (Applicable if the contract includes deliverable
                          supplies) (This clause does not apply if an exception to
                          the Buy American Act or Balance of Payments Program is
                          known or if using the clause at 252.225-7007,
                          252.225-7021, or 252.225-7036.)
</TABLE>

Contract Number: N00014-05-C-0384

<PAGE>

<TABLE>
<S>  <C>                  <C>
     DFARS 252.225-7002   Qualifying Country Sources as Subcontractors (APR 2003)
                          (Applicable when clause at DFARS 252.225-7001,
                          252.227-7007, 252.227-7021, or 252.227-7036 applies)
     DFARS 252.225-7016   Restriction On Acquisition Of Ball And Roller Bearings
                          (JUN 2005) (Applicable if contract includes deliverable
                          supplies, unless Contracting Officer knows that items
                          being acquired do not contain ball or roller bearings)
     DFARS 252.226-7001   Utilization of Indian Organizations and Indian-Owned
                          Economic Enterprises, and Native Hawaiian Small Business
                          Concerns(SEP 2004) (Section 8021 of Pub. L.107-248 [ and
                          similar sections in subsequent DoD appropriation acts.])
X    DFARS 252.227-7018   Rights in Noncommercial Technical Data and Computer
                          Software - Small Business Innovation Research (SBIR)
                          Program (JUN 195) (Also applies to STTR programs)
     DFARS 252.227-7025   Limitations On The Use Or Disclosure Of
                          Government-Furnished Information Marked With Restrictive
                          Legends (JUN 1995) (Applicable when the Government will
                          provide the contractor, for the performance of its
                          contract, technical data, including software marked with
                          another contractor's restrictive legend(s))
X    DFARS 252.227-7034   Patents--Subcontracts (APR 1984) [Applicable to contracts
                          containing FAR 52.227-11, Patent Rights--Retention by the
                          Contractor (Short Form)]
X    DFARS 252.227-7039   Patents--Reporting Of Subject Inventions (APR 1990)
                          [Applicable to contracts containing FAR 52.227-11, Patent
                          Rights--Retention by the Contractor (Short Form)]
</TABLE>

SECTION J - LIST OF ATTACHMENTS

1.   EXHIBIT A, entitled "Contract Data Requirements List" (DD Form 1423) - 1
     page with Enclosure Number 1, entitled "Contract Data Requirements List -
     Instructions for Distribution."

2.   Attachment Number 1, entitled, "Statement of Work" - 5 pages.

3.   Attachment Number 2, entitled, "Report Documentation Page" (SF 298) 1 page.

4.   Attachment Number 3, entitled, "Financial Accounting Data Sheet."

SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS

1. The Contractor's ORCA validation dated from: 28 July 2005 to: 28 July 2006 is
hereby incorporated into this contract by reference. The DFARS and Contract
Specific Representations and Certifications, dated 30 March 2005 are hereby
incorporated by reference.

Contract Number: N00014-05-C-0384
<PAGE>

<TABLE>
<S>                                                                         <C>
             CONTRACT DATA REQUIREMENTS LIST                                  Form Approved
                      (2 Data Items)                                        OMB No. 0704-0188

The public reporting burden for this collection of information is estimated to average 110 hours per response,
including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate
or any other aspect of this collection of information, including suggestions for reducing the burden to Department
of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports (0701-0188), 1215
Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302. Respondents should be aware that notwithstanding any
other provision of law, no (illegible) be subject to any penalty for failing to comply with a collection of information
if it does not display a currently valid OMB control number. Please DO NOT RETURN your form to the above address.
Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. Listed in Block E.

A. CONTRACT LINE ITEM NO.        B. EXHIBIT               C. CATEGORY
          0001                        A                   TDP                 TM                 OTHER       X
                                                              -------------      -------------         -------------

D. SYSTEM/ITEM                        E. CONTRACT/PR NO.                        F. CONTRACTOR
   WET Program                           N00014-05-C-0384                          Ocean Power Technologies, Inc.    17. PRICE GROUP

1. DATA ITEM NO.                      2. TITLE OF DATA ITEM                     3. SUBTITLE
     A001                                Progress Reports

4. AUTHORITY (DATA ACQUISITION DOCUMENT NO.)              5.  CONTRACT REFERENCE         6. REQUIRING OFFICE         18. ESTIMATED
                                                                 See Section H.1            See Section F                TOTAL PRICE

7. DD 250 REQ   9. DIST STATEMENT   10 FREQUENCY          12. DATE OF FIRST SUBMISSION   14. DISTRIBUTION
      LT*          REQUIRED         As Required                         *

8. APP CODE                         11. AS OF DATE        13. DATE OF SUBSEQUENT                              B. COPIES
      N/A                                   *                 SUBMISSION                                 -------------------
                                                                        *                                           FINAL
                                                                                                                 -----------
                                                                                         A. ADDRESSEE    DRAFT   REG   REPRO
                                                                                         ------------    -----   ---   -----
16. REMARKS                                                                              See Enclosure
                                                                                         Number 1

*    As required by the Program Officer, these reports, submitted quarterly
     for the purpose of reporting progress (both technical and cost
     expenditure status), may be in the form of a letter report or a
     technical report.

                                                                                         15. TOTAL

1. DATA ITEM NO.                      2. TITLE OF DATA ITEM                     3. SUBTITLE                          17. PRICE GROUP
      A002                               Final Report

4. AUTHORITY (DATA ACQUISITION DOCUMENT NO.)              5. CONTRACT REFERENCE          6. REQUIRING OFFICE         18. ESTIMATED
                                                             See Section H.1                See Section F                TOTAL PRICE

7. DD 250 REQ   9. DIST STATEMENT   10 FREQUENCY          12. DATE OF FIRST SUBMISSION   14. DISTRIBUTION
      DD*          REQUIRED            ONE/R                       31 MAR 2007

8. APP CODE                         11. AS OF DATE        13. DATE OF SUBSEQUENT                              B. COPIES
      N/A                               31 MAR 2007           SUBMISSION                                 -------------------
                                                                       N/A                                          FINAL
                                                                                                                 -----------
                                                                                         A. ADDRESSEE    DRAFT   REG   REPRO
                                                                                         ------------    -----   ---   -----
16. REMARKS                                                                              See Enclosure
                                                                                         Number 1
*    The Contractor shall include relevant databases as part of the Final
     Report.

*    DD 250 is only required for acceptance by the Program Officer
     designated in Section F. Information copies shall be sent to the
     appropriate parties in accordance with EncLosure Number 1.

                                                                                         15. TOTAL

G. PREPARED BY                        H. DATE                    I. APPROVED BY                        J. DATE
Brian K. Murphy                       9/19/2005                  R. Brian Bradley                      9/19/2005

DD FORM 1423-2, AUG 96 (EG)                  PREVIOUS EDITION MAY BE USED                      PAGE 1 OF 1 PAGE(S)

N00014-04-C-0384                                                                                         Exhibit A
</TABLE>

Contract Number: N00014-05-C-0384
USIDOCS 5881056v1
<PAGE>

ENCLOSURE NUMBER 1

                         CONTRACT DATA REQUIREMENTS LIST
                          INSTRUCTIONS FOR DISTRIBUTION

DISTRIBUTION OF TECHNICAL REPORTS AND FINAL REPORT

The minimum distribution of technical reports and the final report submitted in
connection with this contract is as follows:

<TABLE>
<CAPTION>
                                                               NUMBER OF COPIES
                                                     ------------------------------------
                                            DODAAD   UNCLASSIFIED/   UNCLASSIFIED/LIMITED
                ADDRESSEE                    CODE      UNLIMITED        AND CLASSIFIED
                ---------                   ------   -------------   --------------------
<S>                                         <C>      <C>             <C>
Program Officer, Paula Furman               N00014         1                   1
E-Mail: Paula_Furman@onr.navy.mil

Administrative Contracting Officer*         S3915A         1                   1

Director, Naval Research Lab                N00173         1                   1
Attn: Code 5227
4555 Overlook Avenue, SW
Washington, D.C. 20375-5320
E-mail: reports@library.nrl.navy.mil

Defense Technical Information Center 8725   HJ4701         2                   2
John J. Kingman Road
STE 0944
Ft. Belvoir, VA 22060-6218
E-mail: tr@dtic.mil
</TABLE>

*    Send only a copy of the transmittal letter to the Administrative
     Contracting Officer; do not send actual reports to the Administrative
     Contracting Officer.

ELECTRONIC SUBMISSIONS OF TECHNICAL REPORTS IS PREFERRED AND ENCOURAGED.
ELECTRONIC SUBMISSION SHOULD BE SENT TO THE E-MAIL ADDRESSES PROVIDED IN THE
ABOVE TABLE, HOWEVER PLEASE NOTE THE FOLLOWING:

-    Only Unlimited/Unclassified document copies may be submitted by e-mail.

-    Unclassified/Limited has restricted distribution and a classified document
     (whether in its entirety or partially) is to be distributed in accordance
     with classified material handling procedures.

-    Electronic submission to DIRECTOR, NAVAL RESEARCH LAB, shall be
     unclassified/unlimited reports and 30 pages or less. If unclassified and
     more than 30 pages, hardcopies of reports must be mailed.

-    Electronic submission to DTIC shall be unclassified/unlimited reports. If
     submission is for limited documents, please send them in on a disk or sign
     up for DTIC's web-based document submission system at
     http://www.dtic.mil/dtic/submitting/elec_subm.html.

If the Program Officer directs, the Contractor shall make additional
distribution of technical reports in accordance with a supplemental distribution
list provided by the Program Officer.

Contract Number: N00014-05-C-0384

<PAGE>

DISTRIBUTION OF PROGRESS REPORTS, WHICH ARE NOT, TECHNICAL REPORTS

The minimum distribution for reports that are not technical reports is as
follows:

<TABLE>
<CAPTION>
                                                               NUMBER OF COPIES
                                                     ------------------------------------
                                            DODAAD   UNCLASSIFIED/   UNCLASSIFIED/LIMITED
                ADDRESSEE                    CODE      UNLIMITED        AND CLASSIFIED
                ---------                   ------   -------------   --------------------
<S>                                         <C>      <C>             <C>
Program Officer, Paula Furman               N00014         1                   1
E-Mail: Paula_Furman@onr.navy.mil
Administrative Contracting Officer*         S3915A         1                   1
</TABLE>

*    Send only a copy of the transmittal letter to the Administrative
     Contracting Officer; do not send actual reports to the Administrative
     Contracting Officer.

Contract Number: N00014-05-C-0384

<PAGE>

STATEMENT OF WORK

TASK GROUP 1.0: REQUIREMENTS

1.1 PREPARATION OF DESIGN REQUIREMENTS - OPT will prepare a document that states
the requirements of the scaled up advanced WEC system for Hawaii in order to
guide design work. The design requirements document prepared in earlier work may
be used as a template or baseline if deemed adequate or helpful in this purpose.
OPT will solicit input from the project team and the program review board in the
preparation of the design requirements.

1.2 PREPARATION OF TEST REQUIREMENTS - OPT will prepare a test requirements
document that will identify parameters to be tested, the method of test, how the
data is to be managed and analyzed, and the sampling rate. OPT will solicit
input from the project team and the program review board in the preparation of
the test requirements.

1.3 REVIEW OF PREVIOUS PROGRAM RESULTS - OPT and the project team will review
the results of the work performed under the previous WET Project Multi-Buoy
Power Integration Development Program. The team will review "lessons learned"
from that program and utilize fundamental design parameters applicable to the
larger scale advanced WEC. Areas of continued development and investigation will
be identified.

1.4 CONCEPT MODELING AND DESIGN ANALYSIS - OPT (and designated contractors as
required) will engage in modeling, simulation work, and trade studies to arrive
at an [**]. Key design parameters will be identified and alternative design
solutions will be investigated. Various design options will be matched against
the design requirements for compliance. OPT will prepare and provide technical
reports as called out by the Navy in the CDRL items, performing necessary
requirements validation through laboratory testing, and conducting design
reviews with the Navy.

1.5 STUDY OF ENVIRONMENTAL CONSIDERATIONS - OPT and the project team will review
the [**] and prepare a document that defines the advanced system with respect to
environmental considerations.

1.6 [**] AND EVALUATION - OPT, the project team and the [**] board will hold a
formal [**] meeting. The [**] will be evaluated, discussed and rated as to their
relative merits versus the requirements, and [**] will be selected. The [**]
will be further reviewed by the project team for conformance to [**] and test
requirements and for an assessment of risk. Based on the program progress and
material presented, the program [**] board will make recommendations for moving
forward to the next task group.

TASK GROUP 2.0: PRELIMINARY DESIGN PHASE

2.1 BUOY SCALING FOR MCBH SITE WAVE CLIMATE - OPT will [**]. The [**] will yield
key parameters such as [**] to be used in establishing the structural and
equipment requirements for both prevailing and maximum design ocean conditions.
The [**] will consist of [**].

2.2 POWER SYSTEMS SPECIFICATIONS - OPT will provide specifications for the new
[**] to support follow-on designs of critical components for the [**]. A scheme
for [**] will be specified. A one-line diagram will be produced. [**]. [**] for
the [**] will be calculated.

2.3 SEA-KEEPING AND SAFETY COMPONENTS SPECIFICATIONS - OPT and its contractors
will determine the [**]. Previously designed system [**] configurations will be
[**] as appropriate for the [**]. The final configuration of equipment design
and structural members will be designed to accommodate the [**] under certain
maximum ocean conditions.

2.4 INSTALLATION, RETRIEVAL AND MAINTENANCE CONSIDERATIONS - OPT will determine
necessary installation, retrieval and maintenance procedures for the [**]. A
configuration of [**] and [**] features and [**] will be established to
accommodate the [**] and [**] required for [**].

2.5 ESTABLISH STRUCTURAL, MECHANICAL SPECIFICATIONS - This task includes [**],
and determination of key structural components of the [**] based on [**] and
[**] from [**]. An initial [**] is prepared in order to establish [**] and [**]
based on [**] summaries. A [**] will be conducted on the [**]. A [**] of the
mechanical systems will be conducted by the project team.

N00014-05-C-0384

                                  Attachment 1

<PAGE>

2.6 ESTABLISH ELECTRICAL SPECIFICATIONS - OPT will design the [**] system for
the [**]. This includes detailed specifications for [**] for the [**]. OPT will
determine [**] and [**] necessary for [**] of the WEC into the [**] system. OPT
will review the [**] and relevant [**] from existing unit tests. This
engineering work will form the basis for [**] during the test phase.
Specifications for the [**] and [**] will be prepared. [**] and [**] analysis of
the [**] will be conducted.

2.7 ESTABLISH [**] - OPT will develop a [**] and [**] that encompasses the
addition of a [**] with its [**] and [**]. Additional features will be necessary
for [**]. The [**] will include [**] with existing [**] and [**] will be
studied. A [**] will be conducted.

2.8 PRELIMINARY [**] REVIEW - OPT, the project team and the review board will
hold a [**] review meeting. During this review, the preliminary [**] activities
and resulting preliminary analyses and [**] will be examined for conformance to
the [**] and test requirements. [**].

TASK GROUP 3.0: FINAL DESIGN PHASE

3.1 MECHANICAL DESIGN AND CREATION OF FABRICATION DRAWINGS - This task includes
converting the [**] for the [**] and [**] into a detailed design that meets the
required [**] and [**] requirements. This effort includes [**], and providing a
[**]. Reviews with [**] will be held to [**]. This task will include the [**].

3.2 POWER TAKE-OFF AND POWER CONVERSION SYSTEM SPECIFICATIONS - OPT will prepare
[**] to allow [**] such equipment. Reviews with [**] will be held to insure [**]
for the new system.

3.3 CIRCUIT DESIGN AND HARDWARE SPECIFICATIONS - Based on the [**] system
designs, OPT will specify the [**] to enable integration of the [**]. Circuit
diagrams and drawings, including [**] diagrams will be prepared. Proper [**]
will be prepared for the [**]. [**] will be produced for [**]. Reviews with [**]
will be held to insure [**].

3.4 [**] - OPT will prepare a detailed [**] document that encompasses the [**]
for the [**] as well as the [**]. Reviews with [**] will be held to insure [**].
OPT will prepare final specifications and drawings to [**].

3.5 FINAL DESIGN REVIEW - OPT, the project team and the review board will hold a
formal design review meeting. During this review, the final design activities,
analyses and resulting final design will be examined for conformance to the
design and test requirements. [**].

TASK GROUP 4.0: OCEAN TEST PREPARATION- PLAN, BUILD AND INSTALL

4.1 FABRICATION, INSTALLATION AND TEST PLANS - Plans for the fabrication,
installation and testing phases of the project will be drafted by OPT and its
contractors, and circulated to the project team for feedback, leading up to a
review of such plans. Test plans will include [**]. Installation plans will
include [**]. Installation plans will be in sufficient detail to denote
responsibilities, communications, methods, equipment, contingencies, and timing.
The project team will participate in fabrication, installation and test plan
reviews; necessary contractors will be involved. The purpose of reviews is to
insure that ocean test and installation plans have been established to satisfy
the following criteria:

     [**]

4.2 SYSTEM PROCUREMENT & FABRICATION - This task includes activities involved in
procurement, fabrication, supplier and QA management. For major expense items,
where possible, [**]. Long lead-time items will be identified and [**] to allow
the final installation and ocean test schedules to be met.

4.3 [**] ASSEMBLY AND TEST IN-HOUSE - The [**] and [**] and sub-assemblies for
the [**] will be [**].

4.4 FINAL ASSEMBLY AND TEST AT STAGING AREAS - All [**] will be shipped to the
[**] for final assembly into [**]. Final system testing at that stage will be
conducted to insure [**] and [**] are to specification. Integration of the [**]
will be performed.

4.5 SITE PREPARATIONS - [**]. Any necessary [**] or [**] will be installed.

4.6 PRE-DEPLOYMENT REVIEW - Prior to deployment, an on-site review by members of
the project team will be held that covers the objectives, methods, equipment,
safety, and contingency procedures intended

N00014-05-C-0384

                                  Attachment 1

<PAGE>

with respect to the installation and test plans. This will include review of
[**].

4.7 DEPLOYMENT OF [**] - The installation of the [**] will utilize [**]. All
sea-based equipment will require [**], as well as [**] to make [**]. Final
staging and fabrication will be conducted in [**] and the equipment can [**] to
the final site. The installation may be [**] and [**] and [**] will be installed
in that order. Once the required equipment is situated [**], the [**] can be
made to the existing [**] via the [**]. Once the [**], the [**] is followed
utilizing a [**] as the system is [**], and [**].

TASK GROUP 5.0: CONDUCTING THE OCEAN TEST

5.1 MONITORING, DATA COLLECTION, ANALYSIS AND REVIEW - [**] operation will be
collected and entered into the operational database. Many parameters will be
monitored electronically from sensors located throughout the system via a data
acquisition system. Other parameters will require [**]. Data from other sensing
devices such as the [**] will be collected and integrated. Analysis of the data
will identify [**]. Some of the analysis will be conducted by [**] from
spreadsheet or other database format. Data will be analyzed by [**] as required.
Members of the project team will review the results of the ocean test mid-way
through the test period. [**].

5.2 INSPECTION, MAINTENANCE, AND REPAIR - An [**] will be contracted to make
[**] to check for [**], and [**] on the sea-based equipment. [**].

5.3 DESIGN VALIDATION - Data collected via the automated data collection system
will be available in a database format suitable for analysis. [**] will be used
[**].

5.4 CONCLUSIONS AND RECOMMENDATIONS AND FINAL REVIEW - Comparisons of the [**]
will be made to form the results. Conclusions and recommendations can then be
formulated. Project members will review the results, conclusions and
recommendations, and key findings.

5.5 [**] - At the [**], the [**] will be [**]. An [**] for this task.

TASK GROUP 6.0: PROGRAM AND TECHNICAL MANAGEMENT

The OPT Technical Manager will provide the overall technical direction for this
effort in coordination with the Program Manager.

          -    Program Planning, Tracking and Technical Management - The OPT
               Technical and Program Managers will be responsible for resource
               assignment, technical direction, task direction and schedule
               management. OPT will [**].

          -    Program Meetings- Program Meetings- Program meetings will be
               established to coincide with key technical milestones.

          -    Progress Reports- OPT will prepare and distribute the minutes
               from Review Meetings, Monthly Progress Reports, and Major
               Technical Reports in accordance with the Contract Data
               Requirements List (CDRL) Items.

TASK GROUP 7.0: DELIVERABLES

Contract Data Requirements List consists of the following items;
Administrative Progress Reports (APR)
Review meeting agendas
Minutes from review meetings
Presentation materials from review meetings
Technical Documents -

               [**] as part of this contract. In addition, this report will
               include [**] of [**] including [**].

               [**] - This report will contain [**] of expected hydrodynamic and
               electrical (power) [**] and associated [**].

               [**] - This report will describe [**].

N00014-05-C-0384

                                  Attachment 1

<PAGE>

               [**] - This document will compare [**], including associated [**]
               and/or the [**].

               [**] - This report will contain [**] subsystems, [**]. The report
               will outline installation, repair, and recovery scenarios and
               risk analyses.

               [**] - This report will contain [**] information for all system
               components.

               [**]- This plan will describe [**] associated with [**]. It will
               include all parameters to be monitored while the system is
               deployed- [**].

               [**]- This report will [**].

               [**] - This report will summarize the [**] results of at-sea
               mechanical, electrical, and hydrodynamic performance.

Final Program Report- This report will summarize final administrative aspects of
the project.

N00014-05-C-0384

                                  Attachment 1
<PAGE>

<TABLE>
<S>                                                                   <C>
               REPORT DOCUMENTATION PAGE                                Form Approved
                                                                      OMB No. 0704-0188

Public reporting burden for this collection of information is estimated to average 1 hour per
response, including the time for following instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing this collection of
information. Send comments regarding this burden estimate or any other aspect of this
collection of information, including suggestions for reducing this burden to Department of
Defense, Washington Headquarters Services, Directorate for Information Operations and Reports
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a currently valid OMB control number.

PLEASE DO NOT RETURN YOUR FORM TO THE ABOVE ADDRESS.

1. REPORT DATE (DD-MM-YYYY)         2. REPORT TYPE         3. DATES COVERED (From - To)

4. TITLE AND SUBTITLE                                      5A. CONTRACT NUMBER

                                                           5B. GRANT NUMBER

                                                           5C. PROGRAM ELEMENT NUMBER

6. AUTHOR(S)                                               5D. PROJECT NUMBER

                                                           5E. TASK NUMBER

                                                           5F. WORK UNIT NUMBER

7. PERFORMING ORGANIZATION NAMES(S) AND ADDRESS(ES)        8. PERFORMING ORGANIZATION REPORT

9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES)    10. SPONSOR/MONITOR'S ACRONYM(S)

                                                           11. SPONSOR/MONITOR'S NUMBER(S)

12. DISTRIBUTION/AVAILABILITY STATEMENT

Distribution authorized/limited to U.S. Government Agencies only; report contains proprietary
data produced under SBIR(or STTR) contract (whichever applies). Other requests shall be
referred to the performing organization in Block 7 of this form.

13. SUPPLEMENTARY NOTES

14. ABSTRACT

This record was developed under a SBIR or STTR (Cite the appropriate Program) contract award
for Solicitation topic # _____.

15. SUBJECT TERMS

16. SECURITY CLASSIFICATION OF:   17. LIMITATION   18. NUMBER   19A. NAME OF RESPONSIBLE
                                                                     PERSON

A. REPORT   B. ABSTRACT   C. THIS PAGE                          19B. TELEPHONE NUMBER
                                                                     (include area code)

                                                                 STANDARD FORM 298(REV. 8-98)
                                                               PRESCRIBED BY ANSI STD. Z39.18
</TABLE>

N00014-05-C-0384                                           Attachment 2
<PAGE>

                     FINANCIAL ACCOUNTING DATA SHEET - NAVY

<TABLE>
<S>                             <C>                   <C>                 <C>                      <C>           <C>
1. CONTRACT NUMBER (CRITICAL)   2. SPIIN (CRITICAL)   3. MOD (CRITICAL)   4. PR NUMBER                           PAGE 1 OF 1

   N0001405C0384                                                             05PR09436-00

          6. LINE OF ACCOUNTING
          ----------------------------------------------------------------------------------------
                                                                                   K.
                                                                                      COST CODE
          A.         B.            C.         D.              H.                   ---------------                NAVY INTERNAL
          ACRN       APPROPRIATION SUBHEAD    OBJ E.   F.  G. AAA        I. J.      PROJ      PDLI 7.  AMOUNT        USE ONLY
CLIN/SLIN (CRITICAL) (CRITICAL)    (CRITICAL) CLA PARM RFM SA (CRITICAL) IT PAA     UNIT MCC & SUF   (CRITICAL)    REF DOC/ACRN
--------- ---------- ------------- ---------- --- ---- --- -- ---------- -- ------ ----- --- ----- ------------- ---------------
              AA        1751319       W3DK    255  RA  333  0   068342   2D 000000 09019 000  4KT0 $2,799,405.00 PR#05PR09436-00
                                                                                                                 FRC: 34KT

                                                                                        PAGE TOTAL $2,799,405.00

                                                                                       GRAND TOTAL $2,799,405.00

PREPARED/AUTHORIZED BY:                                COMPTROLLER APPROVAL:
                                                          FOR FISCAL DATA AND SIGNATURE

                                                          BY                                  for COMPTROLLER, ONR CONTRACT REVIEWED
                                                             --------------------------------
DATE:                                                  DATE:
</TABLE>

ONR AWARD FORM (2/00) - version 1.1

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