Document:

Varitek Promissory Notes to Lockheed Martin Space Operations

 Promissory Note 
 $480,483.54 
  
 Exhibit 10.28 
  
 PROMISSORY NOTES 
  

	 $480,483.54
	 	City of Houston

  
 State of Texas

  
 December 19, 2002 
  
 FOR FAIR VALUE RECEIVED AND ACKNOWLEDGED, Varitek Industries, Inc.
(Payee), City of Houston, County of Harris, State of Texas, promise to pay to the order of Lockheed Martin Services, Incorporated, doing business as Lockheed Martin Space Operations (Holder), without grace, on or before August 31, 2003 the principal
sum of Four Hundred Eighty Thousand Four Hundred Eighty-Three Dollars and Fifty-Four Cents (American) ($480,483.54) together with interest from the date of November 30, 2002 at a rate of six percent (6%) per annum on the unpaid balance in accordance
with the following provisions: 
  
 Unless Payee makes periodic
principal payments to Holder during the term of this agreement, effective August 31, 2003, Varitek Industries, Inc. (Payee) shall pay to Holder without grace $480,483.54 plus accrued interest of $22,059.27 for the total sum of
                    . The payment schedule is provided as Attachment B hereto. 
  
 This Note and the instruments securing it are to be governed, interpreted and construed by, through and under the laws of
the State of Texas. This Note may be prepaid in whole or in part at any time without penalty or premium. If prepayment of principal is made, such amount shall be applied in the inverse order such installment payments are due, applying first to the
last principal installment due hereunder. 
  
 This Note is
partially secured by the equipment detailed in Attachment A hereof as collateral as well as computer source code produced under contract VSG 2001-02 as amended with the Holder. 
  
 For any remaining payments plus interest, that are not secured by the equipment described in Attachment A hereof, the Holder
is given a continuing lien for the remaining amount of the obligations evidenced by this note on any and all money, securities, and other property of Payee and of the proceeds, now or hereafter actually or constructively held or received by, or in
transit in any manner, to Payee, its correspondents, or its agents, from or for the Payee, whether for safekeeping, custody, pledge, transmission, collection, or otherwise, or coming into Payee’s possession in any way, and also on any and all
deposits, general or special, and credits of Payee with Holder, and any and all claims of Payee against Holder existing at any time. 
  
 Holder is not required to rely on collateral for the payment of this note in the event of default by Payee, but may proceed directly against the Payee in
such manner as Holder deems desirable or appropriate. None of the rights and remedies of Holder is to be waived or affected by failure or delay to exercise them. All remedies conferred on Holder by this note or any other 

 instrument or agreement shall be cumulative, and none is exclusive. Such remedies may be exercised concurrently or
consecutively at Holder’s option. 
  
 The Payee authorizes
any attorney at law to appear in any court of record in the State of Texas, or any other state in the United States, on default in the payment of this obligation and waive the issuance and service of process, and confess judgment against the Payee
in favor of the Holder for the amount of the note, together with costs of the suit and reasonable attorney fees to the extent permitted by applicable law, and to release all errors and waive all rights of appeal. 
  
 This note shall be governed by and construed in accordance with the laws of
the State of Texas. To the extent that any portion of this note is determined to be unenforceable under the laws of Texas, the remainder of this note shall be unaffected and shall continue to be enforceable against the Payee as written. 

 
  Executed this 19th day of December, 2002. 
   
 
	
	         /s/    Randy S.
Bayne

	(Signature)

   
 
	
	         Randy S. Bayne

	(Printed Name)

   

	
	

	(SSN)

  
 Notary Seal

  
  

 2 

 Promissory Note 
 $480,483.54 
  
 ATTACHMENT A 
  
 Secured Equipment List 
  

	 Rack 1

	 	 Equipment Description

	 	 Serial #

	 Access Server
	 	 	 	 
	 Switch
	 	 	 	 
	 Switch
	 	 	 	 
	 Switch
	 	 	 	 
	 Local Director
	 	 	 	 
	 KVM Switch Monitor Key
	 	 	 	 
	 Storage Works
	 	 	 	 
	 Firewall
	 	 	 	 
	 Raid Array
	 	 	 	 
	 Web Server
	 	 	 	 
	 Communication Server
	 	 	 	 
	 Database Server
	 	 	 	 
	 Application Server
	 	 	 	 

  

	 Rack 2

	 	 Equipment Description

	 	 Serial #

	 Access Server
	 	 	 	 
	 Switch
	 	 	 	 
	 Switch
	 	 	 	 
	 Switch
	 	 	 	 
	 Local Director
	 	 	 	 
	 KVM Switch Monitor Key
	 	 	 	 
	 Storage Works
	 	 	 	 
	 Firewall
	 	 	 	 
	 Web Server
	 	 	 	 
	 Communication Server
	 	 	 	 
	 Database Server
	 	 	 	 
	 Application Server
	 	 	 	 

 ATTACHMENT B 
  
 Payment Schedule 
  

	Payment Schedule
	 LOAN AMOUNT ($)
	 	$480,483.54	 	 	 	Interest Amount	 	$22,059.27
	 ANNUAL INTEREST RATE %
	 	 	 	6	 	 	 	 
	 LENGTH OF LOAN (YEARS)
	 	 	 	1	 	 	 	 
	 NO. OF PAYMENTS PER YEAR
	 	 	 	12	 	 	 	 
	 COMPOUNDING PERIODS
	 	 	 	12	 	 	 	 

  

	 Pmt

	 	 Due Date

	 	 Beginning Balance

	 	 Scheduled
Payment

	 	 Interest
 Portion

	 	 Principal
 Portion

	 	 Optional Payments

	 	 Closing
 Balance

	
	Final Payment = Beginning Balance + Interest
	
	$502,542.81  $480,483.54  $22,059.27

  

 4Engineering and Development Agreement with Lockheed Martin Space Operations

 Exhibit 10.29 
  
 CONTRACT 
  

	 Contract Number
	 	 	  	VSG-2001-002

  
 Between 
  
 LOCKHEED MARTIN [LOGO] 
  
 Lockheed Martin Services, Inc. 
 Lockheed Martin Space Operations 
  
 And 
  
 VARITEK [LOGO] 
  
 Varitek Industries, Inc. 
  
 For 
 VARILINK PHASE I AND PHASE II 
  
 PROPRIETARY NOTICE 
  
 The information contained herein is proprietary to Lockheed Martin Services, Inc., is to be used by Varitek Industries,
Inc. solely for the purpose of this Contractual relationship, and shall not be disclosed in whole or in part to any other party without the prior written permission of Lockheed Martin Services, Inc. 
  

 Table Of Contents 
  

	 ARTICLE 1. SCOPE OF WORK
	  	2
		
	 ARTICLE 2. CONTRACT PRICE
	  	3
		
	 ARTICLE 3. TAXES
	  	4
		
	 ARTICLE 4. DELIVERY
	  	4
		
	 ARTICLE 5. PAYMENT
	  	4
		
	 ARTICLE 6. INSPECTION AND FINAL ACCEPTANCE
	  	6
		
	 ARTICLE 7. ACCESS TO WORK
	  	6
		
	 ARTICLE 8. EXCUSABLE DELAYS
	  	6
		
	 ARTICLE 9. DATA RIGHTS
	  	7
		
	 ARTICLE 10. DISCLOSURE AND USE OF INFORMATION BY THE PARTIES
	  	7
		
	 ARTICLE 11. PROPERTY LIABILITY AND INDEMNIFICATION
	  	9
		
	 ARTICLE 12. LIMITATION OF LIABILITY
	  	9
		
	 ARTICLE 13. EXPORT REQUIREMENTS
	  	9
		
	 ARTICLE 14. ARBITRATION
	  	10
		
	 ARTICLE 15. PUBLIC RELEASE OF INFORMATION
	  	11
		
	 ARTICLE 16. WARRANTY
	  	11
		
	 ARTICLE 17. MISCELLANEOUS PROVISIONS
	  	11
		
	 ARTICLE 18. ENTIRE AGREEMENT
	  	13
		
	 EXHIBIT A – STATEMENT OF WORK
	  	14
		
	 EXHIBIT B – DISCREPANCY REPORT SEVERITY DEFINITION
	  	16

	LOCKHEED MARTIN [LOGO]	 	VARITEK [LOGO]

  
 PREAMBLE 
  
 THIS CONTRACT, made as of the 16th day of August, 2001, by and between VARITEK INDUSTRIES, INC. (hereinafter called “VATK” or “Buyer”), a company
organized and existing under the laws of the State of Texas, U.S.A. and having its principal place of business at 8748 Clay Road, Suite 308, Houston, Texas 77080, and LOCKHEED MARTIN SERVICES, INC., (hereinafter called “LMSI”
or “Seller”) a corporation organized and existing under the laws of the State of Delaware, U.S.A. and having a place of business at 2339 Route 70 West, Cherry Hill, New Jersey 08358, acting by and through its LOCKHEED MARTIN
SPACE OPERATIONS (hereinafter called “LMSO”) business, with a principal office at 2625 Bay Area Blvd, Houston, Texas 77058. The Buyer and Seller may hereinafter be referred to individually as a “Party” and collectively as the
“Parties”). 
  
 WITNESSES THAT: 
  
 WHEREAS, Buyer has the need to procure Engineering Services and 
  
 WHEREAS, Seller is willing to supply said Engineering Services; 
  
 NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the
Parties hereby agree as follows: 
  
 Article 1. Scope of Work 

 

	A.	 	Seller shall provide its best efforts to deliver to the Buyer the Engineering Services as set forth in Article 2 of this Contract 

  

	B.	 	The Seller shall provide engineering services on a level of effort basis to support the Buyer’s Phase I product launch to market and produce improvements toward a Phase II
product. Any specific task requested outside this support will be evaluated on a case-by-case basis. (Added by Modification No. 3). 

  

	C.	 	Seller shall provide two office spaces at 3700 Bay Area Boulevard to include full service of common areas, janitorial services, reproduction equipment, utilities, security services,
IT support, and local and long distance telephone service to the Buyer from March 1 through August 31, 2002. (Added by Modification No. 3) 

  

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	LOCKHEED MARTIN [LOGO]	 	VARITEK [LOGO]

  
 Article 2. Contract Price

  

	A.	 	The Seller shall deliver Engineering Services to the Buyer at the time and material rates specified below. These rates will remain firm during the period of this contract.

  

	Basis	 	Description	 	Hourly Rate
	 Time and Materials
 (T&M)
	 	 System Definition
 System Implementation (Ph
I)
 System Implementation (Ph II) (Added by Modification No. 3)
	 	 $90.00 (USD)
 $95.00 (USD)
 $125.00 (USD)

			
	Basis	 	Description	 	Reimbursement Rate
	 Travel and Expenses
 (T&E)
	 	 Travel and Expenses
 Required travel between
Principal Offices of Buyer and Seller in fulfillment of Engineering Services
	 	$0.345 per mile plus 7% administrative rate
			
	Basis	 	Description	 	Reimbursement Rate
	 Travel and Expenses
 (T&E)
	 	 Travel and Expenses
 Required travel other
than between Principal Offices of Buyer and Seller in fulfillment of Engineering Services
	 	 Reasonable and Actual Expenses,
 plus 7% administrative rate

			
	Basis	 	Description	 	Reimbursement Rate
	 Change Requests
 (Added by Modification No. 1)
	 	Additional Labor, Material, and Travel as Submitted and Approved through Feb 4, 2002	 	$296,924.00
			
	Basis	 	Description	 	Reimbursement Rate
	 Change Requests
 (Added by Modification No. 2)
	 	Additional Labor, Material, and Travel as Submitted and Approved through Mar 5, 2002	 	$189,352.00

  

	B.	 	There are no material costs included in the above prices. Material estimated to be valued $100,000.00 and below will be coordinated by e-mail with the Buyer. Material estimated to
be in excess of $100,000.00 shall require formal notification be provided for Buyer’s approval. Material purchases in excess of $10,000 shall be paid by Buyer in advance of procurement by Seller. (Added by Modification No. 3)

  

	C.	 	The estimated value of this contract through April 30, 2003, is: 

  

	 Labor, Travel, and Material: August 20, 2001, through May 5, 2002
	  	$	3,213,600.00
	 Labor, Travel, and Material: May 6, 2002, through April 30, 2003
	  	$	2,000,000.00
	 Total Estimated Contract Value
	  	$	5,213,600.00

  
 (Added by Modification No. 3) 
  
  

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	LOCKHEED MARTIN [LOGO]	 	VARITEK [LOGO]

  

	D.	 	The Parties agree to meet every four (4) months during the performance period of the contract (through April 30, 2003) to evaluate warranted changes to current contract terms.
Mutually agreed changes will be based on changes in the operating environment such as any significant change to the skill mix of the ES team, to Varitek’s financial position, and to other events that have a direct effect on contract terms and
conditions. All changes will be formalized with a bilateral modification to this contract. (Added by Modification No. 3) 

  
 Article 3. Taxes 
  
 Seller shall be responsible for payment of all U.S. taxes as included in the Contract Price in Article 2. 
  
 Article 4. Delivery 
  

	 	A.	 	The period of performance for the System Definition Phase is scheduled to be August 20, through October 4, 2001. 

  

	 	B.	 	The period of performance for the System Implementation (Phase I) is scheduled to be October 4, 2001, through May 5, 2002. (Extended by Modification No. 1, Changed by Modification
No. 3) 

  

	 	C.	 	The period of performance for System Implementation (Phase II) is scheduled to be May 6, 2002, through April 30, 2003. (Added by Modification No. 3) 

  

	 	D.	 	Any deliverables will be provided to the Buyer’s location as provided below: 

  
 Buyer(s) Location 
  
 Varitek Industries, Inc. 
 8748 Clay
Road, Suite 308 
 Houston, Texas 77080 
 Attention: Mr. Barth Loney 
  
 Article 5. Payment 
  

	 	A.	 	Payments shall be made monthly at the rates stipulated in Article 3 based upon invoices for the actual hours delivered for the preceding month plus any travel or

  

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 material authorized by
the Buyer. All payments shall be made in US Dollars. All payments shall be net 30 days after receipt of the invoice by the Buyer either by mail or electronically, as follows: 
  

	 By Mail/Check

	 	 By Electronic Funds Transfer

	 Accounts Receivable
	 	CitiBank, N. A.
	 Lockheed Martin Services, Inc.
	 	ABA #0210-00089
	 2339 Route 70 West
	 	Lockheed Martin Space Mission Systems and Services
	 Cherry Hill, NJ 08358-0001
	 	Account #4070-9612

  

	 	B.	 	The following payment schedule is effective April 1, through October 1, 2002: 

  

	 Date of
 Payment

	 	 Principal
 Payment

		
	 4/1/2002
	 	$100,000.00
		
	 5/9/2002
	 	$100,000.00
		
	 5/13/2002
	 	$520,000.00
		
	 5/31/2002
	 	$300,000.00
		
	 7/1/2002
	 	$300,000.00
		
	 8/1/2002
	 	$300,000.00
		
	 9/2/2002
	 	$300,000.00
		
	 10/1/2002
	 	$300,000.00

  

	 	C.	 	Any payment not received within thirty days after receipt of invoice will accrue interest at the rate of one and a quarter percent (1.25%) per thirty-day period from date of invoice
to date of receipt of payment. (Added by Modification No. 3) 

  

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 Article 6. Inspection and Final
Acceptance 
  

	 	A.	 	Inspection – Buyer, or its designated representative (which representative shall be subject to Seller’s reasonable prior approval), shall have the right to inspect
Seller’s performance on a non-interference basis with prior notice during normal business hours. 

  

	 	B.	 	Final Acceptance – Final Acceptance of the Varilink System Implementation shall be deemed to occur after successful completion of the performance of the required tasks
and Seller’s written notification to Buyer upon successful completion of performance. 

  
 Article 7. Access to Work 
  

	 	A.	 	For the purpose of observing Seller’s performance hereunder, Seller shall afford reasonable access to all work in process under this Contract on a non-interference basis at
Seller’s or its Major Subcontractors’ facilities to a limited number of Buyer’s personnel or Buyer’s consultant(s), provided that Seller is able to first reasonably approve any such consultant(s). In consideration therefore,
Buyer agrees that all Buyer’s personnel and consultants will adhere to Seller’s procedures, including without limitation all safety and security measures and any restrictions required by the U.S. Government regarding export controls.

  

	 	B.	 	Information of any nature disclosed to Buyer pursuant to this Article shall be deemed proprietary information subject to the restrictions on use and disclosure set forth in Article
10 of this Contract. 

  
 Article 8. Excusable Delays

  

	 	A.	 	Without limiting any other provision specifying what constitutes an excusable delay under this Contract, acts of God; acts of any government in its sovereign or contractual
capacity, but not limited to government priorities, allocations regulations or orders affecting materials or facilities, fires; floods; snowstorms; earthquakes; epidemics; quarantine restrictions; wars, riots, rebellions, insurrections or civil
unrest; freight embargoes, strikes or other work stoppages; or any other events which cause failure or delay to perform hereunder and in every case are beyond the reasonable control and without the fault or negligence of Seller or its subcontractors
hereunder, shall constitute an excusable delay. In the event of a delay resulting from any of the above causes, Seller shall be entitled to an equitable adjustment in the Contract price and delivery schedule. 

  

	 	B.	 	The Seller shall promptly notify the Buyer in writing within a reasonable time after the occurrence of an excusable delay event specified in paragraph A of this Article. Thereafter,
the Seller shall provide written documentation specifying the cause of the delay. A notice of a claim for equitable adjustment of any affected 

  

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 delivery dates and
Contract price shall be given in writing within sixty (60) calendar days from the date the event causing the excusable delay ceases to exist. 
  

	 	C.	 	The Seller shall use reasonable efforts to mitigate the delaying effect of any excusable delay event under this Contract, but the Seller need not, for example, settle strikes or
other work stoppages on terms that it considers unfavorable to it. The Seller shall keep the Buyer informed about the status of any continuing excusable delay event. 

  
 Article 9. Data Rights 
  

	 	A.	 	Upon Seller’s delivery of system and Buyer’s payment of total contract value, all source code and engineering drawings will be provided to Buyer. Buyer shall own
exclusively any data, licenses, patents, and other intellectual property developed under this contract. (Added by Modification No. 1) 

  

	 	B.	 	Nothing in this Contract shall convey to Buyer a license under any patent rights or other intellectual property rights owned or controlled by Seller. Any product related information
or sensitive proprietary information supplied by Seller shall remain Seller’s property and shall be held in confidence by Buyer. Buyer may reproduce Seller’s data for internal use only within Buyer’s organization. The release of
Seller’s data to a third party is prohibited. Buyer shall maintain adequate procedures for control and protection of said data in accordance herewith. A copy of such procedure shall be provided to Seller upon request. Buyer shall also maintain
adequate records relating to the location and use of Seller’s data. These records shall include, without limitation, physical location of data; names of individuals who have had access to such data, including the purpose for such access; and an
accounting of the reproductions which have been made of such data, the physical location thereof, and the reason therefore. These records shall be made available to Seller for examination and audit at reasonable times at Buyer’s facility. Buyer
shall provide the same degree of protection to data provided orally as is required for written or pictorial data. 

  
 Article 10. Disclosure and Use of Information by the Parties 
  

	 	A.	 	If documents supplied by one Party to the other are marked with a proprietary legend, the receiving Party shall take all necessary steps to ensure that the documents and contents of
such documents are not disclosed to any person other than a person employed or engaged by the receiving Party, whether under subcontract or otherwise, for the performance of this Contract. Any such document supplied hereunder shall be returned to
the disclosing Party together with any copies thereof promptly upon written request of the disclosing Party, except for one copy to be retained for legal purposes. 

  

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 All previous
documentation created or generated by Varitek Industries, Inc. prior to Contract award, whether or not specifically marked with a proprietary legend, shall be afforded the same protections and handling as documents provided by Varitek Industries,
Inc. that are specifically marked with a proprietary legend. Whenever the receiving Party makes copies of such proprietary documents for performance of work covered by this Contract, the receiving Party shall mark each such copy as proprietary to
the disclosing Party. In no event shall Buyer release or disclose such proprietary information to a competitor of Seller’s. 
  

	 	B.	 	Any disclosure to any person permitted under paragraph A. above shall be made under the same conditions that apply to the initial disclosure and shall extend only so far as may be
necessary for purposes of performance of this Contract. Any such disclosure to a person other than an employee of the receiving Party shall be made pursuant to a written confidential disclosure agreement or with prior written approval of the
disclosing Party. Buyer hereby approves disclosure for the purpose of Seller’s subcontracting hereunder. 

  

	 	C.	 	Except with the written consent of the disclosing Party, the receiving Party shall not make use of any proprietary document (or the proprietary information contained therein)
described in paragraph A of this Article other than for purposes of performance of this Contract. 

  

	 	D.	 	The obligations and restrictions imposed by this Article shall not apply to information: 

  

	 	(1)	 	that is or becomes available to the public from a source other than the receiving Party and without breach of this Contract; 

	 	(2)	 	that is authorized for release in writing by the disclosing Party; 

  

	 	(3)	 	that is lawfully obtained by the receiving Party without restriction from a third party; 

  

	 	(4)	 	that is known by the receiving Party without restriction prior to such disclosure; or 

  

	 	(5)	 	that is, at any time, developed by the receiving Party completely independently of any proprietary information of the disclosing Party. 

  

	 	E.	 	Neither Party shall be liable for the inadvertent or accidental disclosure of such information marked as proprietary if such disclosure occurs despite such Party having exercised
reasonable efforts to preserve and safeguard such information. 

  

	 	F.	 	Neither Party shall be liable for the disclosure of proprietary information of the other Party’s pursuant to any legally enforceable requirement of any court or of the U.S.
Government or any agency or department thereof. 

  

	 	G.	 	No license under any patents or copyrights is granted or implied by disclosing or conveying Data and Documentation or other information under this Contract.

  

	 	H.	 	Any proprietary disclosure to either Party, if made orally or visually, shall be so identified at the time of disclosure and shall be promptly confirmed in writing by

  

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 the disclosing Party
and identified as proprietary information if the disclosing Party wishes to keep such information proprietary under this Contract. 
  

	 	I.	 	The obligations of this Article shall be effective with respect to particular information for a period of seven (7) years from the date of first disclosure of that particular
information hereunder notwithstanding any prior termination or expiration of this Contract. 

  
 Article 11. Property Liability and Indemnification 
  
 Seller and Seller’s Suppliers, and the personnel of each, shall not be liable for any injury to (including death of) Buyer’s employees or third parties, or for any loss or damage to Buyer’s property or
third parties’ property, the property of Buyer’s employees, or the property arising in connection with the performance of this Contract, including any tortious acts of Seller or Seller’s Suppliers. To the maximum extent permitted by
law, Buyer shall hold harmless and indemnify Seller, Suppliers, and the personnel of each against any claim, liability, damage, loss, cost or, expense, including without limitation attorneys’ fees, arising out of any such injury, death, loss or
damage. 
  
 Neither party shall be liable to the other for any special,
consequential, incidental, or punitive damages arising in connection with the performance of, or the failure of, the Seller to perform this Contract. 
  
 Article 12. Limitation of Liability 
  
 In no event shall Seller be liable, whether in contract, tort, or otherwise, for special, punitive, incidental, indirect or consequential damages, including, without
limitation, lost profits or revenues. In no event shall the Seller’s total liability under this Contract be greater than the contract price. 
  
 Article 13. Export Requirements 
  

	 	A.	 	This Contract is subject to all applicable United States of America laws and regulations. Buyer and Seller agree that all exchange of data and information and hardware pursuant to
this Contract shall be in strict compliance with all laws, rules, and regulations of the United States regarding exportation and re-exportation of the commodities provided under this Contract including the United States Government.

  

	 	B.	 	Buyer shall be responsible for obtaining any required authorizations such as an Export License, or any other required U.S. Government authorization. Seller shall not be liable for
any delays, or refusals by the U.S. Government to approve the export of the requirements under this contract. 

  

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	 	C.	 	Any visitors entering the Varitek offices at 3700 Bay Area Boulevard shall either be a citizen of the United States or shall have a Green Card. (Added by Modification No. 3)

  
 Article 14. Arbitration 
  

	 	A.	 	Any dispute or disagreement arising between the Parties in connection with the interpretation of any Article or provision of this Contract, or the compliance or non-compliance
therewith, or the validity or enforceability thereof, or any other dispute related to this Contract which is not settled to the mutual satisfaction of the Parties within thirty (30) days (or such longer period as may be mutually agreed upon) from
the date that either Party informs the other, in writing, that such dispute or disagreement exists, shall be settled exclusively by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, in effect on
the date that such notice is given. Arbitration shall be held in Harris County, Texas and shall apply the substantive laws of the state of Texas, excluding its conflict of law provision. 

  

	 	B.	 	Either Party demanding arbitration of a controversy shall, in writing, specify the matter to be submitted to arbitration and, simultaneously, choose and nominate a competent
individual to act as an arbitrator. Thereupon, within fifteen (15) days after receipt of such written notice, the other Party shall, in writing, choose and nominate a second competent arbitrator. The two arbitrators so chosen shall promptly meet and
endeavor to resolve the question in dispute; and, if they agree upon such determination, the determination so made shall be reduced to writing and signed by both arbitrators. 

  
 If such two arbitrators fail to agree, they shall promptly select a third
arbitrator, giving written notice to both Parties of their choice and fixing a time and place at which both Parties may appear and be heard with respect to the controversy at hand. In the event the two arbitrators fail to agree upon a third
arbitrator within a period of seven (7) days, or if, for any other reason, there is a lapse in the naming of an arbitrator or arbitrators, or in the filling of a vacancy, or in the event of failure or refusal of any arbitrator(s) to attend to or
fulfill his or their duties, then upon application by either Party to the controversy, an arbitrator or arbitrators shall be named by the American Arbitration Association. 
  

	 	C.	 	The arbitration award made shall be final and binding upon the Parties and judgment may be entered thereon, upon the application of either Party to any court having jurisdiction.
The relief that may be awarded by the arbitrators under any arbitration arising from this Contract may not exceed actual compensatory damages. In no event may the arbitrators award special, incidental, consequential 

  

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 or punitive damages.
Any relief awarded by the arbitrators shall be subject to the limitations of Article 13. 
  

	 	D.	 	Each Party shall bear the cost of preparing and presenting its case. The cost of arbitration, including the fees and expenses of the third arbitrator, will be shared equally by the
Parties unless the award otherwise provides. 

  
 Article 15.
Public Release of Information 
  

	 	A.	 	During the performance period of this Contract, neither Party, its affiliates, subcontractors, employees, agents, or consultants, shall release items of publicity of any kind,
including without limitation news releases, articles, brochures, advertisements, prepared speeches, company reports or other information releases to the public related to this Contract, including without limitation the confirmation or denial of its
negotiation, issuance, award or performance, without the other Party’s prior written consent, which consent shall not be unreasonably withheld. 

  

	 	B.	 	The seller is hereby given consent to use Buyer’s name, logotype, and a general description of the work performed for Buyer on the Seller’s web site and in Power Point
presentations. The use will be for identifying the Buyer as a customer of the Seller. 

  
 Article 16. Warranty 
  

	 	A.	 	Except as expressly provided herein, LMSI disclaims all other warranties, express or implied, in fact or by operation of law or otherwise, contained in or derived from this
agreements, any of the exhibits attached hereto, any other documents referenced herein, or in any other materials, presentation, or other documents of communications whether oral or written, including without limitation implied warranties of
merchantability and fitness for a particular purpose. 

  
 Article
17. Miscellaneous Provisions 
  

	 	A.	 	Assignment – Neither Party shall assign or delegate this Contract or any of its rights, duties, or obligations hereunder to any other person without the prior express
written approval of the other Party, which consent shall not be unreasonably withheld. Nothing contained in this Article shall restrict Seller from subcontracting work or procuring parts, materials, equipment or services in the ordinary course of
performance of this Contract. This assignment restriction shall not apply in the event of assignment by Seller to any successor corporation, subsidiary or affiliate. 

  

	 	B.	 	Applicable Law – This Contract shall be interpreted and enforced in accordance with the laws of the State of Texas, U.S.A., excluding its conflict of laws

  

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	LOCKHEED MARTIN [LOGO]	 	VARITEK [LOGO]

  
 provision. The United
Nations Convention on the International Sale of Goods does not apply to this Contract. 
  

	 	C.	 	Contract Effectivity – The Effective Date of this Contract shall be the date on which the last of the following occurs: 

  

	 	1.	 	Buyer signs this Contract 

  

	 	2.	 	Seller signs this Contract 

  

	 	D.	 	Language – This Contract and all Data and Documentation, reports and other written materials, and all communications between the Parties pursuant to performance of this
Contract, shall be in the English language. 

  

	 	E.	 	Units of Measure – Seller’s standard measurement units shall be used for drawings and technical documents supplied to either Party by the other pursuant to
performance of this Contract. 

  

	 	F.	 	Enforcement of Remedies – Unless expressly stated to the contrary within a specific Article, all rights and remedies hereunder shall be cumulative and may be exercised
singly or concurrently. Failure by either Party to enforce any of its rights under this Contract shall not be deemed a waiver of future enforcement of such rights or any other rights hereunder. 

  

	 	G.	 	Severability of Provisions – If any provision of this Contract is found to be invalid or unenforceable, it shall not affect any other provision of this Contract, and the
invalid or unenforceable provision shall be replaced with a provision consistent with the original intent of the Parties. 

  

	 	H.	 	Surviving Articles – The following Articles shall survive the completion, expiration or termination of this Contract: Article 3, Taxes; Article 10, Disclosure and Use of
Information by the Parties; Article 12, Limitation of Liability; Article 14, Arbitration; Article 17.B, Applicable Law. 

  

	 	I.	 	Correspondence – All correspondence, including notices, reports and Data and Documentation to be provided to Buyer or Seller under this Contract shall be sent to the
appropriate point(s) of contact for Buyer or Seller as follows: 

  

	 To Buyer:

	 	 To Seller:

	 Varitek Industries, Inc.
	 	 Lockheed Martin Services, Inc.

	 8748 Clay Road, Suite 308
	 	 901 Bay Area Boulevard
 PO Box 58487

	 Houston, Texas USA 77080
	 	 Houston, Texas USA 77258

	 Attention: Mr. Barth Loney
	 	 Attention: Ms. Barbara George

	 Phone: 713-690-9935
	 	 Phone: 281-218-2455

	 Fax: 713-934-8290
	 	 Fax: 281-218-2677

	 Email: bloney@varitekindustries.com
	 	 Email: barbara.george@lmco.com

  

 12 

	LOCKHEED MARTIN [LOGO]	 	VARITEK [LOGO]

  
 Either Party may change its designated
point(s) of contact upon prior written notice to the other Party. 
  
 Article
18. Entire Agreement 
  
 This Contract constitutes the entire agreement
between the Parties and supersedes all prior understandings, commitments, and representations with respect to the subject matter. It may not be amended, modified, or terminated (other than as specifically provided in the applicable Article hereof),
and none of its provisions may be waived, except by a writing signed by a legally authorized representative of each of the Parties. The paragraph headings herein shall not be considered in interpreting the text of this Contract. 
  
 IN WITNESS WHEREOF, the Parties hereto have caused their legally authorized
representatives to execute this Contract. 
  

	 LOCKHEED MARTIN SERVICES, INC.
	 	 	 	 VARITEK INDUSTRIES, INC.

			
	/s/    BARBARA A. GEORGE        	 	 	 	/s/    RANDY S. BAYNE        
	
	 	 	

	Signature	 	 	 	Signature
			
	Barbara A. George	 	 	 	Randy S. Bayne
	
	 	 	

	Typed/Printed Name	 	 	 	Typed/Printed Name
			
	Sr. Contract Administrator	 	 	 	Chairman & CEO
	
	 	 	

	Title	 	 	 	Title
			
	May 6, 2002	 	 	 	May 6, 2002
	
	 	 	

	Date	 	 	 	Date

  
  

 13 

 LOCKHEED MARTIN [LOGO] 
 Exhibit A – Statement of Work 
  
 (Changed by Modification No. 3) 
  

	A.	 	Introduction 

  
 This Statement of Work (SOW) defines the efforts to be performed by Seller in support of Buyer. The efforts under this SOW will provide a Varitek
Operations Center software system and documentation, Varilink firmware package and documentation, the design required to allow production of Varilink hardware devices and documentation, software package for the device installer and documentation, a
motherboard test stand, an assembled unit test stand, and a combination test stand. (Changed by Modification No. 1 and Modification No. 2) 
  

	B.	 	Task Definition 

  

	 	1.	 	Develop and deliver a Varilink System Phase 1 Project Plan. (Complete) 

  

	 	2.	 	Develop and deliver a Varitek Operations Center Project Implementation Plan. (Complete) 

  

	 	3.	 	Develop and deliver a Varilink Project Implementation Plan. (Complete) 

  

	 	4.	 	Develop and deliver Project Status Reports. (Complete) 

  

	 	5.	 	Conduct Project Status Reviews. (Complete) 

  

	 	6.	 	Develop and deliver a Project Completion Report. (Not Complete) 

  

	 	7.	 	Develop and deliver a Varilink Systems Requirements Document for the Varilink system including requirements for: the Varitek Operations Center, the Varilink device and all required
data interfaces. (Complete) 

  

	 	8.	 	Develop and deliver a Varilink System Design Specification. (Complete) 

  

	 	9.	 	Develop and deliver prototype graphical user interfaces layouts. (Complete) 

  

	 	10.	 	Develop and deliver a Varitek Operations Center database schema. (Complete) 

  

	 	11.	 	Develop and deliver a Varitek Operations Center test bed architecture description. (Not Complete) 

  

	 	12.	 	Develop and deliver a pre-production Varilink PCB assembly documentation package. (Complete) 

  

	 	13.	 	Develop and deliver a pre-production Varilink final assembly documentation package. (Complete) 

  

	 	14.	 	Develop and deliver a production Varilink PCB assembly documentation package. (Complete) 

  

	 	15.	 	Develop and deliver a production Varilink final assembly documentation package. (Complete) 

  

	 	16.	 	Develop and deliver a Varilink Demonstration System Requirements Specification. (Complete) 

  

	 	17.	 	Develop and deliver a Varilink Demonstration system software package. (Complete) 

  

	 	18.	 	Develop and deliver a Varilink Demonstration system firmware package. (Complete) 

  

 14 

 LOCKHEED MARTIN [LOGO] 
  

	 	19.	 	Develop the software and firmware systems necessary to implement the design specification. (Complete) 

  

	 	20.	 	Develop and deliver a System Test Plan. (Complete) 

  

	 	21.	 	Develop and deliver a System Test Procedure. (Complete) 

  

	 	22.	 	Conduct a System Test Readiness Review. (Complete) 

  

	 	23.	 	Perform and obtain customer approval for System Acceptance Testing. 

  

	 	24.	 	Develop and deliver a System Test Report. (Not Complete) 

  

	 	25.	 	Develop and deliver an Installation Test Procedure. (Complete) 

  

	 	26.	 	Develop and deliver an Installation Test Report. (Not Complete) 

  

	 	27.	 	Develop and deliver Software Users Training material. (Complete) 

  

	 	28.	 	Develop and deliver software and firmware build procedures. (Complete) 

  

	 	29.	 	Develop and deliver software and firmware build procedures. (Complete) 

  

	 	30.	 	Perform System Installation Testing. (Not Complete) 

  
  

 15 

 LOCKHEED MARTIN [LOGO] 
  
 Exhibit B – Discrepancy Report Severity Definition 
  
 (Changed by Modification No. 3) 
  

	 Severity Level

	  	 Description

	 Severity 1
	  	 A problem which has severe impact to the production application, business function, and/or service function. Code cannot be installed
in production and testing cannot proceed. Examples are:
  
 •      An error condition for which there is no viable work-a-round.
  
 •      An error that cannot be corrected with a simple changes or simple manipulations.
Testing will be suspended on the affected functionality until a resolution is found.

		
	 Severity 2
	  	 A problem which has a critical impact to the customer, member, application, business function, and/or service function. Examples
are:
  
 •      Incorrect member data.
  
 •      An error that can be corrected with ad-hoc changes to scripts.
  
 •      When a
function is not working properly. Testing may be suspended until a resolution is found. Code cannot go into production without changes, but testing might be able to proceed; work-a-rounds may have to be activated.

		
	 Severity 3
	  	A problem which has a minimal impact to the customer, member, application, business function, and/or service function. An example is incorrect report formatting.
		
	 Severity 4
	  	A problem which has a minor impact to the customer, member, application, business function, and/or service function. An example is an error that is cosmetic or
transparent.

  

 16

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