10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to

Commission file number 001-33253

FORCE PROTECTION, INC.
(Exact name of Registrant as Specified in Its Charter)

Nevada (State or Other Jurisdiction of Incorporation or Organization)	84-1383888 (I.R.S. Employer Identification No.)
9801 Highway 78, Building No. 1 Ladson, South Carolina (Address of registrant's principal executive offices)	29456 (Zip Code)
Registrant's telephone number, including area code: (843) 574-7000
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	The NASDAQ Stock Market LLC

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         The aggregate market value of the common equity held by non-affiliates of the registrant on June 30, 2008, computed by reference to the closing price for such stock on the Nasdaq Capital Market on such date, was approximately $226,044,183.

         The number of shares outstanding of the registrant's common stock as of September 9, 2008 was 68,318,162 shares.

DOCUMENTS INCORPORATED BY REFERENCE.

         None.

			Page
PART I			1
	Item 1.	Business	1
MANAGEMENT			20
	Item 1A.	Risk Factors	24
	Item 1B.	Unresolved Staff Comments	42
	Item 2.	Properties	42
	Item 3.	Legal Proceedings	43
	Item 4.	Submission of Matters to a Vote of Security Holders	45
PART II			46
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46
	Item 6.	Selected Financial Data	48
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	50
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	79
	Item 8.	Financial Statements and Supplementary Data	80
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	133
	Item 9A.	Controls and Procedures	133
	Item 9B.	Other Information	136
PART III			137
	Item 10.	Directors, Executive Officers and Corporate Governance	137
	Item 11.	Executive Compensation	138
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders	156
	Item 13.	Certain Relationships and Related Transactions and Director Independence	158
	Item 14.	Principal Accounting Fees and Services	160
PART IV			161
	Item 15.	Exhibits and Financial Statement Schedules	161

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EXPLANATORY NOTE REGARDING RESTATEMENTS

        This Annual Report on Form 10-K for our fiscal year ended December 31, 2007 includes restatements of the previously filed consolidated financial statements and data (and related disclosures) for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007; however, the Company also plans to promptly file separate amended Quarterly Reports on Form 10-Q to reflect the restated condensed consolidated financial statements for such periods. These corrections are discussed in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 16, Summarized Quarterly Unaudited Financial Data, to the accompanying consolidated financial statements included in this Annual Report on Form 10-K. We previously announced, in a Form 8-K filed with the United States Securities and Exchange Commission ("SEC") on March 3, 2008, that we will restate our previously reported condensed consolidated financial statements for the three- and nine-month periods ended September 30, 2007 as a result of errors discovered by management during its year-end review, including errors associated with inventory purchased from a subcontractor as a result of a contract termination. Additionally, we announced, in a Form 8-K filed with the SEC on August 28, 2008, that we will restate our previously reported condensed consolidated financial statements for the three-month period ended March 31, 2007 and the three- and six-month periods ended June 30, 2007 as a result of errors discovered by management during its year-end and quarterly review, including errors associated with recognizing the value of revenues, certain accrued liabilities, inventory and deferred expenses in the proper quarterly periods.

PART I

ITEM 1.    BUSINESS

        We are an important provider of blast- and ballistic-protected products used to support armed forces and security personnel in harm's way. We design, manufacture, test, deliver and support our blast- and ballistic-protected products to increase survivability of the users of our products. Our specialty vehicles, which we believe are at the forefront of blast- and ballistic-protected technology, are designed to protect their occupants from landmines, hostile fire, and improvised explosive devices ("IEDs"). We are an important provider of vehicles for the U.S. military's Mine Resistant Ambush Protected ("MRAP") vehicle program, which is currently one of the highest priority acquisition programs for the U.S. Department of Defense ("DoD") according to a memorandum from Secretary of Defense Robert Gates dated May 2, 2007.

        During the period from January 1, 2006 through December 31, 2006, we delivered 285 vehicles under blast- and ballistic-protected vehicle programs. During the period from January 1, 2007 through December 31, 2007, we delivered 1,657 vehicles under the MRAP and other blast- and ballistic-protected vehicle programs, including vehicles manufactured pursuant to the terms of our "GDLS Subcontract" with General Dynamics Land Systems Inc. (described in this Item 1, Major Contracts below), under the "MRAP Competitive Contract" (described in this Item 1, Major Contracts below). For the year ended December 31, 2007, we reported net sales of $890.7 million, up 354% from our net sales of $196.0 million reported for the year ended December 31, 2006.

        During the period from January 1, 2008 through June 30, 2008, we received additional orders for 375 vehicles, including vehicles to be manufactured pursuant to the terms of our GDLS Subcontract. During this same period we delivered 1,394 vehicles under the MRAP and other blast- and ballistic-protected vehicle programs, including vehicles manufactured pursuant to the terms of the GDLS Subcontract. At June 30, 2008, we had outstanding orders for 763 vehicles, including vehicles to be manufactured pursuant to the terms of our GDLS Subcontract.

Our Products

        Since the early stages of Operation Iraqi and Operation Enduring Freedom, the U.S. military has sought a wheeled vehicle approach that balances three potentially competing operational or mission dynamics: (i) payload, which refers to the load that the vehicles allow using units to carry on board the platform, such as crew members and cargo; (ii) performance, which refers to a vehicle's automotive

mobility and its suitability for transportation in existing military aircraft and ships; and (iii) protection, which refers to the level of crew survivability against blast and ballistic attack. We currently have four vehicle types aimed at fulfilling different operational or mission requirements:

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the Buffalo;



•

the Cougar;



•

the Cougar Lightweight / Cougar Restricted Terrain; and



•

the Cheetah.

         The Buffalo.    The Buffalo Mine Protected Clearance Vehicle ("MPCV"), with a gross vehicle weight of approximately 40 tons, is our largest vehicle and is designed primarily for use in conducting route clearance operations. During these operations, friendly forces patrol areas and routes of likely enemy IEDs and landmine activity searching for concealed explosive devices. The Buffalo has six wheels and is equipped with a hydraulic arm used to interrogate suspect devices while allowing the crew to disable or destroy the device from within the vehicle. The vehicle's capsule is blast-resistant, and the bottom of its passenger compartment is V-shaped (which we refer to as a "V-shaped hull") and is designed to deflect and dissipate the explosive blast from a landmine or IEDs away from the passenger compartment, thus helping protect the occupants from harm. With the Buffalo, we have been designated by the U.S. Army and U.S. Marine Corps as the sole-source supplier of vehicles for explosive ordnance disposal ("EOD"), including EOD vehicles that satisfy the Category III requirements of the MRAP program, under the Ground Standoff Mine Detection System ("GSTAMIDS") and MRAP programs, respectively. In addition to producing Buffalos for the U.S. military, on February 21, 2008 we were awarded a contract through the DoD's FMS program to produce four Buffalos for the Italian military.

         The Cougar.    The Cougar is a family of medium-sized blast- and ballistic-protected vehicles that can be supplied in 4-wheeled and 6-wheeled variants and in a variety of configurations for the wide range of missions performed by our customers. With a gross vehicle weight that ranges from 19 tons to 26 tons, depending on the variant, the operational applications of the Cougar include troop transport, command and control, route reconnaissance, convoy escort, and ambulance duty. Similar to the Buffalo, the Cougar employs a V-shaped hull designed to deflect blast energy, along with a blast- and ballistic-protected steel passenger compartment providing blast and ballistic protection. The Cougar family of vehicles offers our customers the ability to enhance the protection and payload offered to wheeled vehicle platforms, while still offering acceptable levels of performance. In comparison, armored combat platforms, such as main battle tanks and infantry fighting vehicles, offer substantial levels of protection but lesser relative levels of payload and performance; and light unarmored wheeled vehicles (e.g. utility vehicles such as the High Mobility Multi-Purpose Wheeled Vehicle ("HMMWV"), and other non-tactical wheeled vehicles used for supply and support functions) offer higher levels of performance but lesser relative levels of protection. In addition to producing Cougars for the U.S. military, we manufacture several variants for U.S. foreign military allies, including the Canadian military, the Italian military, the United Kingdom Ministry of Defence and the Iraqi National Army.

         The Cougar Lightweight / Cougar Restricted Terrain.    The Cougar Lightweight / Cougar Restricted Terrain is a new class of vehicle developed in response to an urgent request to develop vehicles providing enhanced mobility while maintaining survivability. Although this new class of vehicle is derived from our successful Cougar platform, it incorporates significant amounts of design and technology developed as part of the Cheetah platform. Achieving lighter base vehicle weight with higher available horsepower without sacrificing survivability gives our customer the flexibility to use the increased available payload and power to carry additional operation equipment and/or exterior armor solutions like our Force Armor™ for defeating explosively formed penetrators ("EFPs"), a variant of IEDs. The lighter base vehicle weight also increases the mobility and maneuverability of the vehicle,

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increasing the overall utility of our Cougar as operational requirements change. On September 5, 2008, the United States Marine Corps made a contract award for 5 of these vehicles under the MRAP Competitive Contract.

         The Cheetah.    The Cheetah is a 4-wheeled vehicle with a curb weight of approximately 8 tons, designed specifically for reconnaissance, forward command and control, and urban operations. The Cheetah provides performance levels similar to that of a light-wheeled vehicle, while providing protection levels similar to that of our heavier Cougar fleet and payload levels substantially higher than that of the wheeled vehicle fleet currently available to the military. For example, the Cheetah offers mobility comparable to the HMMWV, and is transportable in any transport aircraft in the military inventory, including the C-130 (a four engine turboprop transport aircraft), as well as externally by a variety of helicopters. We believe the Cheetah represents a significant evolution in blast- and ballistic-protected vehicles that we believe may fill a void in vehicle platforms currently available to the military, specifically the gap between light unarmored or even lightly armored wheeled vehicles and the fleet of MRAP vehicles currently fielded by the military. At present, we have not had any orders for the Cheetah, although on September 15, 2008, we submitted a response to a TACOM Request for Information.

         Life Cycle Support.    We offer ongoing life cycle support in the areas of spare parts, maintenance, and training for our vehicles. As of June 30, 2008, we had delivered an aggregate of over 3,400 vehicles to our customers across our Buffalo and Cougar product lines. Accordingly, we believe that we have a substantial business opportunity to provide life cycle support to our existing and future fleet of vehicles. In addition, as the fleet ages, we have the opportunity to offer upgrades and product improvements for our fleet that are designed to further enhance the operability and capability of the vehicles. We believe this will continue to provide us with an ongoing market to sustain and improve our fleet through contractor logistical support, remanufacturing, and retrofitting.

         Armor Kit / Force Armor™.    We offer an external ballistic protection module ("EBPM") identified as Force Armor™ that provides additional protection from EFPs, as well as from attack by rocket-propelled grenades. The EBPM package design has been tested and validated through the U.S. Army Aberdeen test center. The EBPM package can readily be installed and removed in the field allowing user units to "scale" protection levels in response to likely enemy threats. As a result of its modularity, the EBPM package can also be retrofitted to our previously deployed vehicles as well as to wheeled vehicles manufactured by other companies. We currently provide an EBPM package on remaining vehicles to be delivered under our MRAP Competitive Contract (as of June 30, 2008, 412 vehicles remain to be delivered).

Vehicle Deliveries and Backlog

        The following tables set forth the number of vehicles delivered for the respective periods shown below and the total number of vehicles included in our backlog as of December 31, 2007 and June 30, 2008, including vehicles manufactured or to be manufactured, as appropriate, by GDLS under the GDLS Subcontract. No vehicles were manufactured under the GDLS Subcontract prior to the third quarter of 2007. The backlog shown in the following table is "funded" backlog, meaning that it reflects vehicles for which we have received orders and for which funding has been appropriated and authorized for expenditure by the applicable agency. We cannot assure you that we will deliver or sell

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all of the vehicles included in our backlog. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K for a discussion on the risk associated with backlog.

		Vehicle Deliveries
		2006		2007		January-June 2008
Buffalo			28		85		49
Cougar MRAP (Competitive)*			—		1,165		1,308
Cougar (all other variants)			257		407		37
	TOTAL		285		1,657		1,394

		Vehicle Funded Backlog
		As of December 31, 2007		As of June 30, 2008
Buffalo			51		22
Cougar MRAP (Competitive)*			1,702		412
Cougar (all other variants)			29		329
	TOTAL		1,782		763

*

Refers to Cougar vehicles manufactured under the GDLS Subcontract pursuant to which we and GDLS fulfill the MRAP Competitive Contract.

Industry Overview and Force Protection Market Opportunity

         General.    We believe the world market for blast- and ballistic-protected military vehicles and other survivability solutions is growing rapidly. The global war on terrorism, especially in Iraq and Afghanistan, has confirmed that IEDs, roadside bombs and landmines pose a significant threat to military personnel and civilians. Landmines and IEDs have been used extensively by terrorists and insurgent groups in Iraq and other areas because of their highly effective nature and relatively low cost. As vehicles are fielded with a specific level of protection, insurgent forces attempt to find alternative ways to conduct attacks. This will further evolve as better vehicular protection is designed and leads to potentially new threats (e.g. anti-personnel weapons, hand held EFPs) which will generate the need for an ever expanding field of survivability solutions.

        According to a Government Accountability Office ("GAO") report dated July 15, 2008, over 75% of the casualties suffered by U.S. forces in Operations Iraqi Freedom and Enduring Freedom in Afghanistan have been caused by IEDs. Vehicles that move troops or ordnance while providing significant protection against blast and ballistic threats, landmine hazards and IEDs, or that are capable of mine clearance operations, are critical in these situations. Missions for these vehicles range from troop transport in and around unexploded ordnance or mine threat areas to route clearance, convoy escort, reconnaissance, command and control, ambulance operations, EOD operations, general utility, and humanitarian de-mining.

        In late 2004, the U.S. military began acquiring modern blast- and ballistic-resistant wheeled vehicles in order to counter the effect of IED attacks on friendly forces conducting missions in Iraq and Afghanistan. These missions have often involved the use of lightweight wheeled utility vehicles, including the HMMWV. The HMMWV, however, was not designed to sustain high powered explosive blasts and is vulnerable to enemy fire. In response to the increasing number of casualties from IEDs and other explosive devices sustained during Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom, the U.S. military sought to increase the armor and blast protection of many of its wheeled vehicles, including the HMMWV, by retrofitting them with heavy armor. However,

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retrofitting heavier armor onto the bodies of these normally lightly armored vehicles is costly, and the added weight both increases mechanical wear and reduces the payload of the vehicles. We delivered Buffalos and Cougars in response to the U.S. military demand.

         Mine Resistant Ambush Protected ("MRAP") Vehicle Program.    In 2006, the U.S. effort to acquire blast-and ballistic-protected vehicles evolved into the establishment of the Mine Resistant Ambush Protected Vehicle Program. The DoD accelerated the pace of contract awards under this program in early 2007, and on May 2, 2007 the Secretary of Defense, Robert Gates, directed that the MRAP program be considered the highest priority DoD acquisition program. In June 2007, Secretary of Defense Gates provided the MRAP program with the highest priority access to components and materials among all defense acquisition programs and assigned the MRAP program a DX rating, which is the highest priority rating under the DoD Priority on Allocation System. On June 9, 2008, a Congressional Research Service report on the MRAP program identified that the Joint Requirements Oversight Council ("JROC") in September 2007 had approved the procurement of a total of 15,374 MRAP vehicles. This same report noted, however, that the JROC "suggested that these numbers could change, based on assessment of commanders." According to a report dated July 15, 2008 from the GAO, the DoD had placed orders for 14,173 MRAP Category I and Category II vehicles with five suppliers, of which we received orders for 2,885 vehicles. As a result, we estimate that as of June 30, 2008 the U.S. military would have been permitted to order an additional 1,201 vehicles under the MRAP program. According to that same GAO report, the DoD has appropriated more than $22 billion to acquire MRAP vehicles. As a result and based on expanded operations into the Afghanistan theater of operations, we believe there is potential for additional MRAP vehicles to be approved for procurement by the U.S. Military under the MRAP program.

        The U.S. Marine Corps established a Joint Program Office ("JPO") in 2007 to manage the MRAP program for all branches of the U.S. military and, as part of that program, continues to procure wheeled vehicles that offer more effective blast protection for the military personnel of the U.S. armed forces. The MRAP program specifies three categories of vehicles, as outlined in the table below. The table also indicates which of our vehicles satisfy the criteria for each of these categories.

Vehicle Type	Description	Force Protection Vehicle
Category I	Transports no less than six persons and must be suitable for urban operations	Cougar (4-wheeled variant)
		Cheetah
		Cougar Lightweight / Cougar Restricted Terrain
Category II	Transports no less than ten persons and has multi-mission purposes including troop transport, command and control and route reconnaissance	Cougar (6-wheeled variant)
Category III	Transports no less than six persons and is designed to conduct EOD and route clearance missions	Buffalo

        Under the MRAP program, we submitted bids in response to requests for proposals ("RFPs"), to the U.S. Marine Corps for two different categories of armored vehicles. We have received two contracts under the MRAP program. In November 2006, the U.S. Marine Corps awarded a sole-source contract to us for Category II Cougar 6x6 vehicles and Category III Buffalo vehicles, which as of June 30, 2008 was for an aggregate of 200 Cougars and 89 Buffalos. In January 2007, the U.S. Marine Corps awarded us a competitive contract for Category I and Category II vehicles. This contract allows the Government to acquire up to 20,500 vehicles over a 5-year period. As of December 31, 2007, the U.S. Marine Corps

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had placed seven delivery orders from us against this competitive contract for a total of 1,990 Category I vehicles and 877 Category II vehicles. An additional order for 18 MRAP vehicles was received in 2008 for 17 Category I and six Category II vehicles.

        With the Buffalo, we have been designated by the U.S. Army and U.S. Marine Corps as the sole-source supplier of vehicles for EOD, including EOD vehicles that satisfy the Category III requirements of the MRAP program, under the Ground Standoff Mine Detection System ("GSTAMIDS") and MRAP programs, respectively.

         MRAP II Program.    Under the MRAP II Program, the U.S. military is seeking vehicles smaller than the Cougar that afford better protection to their occupants. On October 1, 2007, we submitted a Cheetah vehicle in response to the DoD's vehicle solicitation for the MRAP II program. On June 17, 2008, we received notice that the Cheetah was not selected for this solicitation. However, we understand that this program has been suspended indefinitely.

         Joint Light Tactical Vehicle ("JLTV") Program.    Under the JLTV program, the U.S. military is seeking a family of vehicles that fulfill mission role gaps identified from the current HMMWV program. The JLTV program specifies three categories of vehicles based on payload. The performance, protection and physical characteristics of these vehicle categories are tailored to fulfill the specified mission roles these vehicles will be required to execute. On July 9, 2008, a briefing by the Army staff on the U.S. Army and U.S. Marine Corps Tactical Wheeled Vehicle fleet strategy indicated that the demand for new light tactical vehicles is approximately 160,000 vehicles between the U.S. Army and the U.S. Marine Corps. The U.S. Army's 2007 light tactical wheeled vehicle budget states that following further development and testing, the DoD intends to replace portions of the HMMWV with a new fleet of vehicles under the JLTV program. The JLTV program is expected to require vehicles to balance increased levels of protection and survivability with mobility and transportability requirements. This same briefing indicates that the U.S. Army will spend an estimated $1-6 billion per year on the JLTV program. On February 5, 2008, we entered into an exclusive teaming agreement with DRS Technologies, Inc. ("DRS"), whereby DRS will serve as prime contractor and we will serve as a subcontractor for awards under the JLTV program. On April 14, 2008, we submitted the Cheetah for consideration under the JLTV program as subcontractor to DRS. On August 14, 2008, we were informed that we were no longer in consideration for the JLTV program Milestone A (Technology Demonstration Phase). We will continue to pursue opportunities on the JLTV program by working with Milestone A vendors to determine whether there are potential fits for Force Protection technology (e.g. Force Armor™). In addition, we will continue to monitor the JLTV program as it transitions from Milestone A to Milestone B (System Development Phase) in fiscal years 2010 - 2011 with a view to reentering the competition.

         Ground Standoff Mine Detection System ("GSTAMIDS") Program.    The Ground Standoff Mine Detection System program is aimed at fielding newly established "Route Clearance Companies" for the purposes of conducting IED clearing operations to eliminate IED threats to friendly force mobility in theaters of operations. With the Buffalo, we have been designated by the U.S. Army and U.S. Marine Corps as the sole-source supplier of vehicles for EOD, including EOD vehicles that satisfy the Category III requirements of the MRAP program, under the GSTAMIDS and MRAP programs, respectively.

         Foreign Military Sales ("FMS") Program.    The DoD established the FMS program to manage government-to-government purchases of weapons and other defense articles, defense services, and military training. A foreign military buying weapons through the FMS program does not contract directly with the company that makes them. Instead, the DoD serves as an intermediary, usually handling procurement, logistics and delivery. In 2006, we also entered into a subcontract with BAE Systems Land & Armaments L.P. ("BAE") to provide Cougar ILAV vehicles for the Iraqi National Army, and a contract with the DoD to provide Cougar Mastiff vehicles to the United Kingdom

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Ministry of Defence through the DoD's FMS programs. In 2007, we entered into contracts with the DoD to provide Buffalo and Cougar vehicles to the Canadian Ministry of Defence through the FMS program. In 2008, we entered into contracts with the DoD to provide Buffalo and Cougar vehicles to the Italian Ministry of Defence and Cougar Mastiff and Ridgbacks vehicles to the United Kingdom Ministry of Defence through the FMS program. A May 2008 briefing by United Kingdom Ministry of Defence indicated that the United Kingdom Ministry of Defence is considering making their Cougar Mastiff and Cougar Ridgback fleets a long-term component in the United Kingdom Ministry of Defence. The original vision for the Cougar Mastiffs had been a stopgap program under which the vehicles were likely to be disposed of at the end of the combat deployments in Iraq and Afghanistan. As a result of the successful operational performance the United Kingdom experienced in combat operations, it decided to retain the vehicles and expand their fleet in order to maintain this capability within the United Kingdom Ministry of Defence for a longer term. It is our belief this will provide ongoing opportunities for sustainment and upgrade of the Cougar fleet in the United Kingdom.

         Miscellaneous Opportunities.    In addition, many countries have buried landmines as a result of their use as a defensive tactic in areas of enemy egress during the Cold War and in third world civil- and international-warfare during the 1980's and 1990's. In 1998, the number of landmines planted around the world was estimated to be 110 million with another 100 million estimated to be stockpiled by various nations around the world. As a result, humanitarian de-mining operations may become a potential market for our products in order to enable nations to safely clear their land of buried landmines in order to facilitate agricultural and commercial enterprise.

Business Strengths

         Survivability Performance.    Our Buffalo and Cougar blast- and ballistic-protected vehicles have been deployed with the U.S. and allied forces in Iraq and Afghanistan since 2004. We believe our vehicles are the most survivable and sustainable vehicles on the battlefield. According to our internal data, as of September 2008 our vehicles have logged in excess of approximately 288,596 days in combat operations and sustained approximately 3,000 IED and landmine blasts during the course of their active duty. The advanced design and engineering incorporated into our vehicles increases the survivability rate of vehicle occupants in conflict with a hostile force. In addition, the structural integrity of the passenger compartment and our use of readily-available automotive parts helps our vehicles to be quickly repaired and returned to duty after sustaining damage from an attack. As a result, our field data indicates over 99% of our vehicles delivered since 2004 are still in operation, and the U.S. military reports operational availability for those vehicles in excess of 90%.

         Scalable Manufacturing Capabilities.    We have developed a process-driven, scalable manufacturing operation that enables us to design and build vehicles with increased efficiency. Together with key partner and subcontractor relationships, we are able to rapidly expand our production capabilities to meet customer demands. This approach enables us to expand production capacity while reducing our capital investment requirements.

         Proprietary Technology and Commitment to Research and Development.    Our proprietary designs are derived from concepts that were initially developed outside the United States over thirty years ago to protect vehicle occupants against the threat of landmines and unexploded ordnance. We have continuously improved upon our proprietary designs through internally funded research, development and testing. We actively seek to protect our designs through our intellectual property rights. We believe our focus in these areas enables us to remain flexible in our design processes and improve our vehicle sustainability and performance.

         Demonstrated Ability to Anticipate Customer Requirements.    As one of the first U.S.-based manufacturers of the current generation of blast- and ballistic-protected vehicles, we believe we are a leader in technological innovation in this industry. Our expertise enables us to produce a range of

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vehicles that serve a variety of missions, and are capable of withstanding increasingly violent attacks from a constantly evolving threat. We believe we will continue to be able to proactively anticipate the needs of our customers and manufacture vehicles that exceed their operational requirements. For example, we initiated the design and testing of our Cheetah vehicle in 2005, two years prior to the official request by the U.S. military for a higher-mobility blast-resistant wheeled vehicle under the MRAP II solicitation in July 2007. In addition, we started the development of the EFP program in 2006, two years prior to the official request by the U.S. Marine Corps for an exterior armor kit to be added to our MRAP vehicles.

         Strong Customer Relationships.    We generate substantially all of our revenue from sales to the DoD. As a result, we have developed strong relationships with the U.S. Marine Corps, the United Kingdom Ministry of Defence, as well as other U.S. military branches and foreign military allies of the U.S. We believe that these relationships and the performance of our vehicles in the conflicts in Iraq and Afghanistan will provide us with an significant advantage as we compete for future government contracts. Our Buffalo is a U.S. Army "Program of Record."

         Experienced Management Team.    Our success is due in large part to the broad experience and knowledge of our management team and key personnel. Our executive management team has expertise in automotive engineering, manufacturing and government contracting, and brings to the organization extensive knowledge of our customers. In order to keep pace with the growth of our business, we have recently strengthened our management team through the addition of several key personnel.

Business Strategy

        Our business strategy is built around three main imperatives: (i) first, constant focus on innovation and the introduction of new survivability products and solutions; (ii) second, expand our customer base; and (iii) third, procure contracts for sustainment services of our fleet of vehicles across all customers. Specific components of the strategy include the following:

         Identify New Products and Markets to Meet Evolving Customer Requirements.    We plan to continue to maintain a strong emphasis on the development of new products and improved technology and believe that our ongoing commitment to research and development will better position us to anticipate the future needs of our customers.

         Capitalize on Demand for Blast- and Ballistic-Protected Vehicles and other Survivability Solutions.    The ongoing military operations in Iraq and Afghanistan against an innovative enemy have been the primary factor driving demand for our vehicles. Our marketing efforts focus on the sale of vehicles to the U.S. military and, with authorization from the U.S. government, to foreign allies of the United States. We also intend to expand our vehicle offerings by designing new variants and implementing model changes within the current fleet as we seek to anticipate evolving customer requirements.

         Expanding Our Service and Support Network.    We are experiencing an increase in the portion of our revenues generated by the sale of sustainment service, for example, spare parts, field service and training, for our growing fleet of deployed vehicles. Due to the nature of their mission, we expect a significant number of our vehicles will need to be repaired either in the field or upon return from deployment. In order to maintain high levels of customer support, we intend to continue to increase the number of our field service personnel domestically and internationally.

         Focus on Core Competencies.    We are making investments in mainstream and "newstream" innovation capabilities. Mainstream refers to our ability to maintain, improve and evolve our current vehicle platforms with a focus on survivability, sustainability and availability. Mainstream also refers to our ability to understand our current customer's evolving operational needs and to provide whole-system solutions beyond standard vehicle platforms to meet these requirements. "Newstream" refers to our ability to innovate new survivability solutions outside our core vehicle platform base. Our new Force Armor™ EFP protection is an example of this effort.

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         Leverage Key Relationships to Grow our Business.    We have developed strong relationships with the U.S. Marine Corps, the United Kingdom Ministry of Defence, domestic and certain other foreign military customers. We believe that these relationships and the performance of our vehicles in the conflicts in Iraq and Afghanistan will give us an advantage as we compete for future government contracts.

Customer Activity

        Our primary customer is the DoD through which we directly and indirectly service U.S. military branches (primarily, the U.S. Army and the U.S. Marine Corps) and indirectly service foreign military allies of the U.S. through the DoD's FMS program. We have field service representatives deployed in Iraq, Afghanistan and the United Kingdom to provide customer support of our arrangements directly or indirectly through the DoD's FMS program.

        The following table sets forth the number of vehicles we sold in the respective periods shown below, including Cougar MRAP (Competitive) vehicles manufactured by GDLS under our GDLS Subcontract. No vehicles were manufactured under our GDLS Subcontract prior to the third quarter of 2007.

Vehicle	2005		2006		2007		January-June 2008
Buffalo		31		28		85		49
Cougar HEV		22		—		—		—
Cougar JERRV		18		169		25		—
Cougar MRAP (Sole Source)		—		—		200		—
Cougar MRAP (Competitive)		—		—		1,165		1,308
Cougar ILAV (Iraq)		—		58		99		27
Cougar Mastiff (United Kingdom Ministry of Defence)		—		30		78		5
Cougar (United Kingdom Ministry of Defence)		—		—		—		5
Cougar Canada		—		—		5		—
Total		71		285		1,657		1,394

Competitive Positioning

        We are subject to significant competition from companies that market and manufacture armored vehicles, as well as other companies that supply spare parts for armored vehicles and sustainment. This competition could harm our ability to win business and increase the price pressure on our products. The companies we compete against include large, multinational vehicle, defense and aerospace firms such as BAE Systems Land & Armaments, L.P. including its newly acquired subsidiary, Armor Holdings, Textron Inc., International Military and Government LLC, a subsidiary of Navistar International Corporation, Oshkosh Corporation, Mantech Services (UK) Ltd., Raytheon Company, Aerospace and General Dynamics Land Systems Inc. Most of our competitors have considerably greater financial, marketing and technological resources than we do, which may make it difficult for us to win new contracts, and we may not be able to compete successfully. Certain competitors operate fabrication facilities and have longer operating histories and presence in key markets, greater name recognition, larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources. As a result, these competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the promotion, manufacturing and sale of their products.

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        We believe our competitive advantages include:

•

the level of blast and ballistic protection incorporated into our vehicles, which increases the survivability of the occupants and repairability of the vehicles;



•

the fact that our vehicles are currently deployed in Iraq and Afghanistan and have a well-established track record of performance since 2004;



•

our ability to innovate survivability solutions to defeat new and emerging threats of attack;



•

our ability to innovate lightweight, mobile blast- and ballistic-protected vehicles to anticipate and meet developing customer requirements;



•

the fact that our vehicles use many off-the-shelf automotive components that facilitate service; and



•

the prior testing and acceptance of our Buffalo and Cougar vehicles and our EBPM by the U.S. military.

        We believe our products are superior to many other wheeled vehicles currently in use by the U.S. military in terms of mine and blast protection because of their survivability and repairability. Existing U.S. wheeled military vehicles include HMMWV and other non-armored utility support vehicles. U.S. military tracked vehicles (meaning that they have treads instead of wheels) include heavyweight troop transport and offensive armor such as the Bradley Fighting Vehicle ("Bradley"), and the M1A1 Abrams Tank ("Abrams"). The lightly armored and un-armored HMMWV and other wheeled vehicles can be subject to attacks and efforts to "up-armor" these vehicles have not been completely successful due to the costs associated with retrofitting armor onto the body of the vehicle and the increased mechanical wear caused by the weight of the armor. Conventional tracked armored vehicles such as the Bradley and the Abrams offer protection from blast and ballistic threats, but are expensive, require substantial resources to maintain, are large and can be difficult to maneuver in urban environments and may not be well-suited to peace- keeping missions due to their intimidating offensive weapon systems.

Company History

        We were organized under the laws of the State of Colorado in November 1996 as Boulder Capital Opportunities III, Inc., a blank check corporation. In 1998, we acquired Sonic Jet Performance, LLC, a California limited liability company in the business of producing and marketing recreational boats, jet boats, trailers, and related accessories. In November 1998, we changed our name to Sonic Jet Performance, Inc. In 2000 and 2001, we emphasized building recreational boats and, in 2002, we relocated our corporate headquarters, assembly, and prototyping facility to Stanton, California and shifted our focus to the design and production of fire and rescue boats.

        In June 2002, we acquired a 90% interest in Technical Solutions Group, Inc., a development stage manufacturer of blast- and ballistic-protected vehicles based in Charleston, South Carolina. Technical Solutions Group, Inc. was originally formed in 1997 as a Nevada corporation. We subsequently increased our ownership interest in Technical Solutions Group, Inc. to 100%.

        The acquisition of Technical Solutions Group, Inc. shifted our principal focus from our then existing watercraft business to the production of mine clearing and armored vehicles. We sold the assets of our watercraft business in 2003 and we moved our corporate headquarters to South Carolina to utilize the office and manufacturing space previously used by Technical Solutions Group, Inc. on the grounds of the former Navy Shipyard in Charleston, South Carolina. In September 2003, we changed our name to "Force Protection, Inc." to reflect our primary focus on producing and manufacturing protected and armored vehicles. In January 2005, we reincorporated from the State of Colorado to the State of Nevada. We became listed on the Nasdaq Capital Market in January 2007.

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Major Contracts

        Since January 1, 2006, we have secured over $2.5 billion of orders in the global military market. The four major military contracts that we secured since January 1, 2006 include the following, which are further described below:

•

In January 2007, the U.S. Marine Corps awarded us a competitive contract under the MRAP program for our Cougar vehicles ("MRAP Competitive Contract").



•

In August 2006, the United Kingdom Ministry of Defence awarded us a contract under the DoD's FMS program for our Mastiff Protected Patrol Vehicles, a Cougar variant ("FMS UK Contract").



•

In November 2006, the U.S. Marine Corps awarded us a sole-source contract under the MRAP program for our Buffalo and Cougar vehicles ("MRAP Sole-Source Contract").



•

In August 2006, we entered into a subcontract ("BAE Subcontract") with BAE Systems Land & Armaments L.P. for manufacture and provision of sustainment support (spares and field services) for Iraqi Light Armored Vehicles ("ILAV"), a Cougar variant. This subcontract was pursuant to our teaming arrangement with BAE and a prime contract awarded to BAE by the U.S. Army under the DoD's FMS program.

        Our two largest contracts, in terms of value, are with the U.S. Marine Corps under the MRAP Competitive Contract and with the United Kingdom under the DoD's FMS program.

         MRAP Competitive Contract.    Our largest contract, in terms of value, is for our Cougar vehicles under the MRAP program. The contract, which was competitively bid, was awarded to us in January of 2007 and expires in 2012. The MRAP Competitive Contract is an Indefinite Delivery/Indefinite Quantity ("ID/IQ") contract that allows the U.S. government to order up to a maximum of 4,100 MRAP vehicles per year for a five-year period. However, the U.S. government is not required to issue vehicle orders under this competitive contract, and existing orders can be terminated at the convenience of the government before completion. We fulfill this competitive contract with GDLS through the GDLS Subcontract described below. During the period from January 1, 2007 through December 31, 2007, we delivered 1,165 vehicles under the MRAP Competitive Contract. During the period from January 1, 2008 through June 30, 2008, we delivered 1,308 vehicles under the MRAP Competitive Contract. As of June 30, 2008, we had outstanding orders for 412 vehicles under the MRAP Competitive Contract. The total awarded value of this contract from inception to date as of July 31, 2008 is approximately $1.8 billion (a portion of which is subject to price definitization) of which approximately $900 million will be provided by GDLS under the terms of the Workshare Agreement.

        On September 10, 2007, we entered into a subcontract ("GDLS Subcontract") with General Dynamics Land Systems Inc. ("GDLS") pursuant to which GDLS manufactures approximately 50% of the Cougar vehicles to be manufactured under, and performs approximately 50% of the life cycle support required by, the MRAP Competitive Contract based on revenues. We previously entered into a joint venture with GDLS on December 15, 2006 ("Workshare Agreement") pursuant to which we and GDLS would fulfill the obligations of the MRAP Competitive Contract. We formed a Delaware limited liability company, Force Dynamics, LLC ("Force Dynamics"), to govern the terms of the joint venture. However, the MRAP Competitive Contract was awarded to us and not to Force Dynamics or GDLS. We have attempted to novate this contract to Force Dynamics, although the U.S. government has not yet agreed to the novation. If the contract is novated, we and GDLS may be required to guarantee payment of all liabilities and performance of all obligations that Force Dynamics will assume under the novated contract.

         FMS UK Contract.    On August 11, 2006, we were awarded a contract by the United Kingdom Ministry of Defence for the purchase of 86 Cougar Explosive Ordnance Disposal Vehicles, known as

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Mastiff Protected Patrol Vehicles ("Cougar Mastiffs"), a Cougar 6x6 variant through the DoD's FMS program. The contract includes associated spare parts, technical manuals and field service support. The FMS UK Contract was modified on February 20, 2007 to increase the number of Cougar Mastiffs to be delivered under the contract to 108 vehicles. The contract was modified again on February 21, 2008 to add 174 Cougar Mastiffs, on April 29, 2008 to add six Cougars, and on May 2, 2008 to add 151 Cougar Ridgbacks, a Cougar 4x4 variant. During the period from January 1, 2006 through December 31, 2006, we delivered 30 vehicles under the FMS UK Contract. During the period from January 1, 2007 through December 31, 2007, we delivered 78 vehicles under the FMS UK Contract. During the period from January 1, 2008 through June 30, 2008, we delivered 10 vehicles under the FMS UK Contract. As of June 30, 2008, we had outstanding orders for 321 vehicles under this contract. This contract is administered by the U.S. Marine Corps Systems Command and the 2008 orders are subject to price definitization. The total awarded value of this contract from inception to date as of July 31, 2008 is approximately $280 million.

         MRAP Sole-Source Contract.    In November 2006, we were awarded a sole-source contract by the U.S. Marine Corps for our Cougar and Buffalo vehicles under the MRAP program. The contract, which was awarded on a sole-source basis, was substantially performed in 2007. During the period from January 1, 2007 through December 31, 2007, we delivered 260 vehicles under the MRAP Sole-Source Contract. During the period from January 1, 2008 through June 30, 2008, we delivered 18 vehicles under the MRAP Sole-Source Contract. As of June 30, 2008, we had outstanding orders for 11 vehicles under the MRAP Sole-Source Contract. The total awarded value of this contract from inception to date as of July 31, 2008 is approximately $200 million.

         BAE Subcontract.    On May 30, 2006, the U.S. Army Tank-Automotive and Armaments Command ("TACOM") awarded BAE a delivery order in the amount of $180.5 million as part of a $445.4 million fixed-price contract for the production and delivery of 378 ILAVs to the Iraqi National Army ("BAE Agreement"). On August 8, 2006, we entered into a subcontract with BAE pursuant to which, among other things, we serve as BAE's principal subcontractor to provide the manpower and other resources needed to produce 50% of the vehicles in Ladson, South Carolina. We provide 100% of the after sales service and life cycle support required under the BAE Agreement. On June 30, 2008, this subcontract was amended to allow the purchase of up to 1,602 vehicles and life cycle support services through June 30, 2010. During the period from January 1, 2006 through December 31, 2006, we delivered 58 vehicles under the BAE Subcontract. During the period from January 1, 2007 through December 31, 2007, we delivered 99 vehicles under the BAE Subcontract. During the period from January 1, 2008 through June 30, 2008, we delivered 27 vehicles under the BAE Subcontract. The total awarded value of this contract from inception to date as of July 31, 2008 is approximately $62 million.

Production

        The key components of our manufacturing process are the following:

•

we utilize proprietary technology to design and manufacture blast- and ballistic-protected vehicle passenger compartments, which we sometimes refer to as "capsules," that we believe are capable of withstanding the explosive effects of landmines, IEDs and other blast threats encountered in wars, insurgency and urban conflicts;



•

we use commercial American-made automotive drivetrains and certain other components that can be repaired and maintained by traditional truck mechanics, although certain of our components are manufactured abroad or are in limited supply;



•

our workforce includes skilled welders and automotive mechanics;



•

we maintain a staff of engineers to provide in-house engineering support and utilize various manufacturing approaches to increase efficiency and product quality;

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•

we utilize partners and subcontractors, including GDLS, to expand our capacity and capabilities to meet customer specifications, standards and delivery schedules at anticipated costs; and



•

we source steel and other raw material from various key vendors in the United States and overseas, and secure our automotive components from a variety of U.S. suppliers (including Caterpillar, Mack Trucks, a member of the Volvo Group, and Allison Transmission) and in certain cases, from foreign suppliers. We currently obtain all of the steel for the Buffalo vehicle from foreign suppliers and for our other vehicles, substantially from domestic suppliers. The next generation Buffalo, currently in testing with the U.S. Army, will incorporate domestic steel in place of foreign steel.

Sales and Marketing

        Our employees, including senior management and our vice presidents of marketing, business development, and program management, conduct our primary sales and marketing efforts. Apart from our senior management, our primary sales staff consists of 16 employees who reside in South Carolina, Virginia and Connecticut. We also have consultants and representatives in South Africa, the United Kingdom, Turkey, Japan, Poland and the United Arab Emirates; these representatives facilitate our business development activities in their respective countries and serve as local subject matter experts in helping us to better understand local requirements and practices in our efforts to establish markets overseas.

        We actively participate in shows involving countermine operations and technology, military vehicles, law enforcement technology and military force protection, including the Association of the U.S. Army Annual Meeting, Winter Symposium, Modern Marine Expo, and Tactical Wheeled Vehicle conferences. Additionally, our marketing efforts include advertising focused on the military community and brochures.

Sales to the U.S. Government

        For each of 2006 and 2007 and the six months ended June 30, 2008, substantially all of our net sales were derived from work performed directly or indirectly under U.S. government contracts.

Government Contracts and Regulation

        We are a DoD contractor that delivers products and services to all of the branches of the U.S. military. The U.S. government contracting process differs in many ways from commercial contracting, and involves a high degree of federal government regulation and oversight of the programs in which we participate. As a result, we are subject to extensive regulations and requirements of the U.S. government agencies and entities that govern these programs, including award, administration and performance of contracts. We are also subject to certain unique business risks associated with the U.S. government program funding and appropriations and government contracts.

        U.S. government contracts generally are subject to the Federal Acquisition Regulation ("FAR"), which sets forth policies, procedures, and requirements for the acquisition of goods and services by the U.S. government; agency-specific regulations that implement or supplement the FAR, such as the DoD Federal Acquisition Regulation Supplement ("DFARS"); and other applicable laws and regulations. These statutes and regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment, and audit requirements. A contractor's failure to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and the assessment of civil or criminal penalties and fines and could lead to suspension or debarment from government contracting or subcontracting for a period of time.

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        In addition, U.S. government contractors that perform military programs are also subject to audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency ("DCAA"), the DoD Inspector General, and other government entities. U.S. government agencies review a contractor's performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. These entities also review the adequacy of compliance with internal control systems and policies, including the contractor's purchasing, property, estimating, compensation and management information systems, as well as possible instances of fraud, waste, and abuse. Additionally, each fiscal year, we must submit final cost data to the federal government indicating our actual costs incurred for the prior year, exclusive of certain costs that are not recoverable by federal government contractors. Once audited, the U.S. government may adjust the amounts on certain contracts, based upon established guidance, which may affect our recovery. These audits may also result, in among other things, price reductions, assessment of penalties, interest costs, or even potential debarment from participation in the Federal procurement system. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K, for a discussion of certain additional risks associated with U.S. government contract regulations and requirements compliance.

        Generally, Congress appropriates funds on a fiscal year basis even though a program may extend across several fiscal years. Consequently, programs are often only partially funded initially and additional funds are committed only as Congress makes further appropriations and agencies determine a continued need for the specific program. The contracts under a program generally are subject to termination or adjustment if appropriations for such programs are not available or change or the applicable agency's budgeting priorities change. Additionally, the U.S. government is required to equitably adjust a contract price for additions or reductions in scope or other changes directed by the applicable agency. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K, for a discussion of additional risks associated with program funding and appropriations.

        In most federal procurements, interested contractors submit information indicating their desire to provide the required goods. The agency then solicits competitive proposals or bids from qualified contractors by the publication of a formal RFP. The RFP typically describes the desired goods, terms and conditions, and evaluation criteria that the agency will use. Then, the interested contractors, called offerors, submit proposals in response to an RFP, and the agency evaluates the proposals and makes the award determination. The amount of time for a procurement to be completed (from notification of the RFP to award) can range from several months to a year or more.

        The government contracts for which we compete typically have multiple year terms, and if we are unable to win a particular contract, we generally will be excluded from competing again for that contract until its expiration several years later. In addition, upon the expiration of a contract, if the customer requires further services of the type provided by the contract, there is frequently a competitive re-procurement process.

        Most of our contracts are fixed-price contracts. Under fixed-price contracts, the contractor agrees to perform a specific scope of work for a fixed price. As a result, the contractor benefits from any cost savings but suffers from any losses from any cost overruns. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K for a discussion of certain risks associated with fixed-price contracts.

        In addition we also hold ID/IQ contracts. Essentially, the ID/IQ contracts are umbrella contracts setting forth the basic terms and conditions under which the agency may order goods from a contractor, and in some cases, multiple contractors. Contractors undergo a competitive preselection process to become eligible to receive orders under ID/IQ contracts. In addition, ID/IQ contracts do not obligate the federal government to purchase goods above the minimum levels set forth in the contract. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K for a discussion of the risk associated with ID/IQ contracts.

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        U.S. government contracts generally permit the government to terminate the contract, in whole or in part, without prior notice, at the government's convenience, where the government no longer has a need for the service, or for default, usually based on deficiencies in performance. Generally, if a contract is terminated for convenience, the contractor is entitled to payments for some or all of its allowable costs incurred in performing the work that was terminated and may receive some allowance for profit on the work performed. If a contract is terminated for default, the contractor is generally entitled to payments for its work that has been accepted by the government. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K for a discussion of certain additional risks associated with the U.S. government's right to terminate its contracts.

Certain Laws and Regulations Affecting Our Business

        There are certain federal laws that, while not specifically directed at us as a contractor, may affect our U.S. government contracts. The Anti-Deficiency Act is a collection of laws through which Congress exercises its constitutional control of the public purse. The central provision, codified at 13 U.S.C. §1341, prohibits making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. The Anti-Deficiency Act also prohibits involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. Generally, therefore, agencies cannot fund our contracts unless there has been a full appropriation of the necessary funds. Congress appropriates the majority of an agency's funds on a fiscal year basis, and the agencies, in turn, fund and award our projects. Agencies do not receive all funds for a given year at the outset of that year; rather they receive allocations and allotments in accordance with the Office of Management and Budget guidelines and internal agency policies. Therefore, the Anti-Deficiency Act indirectly regulates how the agency awards our contracts and pays our invoices.

        There are also numerous provisions within the FAR that affect the procurement process and administration of our contracts. With respect to the conducting of a procurement, the FAR provides guidance on how the agency is to conduct the evaluation of an RFP. The FAR also provides a mechanism through which disappointed bidders and contractors excluded from competing for government contracts and task or delivery orders may submit an objection, called a "bid protest," to an agency contracting officer, the Government Accountability Office in accordance with the relevant regulations, or the U.S. Court of Federal Claims. Performance under a contract being protested may be suspended while the protest is pending, and in cases where the contract is found to have been improperly awarded, the contract may be terminated, or other corrective action may be taken.

        Some contracts may be subject to the Truth in Negotiations Act ("TINA"), Cost Accounting Standards ("CAS") and Contract Cost Principles and Procedures ("Cost Principles"). Generally, TINA requires us to provide cost or pricing data and to certify that those data are current, accurate and complete, in connection with the negotiation of certain types of contracts, modifications or orders, but there are some exceptions to TINA, including contracts that are based on adequate price competition. The CAS regulations specifically exempt small businesses from compliance with the accounting requirements. As described under Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K, we were previously categorized as a "small business" under federal procurement regulations, but now have grown sufficiently large that we no longer qualify as such. As a result, CAS will apply to our future contracts. The Cost Principles set forth the rules regarding the allocability and allowability of costs incurred in connection with federal government contracts.

        Another area covered by the FAR is an organizational conflict of interest ("OCI"). These regulations establish rules for avoiding, mitigating and neutralizing conflicts of interest in the issuance and performance of contracts by the federal government. Both contractors and contracting officers bear the burden of identifying and reporting OCIs. An OCI may arise because the nature of the work to be

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performed by a contractor has the potential, absent some restriction on future activities, to result in an unfair competitive advantage to the contractor or impair the contractor's objectivity in performing the contract or providing assistance or advice to the federal government. The government contracting officer is responsible for resolving any significant potential OCIs before a contract award is made or as soon as the OCI is identified.

        Our conduct and performance is also subject to the False Claims Act and other anti-fraud statutes. The False Claims Act, 31 U.S.C. §3729, prohibits contractors from knowingly submitting false or fraudulent claims for money (e.g., a false or fraudulent invoice) to the federal government. Any claim of violation of the False Claims Act may be a criminal and/or civil violation, which carries significant monetary penalties. Agencies may take administrative actions, such as suspension and debarment, in the event of a False Claims Act finding or conviction.

Laws and Regulations Affecting International Activities

        Federal laws affect our ability to sell our products abroad and grant access to our technology to foreign nationals in the U.S. We are obligated to comply with a variety of federal, state and local regulations, both domestically and abroad, governing certain aspects of our international sales and support, including regulations promulgated by, among others, the U.S. Departments of Commerce, Defense, State and Justice and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

        For products and technology exported from the U.S. or otherwise subject to U.S. jurisdiction, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations ("EAR"), the DoD's FMS program and trade sanctions against embargoed countries and destinations administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury. We are also obligated to fulfill requirements under the U.S. Munitions Import List for certain parts and components imported into the U.S. for our products. These laws and regulations impose compliance and licensing obligations to obtain U.S. government authorization for transfers outside the U.S. and to persons in the U.S. other than U.S. citizens and U.S. permanent residents.

        The Foreign Corrupt Practices Act ("FCPA") and equivalent laws and regulations in foreign jurisdictions prohibit improper payments to foreign governments and their officials by U.S. and other business entities. The FCPA has two principal parts: anti-bribery and record keeping provisions. The U.S. Department of Justice enforces the anti-bribery provisions; the Securities and Exchange Commission ("SEC") also has jurisdiction over civil enforcement of the anti-bribery provisions. The record keeping requirement, applicable only to companies registered on U.S. stock exchanges, obligates companies to maintain accurate books and records and internal financial controls regarding all transactions. The SEC oversees enforcement of these provisions.

Research and Development

        We continually seek to improve our technological leadership position through internal research, product development, licensing, and acquisitions of complementary technologies. As of December 31, 2007, we had 36 employees engaged in research and development. We continually work to enhance the survivability and reliability of our existing products and to develop and introduce innovative new products to satisfy the evolving needs of our customers domestically and internationally. To supplement our research activities we purchased a blast and ballistics range which gives us a technological advantage enabling rapid prototyping, confirmation testing, and analysis.

        In addition, we regularly investigate new ways to manufacture our various products to reduce variation, improve manufacturing cycle times, and reduce overall manufacturing costs.

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        For the years ended December 31, 2007, 2006 and 2005, we spent $14.1 million or 1.6% of net sales, $3.2 million or 1.6% of net sales and $1.7 million or 3.3% of net sales, respectively, on research and development. None of our research and development costs were funded by our customers.

        We are committed to product development and expect to continue our investment in this area in the future. We believe that the continual development or acquisition of innovative new products will be critical to our future success. Failure to develop, or introduce on a timely basis, new products or product enhancements that achieve market acceptance could have a material adverse effect on our business, operating results or financial condition. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K for a discussion of the risk associated with product development.

Raw Material and Supplies

        We depend on suppliers and subcontractors for raw material and supplies. The cost of our raw material and supplies may fluctuate substantially and some of our raw material and supplies may be in short supply, may be available from only one or a limited number of suppliers, or may only be available from foreign suppliers. Increased costs or difficulties in obtaining supplies and raw material in the requisite quantities, or at all, can have a material adverse effect on our results of operations. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K for a discussion of our raw material.

        We are highly dependent on the availability of essential materials, parts and subassemblies from our suppliers and subcontractors. The most important raw material required for our products are armored steel, milled steel, major automotive components, and ballistic glass. Several major automotive components are procured or subcontracted on a sole-source, or limited source, basis with a number of domestic and non-U.S. companies. The most important raw material purchased is steel, accounting for approximately 17% of our total materials costs for the vehicles. In the case of the Buffalo, we are dependent on a non-U.S. supplier of Armox and Weldox steels. The next generation Buffalo, currently in testing with the U.S. Army, will incorporate domestic steel in place of foreign steel.

        We are dependent upon the ability of our suppliers and subcontractors to meet our specifications, standards and delivery schedules at anticipated costs. While we maintain a qualification and performance surveillance system to control risk associated with such reliance on third parties, failure of suppliers or subcontractors to meet commitments could adversely affect production schedules and contract profitability, while jeopardizing our ability to fulfill commitments to our customers.

        No material portion of our business is considered to be seasonal. Various factors can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance.

Intellectual Property

        We are a party to two long-term intellectual property agreements pursuant to which we have the right to use certain intellectual property technology relating to ballistic- and blast-protected vehicles. One agreement is with the CSIR Defencetek ("CSIR"), a division of the Council for Scientific and Industrial Research, a statutory council established in accordance with the Laws of the Republic of South Africa. The other is with Mechem, a division of Denel Pty Ltd, a company established under the Laws of the Republic of South Africa ("Mechem"). Under these agreements, we pay a per vehicle royalty fee in exchange for the exclusive transfer to us of certain technology.

        The agreement with CSIR provides for the provision, on an exclusive basis, by CSIR to us of certain technical, scientific and commercial intellectual property rights pertaining to the development of our Cougar, Buffalo and Tempest vehicles. Under our agreement with CSIR, we pay CSIR a fee for each vehicle sold and/or manufactured by us using the licensed intellectual property during the term of

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the agreement, including vehicles manufactured by our subcontractors. We are not obligated to pay a fee in respect of our Cheetah vehicle, and the manufacture of the Cheetah vehicles is not dependent upon the technology granted to us under the agreement. The initial term of the agreement was March 8, 2002 through March 7, 2007, and the term of the renewed agreement is March 8, 2007 through March 7, 2012. We have no right to extend the agreement after March 2012 and, if the agreement expires without renewal, after such date CSIR may grant a license to the licensed intellectual property to other parties. However, even upon expiration of the agreement we will have the ability to manufacture and deliver the Cougar and Buffalo vehicles.

        The agreement with Mechem provides for the provision, on an exclusive basis, by Mechem to us of certain technical, scientific and commercial intellectual property rights pertaining to the development of our Cougar and Buffalo vehicles. Under our agreement with Mechem, we pay Mechem a fee for each vehicle sold and/or manufactured by us using the licensed intellectual property during the term of the agreement, including vehicles manufactured by our subcontractors. We are not obligated to pay a fee with respect to our Cheetah vehicle, and the manufacture of the Cheetah vehicle is not dependent upon the technology granted to us under the agreement with Mechem. Our original agreement with Mechem was effective October 15, 2001 and expired October 15, 2006. Our current agreement with Mechem, which we entered into on September 13, 2006, expires on September 12, 2011. We have no right to extend the agreement after September 2011 and, if the agreement expires without renewal, after such date Mechem may license the licensed intellectual property to other parties. However, even upon expiration of the agreement, we will have the ability to manufacture and deliver the Cougar and Buffalo vehicles.

        We are a party to another license agreement with CSIR, pursuant to which we received two separate licenses. The first is a fully paid up internal license to perform research and development to verify, test and develop the technology (protection of wheeled and tracked vehicles against landmines and IEDs as disclosed in its patent) and assess the market for products through the parties written agreement of Proof of Concept (quantification and demonstration of the protection level and operation) in consideration of investing $500,000 since January 1, 2005. Proof of Concept will occur on the earlier of executing this written agreement or August 16, 2008. This agreement will terminate 12 months after Proof of Concept is attained.

        Once Proof of Concept is attained, we are required to pay a $200,000 exclusivity fee to CSIR that is deferred but paid through any sales of wheels and tracks for the second license. This second license also includes an exclusive, non-sublicensable license to exploit, including the manufacture, marketing, sale and use, the licensed technology in the United States, Canada, the UK, France, Israel, Germany and nonexclusively in South Africa. However, we must also pay CSIR a minimum royalty fee every year for each product that uses the technology or CSIR will have the right to rescind our exclusivity rights or terminate the agreement. The minimum royalty, which was due on August 16, 2008, was $150,000. All patent rights exist solely with CSIR and CSIR will also have the right of first refusal to patent any improvements that are made by us to the licensed technology. In return, CSIR will grant to us a royalty free license to use the patented technology in the proscribed territory. We may cancel this agreement for any reason upon providing CSIR sixty (60) days notice.

        In connection with our agreement with BAE, we entered into a production license agreement with BAE, dated June 13, 2006, pursuant to which we license to BAE the use of our Cougar vehicle as the basis for the ILAV vehicle design, and act as BAE's principal subcontractor to provide the manpower and other resources needed to produce 50% of the vehicles in Ladson, South Carolina. Pursuant to the terms of the agreement, we will receive a license fee for each ILAV vehicle manufactured by BAE under the Agreement. The production license agreement will remain in effect until the earlier of (i) completion of all the work under the BAE Agreement, (ii) termination of the agreement by us in the event of default by BAE, or (iii) termination of the subcontract for convenience. We own all the intellectual properties associated with the ILAV design, including improvements.

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        In connection with our Workshare Agreement with GDLS, we entered into a technology license agreement with Force Dynamics and GDLS, dated December 15, 2006. The agreement provides that we grant Force Dynamics and GDLS a non-exclusive license without the right to sublicense to manufacture the Cougar utilizing our background intellectual property for the MRAP Competitive Contract. Force Dynamics and GDLS pay us a fee per each vehicle manufactured by them using the licensed intellectual property, which fee we use to pay our license fees under the CSIR and Mechem agreements described above. The term of this technology license agreement is the later of completion or complete termination of the MRAP program or the Workshare Agreement.

Personnel

        As of December 31, 2007, we had a total of approximately 1,300 employees, comprised of approximately 1,200 in the United States and approximately 100 located in various foreign countries in support of our vehicles. In addition, we had approximately 600 contract employees. Of our total employees, approximately 800 were hourly employees and approximately 500 were salaried employees. As of June 30, 2008, we had approximately 1,400 employees, including 150 field service representatives. In addition, we had approximately 300 contract employees. We are not a party to any collective bargaining agreement, although we are subject to the risk that labor unions may seek to unionize some of our employees. We believe our relations with employees are good.

Environmental Matters

        We are subject to federal, state and local laws and regulations regarding the protection of the environment, including air, water and soil. Our manufacturing business involves the use, handling, storage and contracting for the recycling or disposal of, hazardous or toxic substances or wastes, including environmentally sensitive materials, such as batteries, solvents, lubricants, degreasing agents, gasoline and resin. We must comply with certain requirements for the use, management, handling and disposal of these materials. We maintain limited pollution liability insurance for our Ladson, South Carolina facility, where we manufacture the Cougar and Buffalo vehicles, our Summerville, South Carolina facility, our Roxboro, North Carolina facility, and our Edgefield, South Carolina facility, where we conduct some of our blast range activities and some of our research and development activities. If we are found responsible for any hazardous contamination, we may have to pay expensive fines or penalties or perform costly clean-up. Even if we are charged, and later found not responsible for such contamination and clean-up, the costs of defending the charges could be high.

Other Regulatory Matters

        In addition to the laws and regulations discussed above under "—Government Contracts and Regulation" "—Certain Laws and Regulations Affecting Our Business" and "—Environmental Matters" above, our operations and products are subject to regulation, supervision, and licensing under various other federal, state, local and foreign laws and regulations. Certain governmental agencies such as the Occupational Safety and Health Administration ("OSHA") monitor our compliance with their regulations, require us to file periodic reports, inspect our facilities and products, and may impose substantial penalties for violations of the regulations. There can be no assurance we will be successful in complying with these laws and regulations, or that any failure to comply with these laws and regulations will not have a material adverse effect on our business, financial position, results of operations, and cash flows.

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Management

        The following table sets forth certain information about our directors and executive officers as of June 30, 2008.

Name	Age		Position
Michael Moody		62	Chief Executive Officer, President, Chairman
Francis E. Scheuerell, Jr.		49	Interim Chief Financial Officer
Lenna Ruth Macdonald		46	Chief Strategy Officer, General Counsel and Corporate Secretary
Daniel Busher		45	Executive Vice President, Operations
Mark Edwards		46	Executive Vice President, Development
Charles Mathis		48	Executive Vice President, Finance
Damon Walsh		46	Executive Vice President, Customer Operations
MGen. Jack A. Davis		62	Director
LTG. Roger G. Thompson, Jr.		63	Director
John S. Day		59	Director
John W. Paxton, Sr.		71	Director

         Michael Moody.    Mr. Moody was appointed President of Force Protection, Inc. in September 2007, the Interim Chief Executive Officer on January 30, 2008 and appointed as the Chief Executive Officer on February 29, 2008. Mr. Moody has more than thirty years of senior management experience in operational management, reorganizations, acquisitions and business transformations. From 2005—2007 he provided business and financial advisory services to privately held businesses. Mr. Moody was the Chief Operating Officer at the London American General Agency and Senior Vice President of Corporate Development for Magna Carta Companies, a mutual insurance company, where he also served on the Board of Directors. Mr. Moody is a CPA (Australia) and an associate with the Australian Society of Accountants, and holds a Bachelor of Arts in Economics from Macquarie University in Sydney, Australia.

         Francis E. Scheuerell, Jr.    Mr. Scheuerell has been the Interim Chief Financial Officer of Force Protection, Inc. since February 2008. Mr. Scheuerell, has over 26 years of experience addressing complex accounting and reporting issues. Prior to joining a predecessor of the Huron Consulting Group Inc. in December 2005, Mr. Scheuerell was Vice President—Financial Reporting for HealthSouth Corporation from June 2004 to December 2005 assisting with rebuilding of its accounting organization and infrastructure. Prior to that, Mr. Scheuerell was a partner in BDO Seidman's national accounting office and, from 1994 to 2001, was a project manager with the Financial Accounting Standards Board. Mr. Scheuerell holds a Bachelor of Science from Illinois State University, and is a certified public accountant and certified management accountant.

         Lenna Ruth Macdonald.    Ms. Macdonald joined Force Protection, Inc. in November 2007 with over 19 years legal experience as in-house counsel and in private practice. Ms. Macdonald has specialized experience in corporate governance, compliance, securities and transactional matters. Prior to joining the Company, she served as Vice President, General Counsel & Secretary of Commonwealth Industries, Inc. (a Nasdaq listed leading aluminum sheet manufacturer), as in-house counsel for Banc One Corporation and as Assistant General Counsel and Group Leader at BONHAM, a Banc One subsidiary. Ms. Macdonald was also an associate with the international law-firm McDermott, Will & Emery based in its Boston, Massachusetts office. Ms. Macdonald holds a Juris Doctor from Emory University School of Law, and a Bachelor of Arts from Brown University.

         Daniel Busher.    Mr. Busher has been the Executive Vice President, Operations, of Force Protection, Inc. since March of 2008. Bringing more than 20 years of international business experience in the automotive industry, Mr. Busher joined Force Protection, Inc. in October of 2006. Previously, he

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was an executive of materials for North American Automotive Operations within Alcoa, maintaining responsibilities in the United States, Mexico and Honduras. In addition, he held numerous senior location Plant and Operations Management roles throughout Alcoa. Mr. Busher began his career as a member of the GM Saturn Corporation start-up team that implemented revolutionary new labor agreements and lean manufacturing methods from early concept to full production. Mr. Busher earned his Bachelor of Science degree in Mechanical Engineering from the University of Wisconsin. He also holds an Executive Master of Business Administration, Beta Gamma Sigma honors, from the Owen School at Vanderbilt University.

         Mark Edwards.    Mr. Edwards has been with Force Protection, Inc. since November 2004. Mark Edwards has more than 18 years experience in both automotive and military transport equipment industries. Prior to joining Force Protection, Mr. Edwards was Vice President, Operations for Ducommun Aerostructures, where he was responsible for all aerostructure manufacturing for the Boeing C-17 and Chinook programs, as well as Sikorsky's BlackHawk/NavalHawk program. Mr. Edwards earned a Bachelor's degree in Mathematics and Chemistry from Wright State University, and a Master's of Business Administration from Pepperdine University.

         Charles Mathis.    Mr. Mathis joined Force Protection, Inc. in June 2008. Mr. Mathis has over 20 years of experience in strategic finance and accounting for a number of manufacturing companies including two major defense contractors. Prior to joining Force Protection, Mr. Mathis was Chief Financial Officer of EFW, Inc. a US segment of Elbit Systems Ltd., a public Israeli defense conglomerate. At Elbit, Mr. Mathis was responsible for all areas of finance, contract accounting, government compliance, Sarbanes Oxley compliance, tax and the development of joint venture agreements. Prior to Elbit, Mr. Mathis was Vice President, Finance and IT, with Fairbank Morse Engine, a supplier of medium speed diesel engines to the US Navy and the engine segment of EnPro Industries. Mr. Mathis received his Master of Business Administration from the University of Chicago Graduate School of Business and completed his undergraduate studies at Wake Forest University. Mr. Mathis is a certified public accountant and also served as a Lieutenant in the United States Marine Corps.

         Damon Walsh.    Mr. Walsh joined Force Protection, Inc. in July 2005. Before joining Force Protection, Mr. Walsh was a career officer in the U.S. Army serving in a wide variety of staff and command positions including operational assignments as an airborne Infantry officer and Special Forces officer. Mr. Walsh also served for over a decade in the Army Acquisition Corps. This culminated in his assignment as the Commanding Officer of the Joint Systems Manufacturing Center at Lima overseeing the manufacture of Abrams Main Battle Tanks, Stryker vehicles, and Marine Corps Expeditionary Fighting Vehicles. Retiring as a Lieutenant Colonel, Mr. Walsh is a Level III Certified Acquisition Professional as well as a Certified Professional Contracts Manager and has over 25 years experience in both the operational Army and the Acquisition community. Mr. Walsh holds a Master in Management from the U.S. Naval Postgraduate School and is a graduate of the Army Command & General Staff College. He is also a veteran of Operations Desert Shield/Desert Storm, Provide Comfort, Uphold Democracy, and Iraqi Freedom.

         Major General Jack A. Davis, USMC (RET.).    MGen. Davis has been a director of Force Protection, Inc. since March 2006 and has a diverse background of senior level management and leadership positions in business, law enforcement and the military. With over 40 years experience, he is highly regarded in each of these fields. MGen. Davis served in the U.S. Marine Corps, both active and reserve, from 1968 to 2005 where he held the rank of Major General. MGen. Davis' career included command at every level from platoon to division in addition to numerous staff assignments. MGen. Davis attended numerous high level schools both here and abroad. MGen. Davis' law enforcement career included both federal and state agencies where he retired in 1999 with 30 years of distinguished service. MGen. Davis is also the founder of J.A. Davis and Associates, a security and

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leadership training company. In addition to his service with Force Protection, MGen. Davis currently serves on the Board of Advisors of two publicly held and one privately held company. MGen. Davis holds undergraduate and masters degrees from Indiana State University and a Master of Urban Administration from University of North Carolina—Charlotte.

         Lieutenant General Roger G. Thompson, Jr., USA (RET.).    LTG. Thompson has been a director of Force Protection, Inc. since December 2006. LTG. Thompson is Vice President of the Association of the United States Army where he is responsible for all operational events including symposia, the largest landpower exhibition and conference in North America and four exhibitions in four overseas trade shows. Additionally, he provides executive leadership of 124 AUSA Chapters worldwide and management of membership programs totaling over 5,300 major, midsize and small defense oriented companies. He currently serves on the Board of Advisors of a privately held company. A veteran with 34 years of experience on active duty, LTG. Thompson commanded at all levels of the Army, including field artillery and transportation units. While with the Department of Army Staff, LTG. Thompson served as Deputy Assistant Secretary of the Army, Financial Management and Comptroller (Director of the Army Budget). LTG. Thompson completed his military career as the Deputy Commander in Chief, United States Transportation Command. In this position he was responsible for the daily operations supporting all military and commercial transportation for the entire DoD. LTG. Thompson holds a Bachelor of Science from the United States Military Academy, a Master of Business Administration from Syracuse University, and a Master's degree in National Security and Strategic Studies from the Naval War College. He graduated from the Army's Command and General Staff College and the Naval War College.

         John S. Day.    Mr. Day has been a director of Force Protection, Inc. since September 2007. Mr. Day has over 30 years of experience in the accounting profession serving a broad range of publicly and privately owned clients. Mr. Day joined Arthur Andersen LLP in 1976 and was admitted as an audit partner in 1986. In 2002, he joined Deloitte & Touche LLP in Atlanta as a Director. Mr. Day retired from Deloitte in December 2005. Mr. Day was appointed to the board of Lenbrook Square Foundation, Inc., a non-profit organization, effective July 1, 2007 where he serves as a member of the finance and governance committees. Mr. Day holds a Bachelor of Arts in Economics from the University of North Carolina and a Master of Business Administration from Harvard Graduate School of Business.

         John W. Paxton, Sr.    Mr. Paxton has been a director of Force Protection, Inc. since February 2008. He has over 30 years of experience in the aerospace, wireless voice and data, logistics and manufacturing industries. Currently, Mr. Paxton is the Chairman and Chief Executive Officer of Pro Mach, Inc., an integrated packaging solutions provider, and has been the Chairman of Mobilisa, a provider of wireless internet solution to the DoD, since 2002. From 2007 until the present, Mr. Paxton has been the Vice Chairman of IntelliCheck Mobilisa, Inc. From 1998 until 2002, Mr. Paxton was the Chairman and Chief Executive Officer of Telxon Corporation. Mr. Paxton served on the Board of Directors of TransDigm, Inc., a supplier of proprietary aerospace components used in commercial and military aircraft. Mr. Paxton holds a Bachelor of Science and Master of Science in business administration from LaSalle University, and is a registered professional engineer.

Our Board of Directors and Committees

        Our board of directors is divided into three classes, with each class of directors serving a staggered three year term. Messrs. Day and Paxton are in the class of directors whose term expires in 2008; MGen. Davis is in the class of directors whose term expires 2009; and Mr. Moody and LTG. Thompson are in the class of directors whose term expires 2010.

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        We have an audit committee and a compensation committee, each of which is composed entirely of directors meeting the applicable independence standards of the Nasdaq Capital Market and the rules and regulations of the Securities Exchange Act of 1934 ("Exchange Act"). Generals Davis and Thompson and Messrs. Day and Paxton are the members of our audit committee. Our board of directors has determined that Mr. Day is an "audit committee financial expert" defined by applicable Securities and Exchange Commission rules. Our compensation committee is comprised of Mr. Paxton and Generals Davis and Thompson.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

        Our principal executive offices are located at 9801 Highway 78, Building No. 1, Ladson, South Carolina 29456, and our telephone number is (843) 574-7000. We are subject to the information reporting requirements of the Exchange Act, and, in accordance with these requirements, we file annual, quarterly and other reports, proxy statements and other information with the SEC relating to our business, financial results and other matters. The reports, proxy statements and other information we file may be inspected and copied at prescribed rates at the SEC's Public Reference Room and via the SEC's website (see below for more information).

        You may inspect a copy of the reports, proxy statements and other information we file with the SEC, without charge, at the SEC's Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and you may obtain copies of the reports, proxy statements and other information we file with the SEC, from those offices for a fee. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are available to the public at the SEC's website at http://www.sec.gov.

        Our website address is www.forceprotection.net. Through a link on the Investor Relations section of our website, we make available the following filings after they are electronically filed with or furnished to the SEC: our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act. All such filings are available free of charge.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K, including the information incorporated by reference herein, contain both historical and forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Exchange Act. All statements other than statements of historical fact included in this Annual Report on Form 10-K and the documents incorporated by reference in this Annual Report on Form 10-K that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial position, results of operations, cash flows and business. We have identified some of these forward-looking statements with words like "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate" or "continue" and other words and terms of similar meaning. These forward-looking statements include, among other things:

•

statements regarding the growth of the U.S. and world market for blast- and ballistic-protected vehicles and survivability solutions;



•

statements regarding the U.S. military's plans or intentions to replace the HMMWV fleet with armored vehicles, including the possible timeframe of this replacement and the potential number of armored vehicles that might be required under this program;

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•

information regarding the number of various types of MRAP and other armored vehicles that may be purchased by the U.S. Marine Corps, the U.S. Army and other U.S. and foreign customers under various programs, including the MRAP, GSTAMIDS, JLTV and FMS programs, and the value of vehicles that may be acquired;



•

statements with respect to our expectations regarding our ability to obtain materials, components and supplies necessary to manufacture our vehicles, our ability to improve cost efficiencies, including, without limitation, as a result of volume purchasing, improvements in our manufacturing process and possible future changes in the efficiencies in our operations;



•

statements regarding any changes in our cost of sales, our general and administrative expenses or our research and development expenses as a percentage of net sales;



•

statements regarding the revenues that may be derived from, and the quantities of vehicles that may be purchased or ordered pursuant to, existing or possible future contracts or orders by various customers, including statements regarding the estimated value of those orders and contracts and statements about the amount of vehicles in our backlog and the value of our backlog;



•

statements regarding our ability to utilize net operating loss carry-forwards for income tax purposes; and



•

statements regarding the rate at which we and GDLS will produce MRAP vehicles and the date as of which we will achieve any particular monthly production rate of these vehicles.

        These forward-looking statements were based on expectations about future events at the time they were made and are subject to numerous uncertainties and factors, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Annual Report on Form 10-K and the documents incorporated by or deemed to be incorporated by reference in this Annual Report on Form 10-K, including the risks outlined under Item 1A, Risk Factors, will be important in determining future results. We do not know whether the expectations reflected in these forward-looking statements will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including those described under "Risk Factors" and those discussed in other documents we file with the SEC, which are incorporated or deemed to be incorporated by reference in this Annual Report on Form 10-K.

        In addition, this Annual Report on Form 10-K and the documents incorporated by reference herein contain historical information, forecasts and estimates regarding defense expenditures by the U.S. federal government, actual and anticipated procurement of armored vehicles and similar matters. This historical data and these forecasts and estimates have been obtained from publicly available information, industry publications, trade associations and data compiled by independent market research firms. However, we have not independently verified this information and we cannot assure you that it is accurate or that these forecasts and estimates will prove correct.

        When used in this Annual Report on Form 10-K, except as specifically noted otherwise, the term "Force Protection, Inc." refers to Force Protection, Inc. only, and the terms "Company," "we," "our," "ours" and "us" refer to Force Protection, Inc. and its consolidated subsidiaries.

ITEM 1A.    RISK FACTORS

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. Please also see "Special Note Regarding Forward-Looking Statements" on page 23.

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If we are unable to obtain future orders for our vehicles, our financial position, results of operations, and cash flows would be adversely affected and our business may fail.

        We have received substantial orders from the U.S. military under the MRAP program, which accounted for substantially all of the increase in our net sales during the year ended December 31, 2007. Substantially all of our income comes from our U.S. government contracts either as a prime contractor or as a subcontractor to another prime contractor to the U.S. government. These orders have resulted, in significant part, from the particular combat situations encountered by the U.S. military in Iraq and Afghanistan, especially the use of IEDs by enemy combatants. We cannot be certain, therefore, to what degree the U.S. military will continue placing orders, and these orders may decrease significantly or cease.

        The main uncertainty about our future operations is whether we will continue to receive additional orders or contracts for our vehicles or our survivability solutions. We estimate that orders for our MRAP vehicles will allow us to continue production through the first part of 2009 and for our Buffalo vehicles to extend production until 2012. It is impossible to predict with certainty whether such future orders or contracts will be placed by existing or new customers. If we do not receive future orders or contracts for production beyond such dates, it is unlikely that our vehicle business will continue and our business will be materially affected.

        Our largest contract in 2006, in terms of value, was awarded to us on a sole source basis in November 2006 by the U.S. Marine Corps under the MRAP Program. The MRAP Sole-Source Contract was for our Cougar and Buffalo vehicles and was substantially performed in 2007.

        Our largest contract in 2007, in terms of value, was awarded to us in January 2007 by the U.S. Marine Corps under the MRAP program competitive bidding process. The MRAP Competitive Contract is an ID/IQ contract that allows the U.S. government to order a maximum of 4,100 Cougar vehicles per year for a five-year period. However, the U.S. government is not required to issue any vehicle orders under the MRAP Competitive Contract, and existing orders can be terminated at the convenience of the government before completion. We fulfill the MRAP Competitive Contract with GDLS through the GDLS Subcontract.

        Our largest contract in 2008, in terms of value, was awarded to us by the United Kingdom Ministry of Defence under the FMS program. The UK FMS Contract is for 174 Cougar Mastiffs, a Cougar 6x6 variant, six 4x4 Cougars, and 151 Cougar Ridgbacks, a Cougar 4x4 variant. The UK FMS Contract is administered by the Marine Corps Systems Command and is subject to price definitization.

        Moreover, we are seeking to sell our Cheetah vehicle to the U.S. military and our future results of operations will depend to a large degree on our ability to sell significant quantities of Cheetah vehicles. To the extent we are unable to sell a substantial quantity of Cheetah vehicles, our results of operations will be materially adversely affected and we may suffer losses.

        In addition, we have received contracts awards through the competitive bidding process, including the MRAP Competitive Contract, and may continue to do so in the future. The competitive bidding process presents a number of risks, including the following:

•

we may expend substantial funds, managerial time and effort to prepare bids and proposals for contracts that we may not win;



•

we may be unable to estimate accurately the resources and cost that will be required to service any contract we win, which could result in substantial cost overruns; and



•

we may encounter expense and delay if our competitors protest or challenge awards of contracts to us in competitive bidding, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in the termination, reduction or modification of the awarded contract.

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We rely on sales to the U.S. government, and a failure to obtain new contracts or a reduction of sales under existing contracts with the U.S. government could adversely affect our operating performance and our ability to generate cash flow to fund our operations. The continuation and renewal of contracts with the U.S. government are contingent upon the availability of governmental funding, which may be unpredictable.

        We derive substantially all of our revenue from contracts and subcontracts with the U.S. government and its agencies, primarily the DoD. We expect that U.S. government contracts, particularly with the DoD, will continue to be our primary source of revenue for the foreseeable future. The continuation and renewal of our existing government contracts and new government contracts are, among other things, contingent upon the availability of adequate funding for various U.S. government agencies, including the DoD. Changes in U.S. government spending could directly affect our operating performance and lead to an unexpected loss of revenue. The loss or significant reduction in government funding of a large program in which we participate could also result in a material decrease to our future sales, earnings and cash flows. U.S. government contracts are also conditioned upon the continuing approval by Congress of the amount of necessary spending. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years. Among the factors that could impact U.S. government spending and reduce our federal government contracting business include:

•

the outcome of the U.S. November 2008 Presidential and Congressional elections;



•

a significant decline in, or reapportioning of, spending by the U.S. government, in general, or by the DoD in particular post election;



•

changes, delays or cancellations of U.S. government programs, requirements or policies;



•

the adoption of new laws or regulations that affect companies that provide services to the U.S. government;



•

U.S. government shutdowns or other delays in the government appropriations process;



•

curtailment of the U.S. government's outsourcing of services to private contractors;



•

changes in the political climate, including with regard to the funding or operation of the services we provide; and



•

general economic conditions, including a slowdown in the economy or unstable economic conditions in the United States or in the countries in which we operate.

        These or other factors could cause U.S. government agencies to reduce their purchases under our contracts, to exercise their right to terminate our contracts in whole or in part, to issue temporary stop-work orders, or decline to exercise options to renew, our contracts. The loss or significant curtailment of our material government contracts, or our failure to renew existing contracts or enter into new contracts could adversely affect our operating performance and lead to an unexpected loss of revenue.

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We identified material weaknesses in our internal control over financial reporting, which have in the past and in the future could adversely affect our ability to report our financial condition and results of operations accurately or on a timely basis. We concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2007. As a result, current and potential shareholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock.

        We identified a number of material weaknesses in our internal control over financial reporting and concluded that, as of December 31, 2007, we did not maintain effective control over financial reporting. As a result in part of these material weaknesses, we also concluded that our disclosure controls and procedures were not effective as of December 31, 2007.

        In addition, we previously identified a number of material weaknesses in our internal control over financial reporting and concluded that, as of December 31, 2005 and 2006, we did not maintain effective control over financial reporting. As a result in part of these material weaknesses, we also previously concluded that our disclosure controls and procedures were not effective as of December 31, 2005 and December 31, 2006.

        Each of our material weaknesses results in more than a remote likelihood that a material misstatement of the annual or interim financial statements that we prepare will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements. Even with this additional work, there is a risk of additional errors not being prevented or detected, which could result in additional restatements. Moreover, other material weaknesses may be identified.

        Material weaknesses in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. If we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our business evolves, we may be unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures. Any such failure in the future could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and periodic management evaluation of our disclosure controls and procedures. If we are unable to report financial information in a timely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC and Nasdaq, including a delisting from the Nasdaq Capital Market, securities litigation, and a general loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our common stock.

        We also have extensive work remaining to remedy the identified material weaknesses in our internal control over financial reporting and our disclosure controls and procedures and this work will continue during 2008. There can be no assurance as to when all of the material weaknesses will be remedied. Until our remedial efforts are completed, management will continue to devote significant time and attention to these efforts, and we will continue to incur expenses associated with the additional procedures and resources required to prepare our financial statements and to remediate these weaknesses. Certain of our remedial actions, such as efforts to hire additional qualified personnel and implement new operating and accounting systems and new financial policies and procedures related thereto, will be ongoing and will result in our incurring substantial additional costs even after our material weaknesses are remedied. In addition, there can be no assurance that, as a result of these remediation efforts or otherwise, we will not identify other inaccuracies in either our previous or future financial statements that will require amendments and restatements to those financial statements, which also could have a material adverse effect on us and on the price of our common stock.

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        Although we have taken steps to correct our material weaknesses, we may still be subject to risks. For a more detailed discussion of our material weaknesses, see Item 9A, Controls and Procedures, in this Annual Report on Form 10-K.

We included restated condensed consolidated financial statements and other financial information in this Annual Report on Form 10-K for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007 and plan on promptly filing separate amended Quarterly Reports on Form 10-Q to reflect the restated condensed consolidated financial statements for such periods. Continued amendments and restatements to our financial statements may result in potential and current shareholders losing confidence in our financial reporting, which could harm our business and the trading price of our stock.

        We included certain restated condensed consolidated financial statements and other financial information in this Annual Report on Form 10-K for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007 and plan on promptly filing separate amended Quarterly Reports on Form 10-Qs for such periods to reflect such restated condensed consolidated financial statements.

        We previously amended our consolidated financial statements and certain other financial information appearing in our Annual Report on Form 10-K for the year ended December 31, 2006 and restated our consolidated financial statements and certain other financial information appearing in our Annual Report on Form 10-K for the year ended December 31, 2005 and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

        Continued and repeated restatements and amendments to our consolidated financial statements and periodic reports may cause shareholders to lose confidence in our financial reporting, and such loss of confidence could cause the trading price of stock to become volatile or to decrease.

We are subject to and may continue to be subject to lawsuits resulting from the material weaknesses in our internal control over financial reporting and our lack of sufficient management and managerial processes to support our rapid growth.

        As described in the preceding risk factors and in more detail in Item 9A, Controls and Procedures, we have announced that we have identified material weaknesses in our internal control over financial reporting. In addition, we have not had robust internal systems in place for our managerial processes. As a result, our rapid growth placed a great strain on the managerial and compliance processes in place at that time; that, along with the material weaknesses in our internal control over financial reporting, has subjected the Company to increased risk of regulatory enforcement proceedings and private litigation.

        We are aware that at least ten shareholder class action lawsuits have been initiated seeking damages to recompense those who purchased or otherwise acquired our securities between August 14, 2006 and February 29, 2008 because of a loss in the trading value of our stock. The allegations include but are not limited to allegations that certain former and current members of management and the board of directors violated the Exchange Act and made false or misleading public statements and/or omissions concerning our business, internal controls, and financial results. Shareholders have filed at least seven derivative lawsuits against former and current officers and board members seeking damages and other relief; and we have been the subject of other suits, described in more detail in Item 3, Legal Proceedings, stemming from weaknesses in our control over financial reporting and/or from our managerial and compliance processes. It is possible that other litigants may institute additional lawsuits against us as a result of these deficiencies seeking the payment of damages. These lawsuits are likely to be costly to defend and could involve the substantial diversion of management time and resources and have other adverse effects, and we may be required to make substantial payments to settle any such lawsuits or to satisfy any judgments that may be rendered against us.

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If we are unable to effectively manage the rate of change of our operations, our business and operating results will be harmed and our reputation may be damaged.

        We significantly expanded our operations in 2005, 2006 and 2007. In contrast, during the first six months of 2008, we have focused on recalibrating the rate of our growth and expansion. For example, our net sales grew from approximately $49.7 million in 2005 to $196.0 million in 2006 and to $890.7 million for 2007.

        We have made substantial investment in our Ladson manufacturing facility. Our ability to right-size our business to match our operational requirements may have an impact as we have made substantial capital investments for our manufacturing capabilities at our leased Ladson facility.

        During the first six months of 2008, we sought to stabilize our business to match our contract delivery order requirements. We recognized that our business was changing, and in response, we are attempting to rebalance our workforce and manufacturing capacity. We may incur costs as a result of our efforts to recalibrate our business to meet the needs of our customers. In addition, in the past three years we had sought to rapidly expand and develop our operations and production capacity. We have incurred costs and are continuing to incur significant costs associated with our rapid expansion based on the expectation of future contract revenues. We are still experiencing and may continue to experience certain effects from this rapid growth, such as payments under serverance arrangements and the cost associated with excess manufacturing capacity and inventory. This growth had placed significant demands on our management and our administrative, operating, manufacturing and financial resources. In addition, our operating and accounting systems and related financial policies and procedures need to be substantially improved in order to accommodate our current and projected production levels and to support our government compliance requirements now that we are classified as a large business under applicable federal contracting regulations. We continue to face challenges in improving our administrative, operating, managerial, accounting and financial systems to accommodate our current and projected production levels.

        Even though the rate of our growth has decreased, the transition may continue to place a significant strain on our resources. Our future performance and results of operations will depend in large part on our ability to attract and retain qualified employees, management and other key personnel, our ability to implement successful increases to our production capacity and enhancements to our management, accounting and information technology systems, and our ability to adapt our facilities and systems, as necessary, to respond to growth and changes in our business.

We recently added significant manufacturing capacity and currently have excess manufacturing capacity. If demand for our vehicles declines, we may have additional inefficient or under-utilized capacity, and our gross margins and cash flows may suffer and we may incur losses.

        In response to the increased demand for our blast- and ballistic-protected vehicles, we added significant manufacturing capacity during each of the past several years. Currently, we have excess manufacturing capacity. In addition, demand for our vehicles may not remain at levels sufficient to utilize our present manufacturing capacity. Much of our manufacturing facilities and production equipment are special purpose in nature and cannot be adapted easily to make other products. If the demand for mine-protected vehicles does not increase or declines substantially from current levels, our facilities may have significant under-utilized capacity. Therefore, a substantial decline in demand for our blast- and ballistic-protected vehicles could result in significant additional excess manufacturing capacity, which would adversely affect our results of operations and could result in losses.

        For example, we purchased and made substantial expenditures at our Roxboro, North Carolina facility to manufacture the Cheetah vehicle. We have not yet begun to manufacture the Cheetah vehicle in commercial quantities. As of June 30, 2008, we had manufactured a limited number of Cheetah vehicles, all of which have been used solely for testing and demonstration purposes. We have not

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received any orders for the Cheetah to date. In March 2008, we had an impairment of our assets in connection with our decision to suspend the construction of the assembly line at our Roxboro, North Carolina facility and development of a plan for an alternative use for the facility. See Item 8 Note 4, Property and Equipment—Subsequent Event—Asset Impairment. We currently intend to use our Roxboro, North Carolina facility for training and sustainment purposes.

Our business may be materially affected if we are unable to anticipate the demand for and develop acceptable next generation vehicles and other survivability solutions to meet the demands of our customers, or if we are unable to sell next generation vehicles in the quantities that we anticipate.

        The future of our business depends on our ability to anticipate threats to the survivability of friendly forces and to develop, test, and be able to produce solutions to counter these threats in a manner that satisfies the cost, performance, and schedule demands of our customers. To the extent that our customers seek additional survivability solutions, we expect to face substantial competition from other companies, many of which have significantly greater financial and other resources than we do, in competing for these orders. Accordingly, if we are unable to develop and design acceptable vehicles and solutions in time to meet the demands of our customers, our net sales may decline in the future.

        Additionally, if we are unable to sell the next generation of vehicles in the quantities that we anticipate, our inventory and prior capital investments may not be fully utilized and our business may be materially affected. For example, we have not yet begun to manufacture the Cheetah vehicle in commercial quantities. As of June 30, 2008, we had manufactured a limited number of Cheetah vehicles, all of which have been used solely for testing and demonstration purposes. This means that we have incurred expenses for components, raw material, and other expenses in connection with producing the Cheetah without any orders from customers to purchase the vehicles we manufacture. Moreover, we may experience difficulties, expenses and delays in starting up production at this new facility, as we have no prior experience in manufacturing the Cheetah vehicle in commercial quantities and it may take a substantial period of time for us and our employees to develop sufficient familiarity with this new facility in order for us to achieve requisite efficiencies in producing the Cheetah. To the extent that we do not receive orders for the Cheetah in significant quantities, or if those orders are received later than we anticipate, or if we incur delays or unforeseen expenses in connection with outfitting and equipping this facility, our business, prospects, results of operations and financial condition may be materially adversely affected. If these events occur, they could have a material adverse effect on our business, results of operations, financial position and cash flows. In addition, if we are not able to sell the Cheetah in significant quantities or at all, we may not be able to sustain the growth of our business, our net sales may decline and our business may be materially adversely affected.

We are now a large business under applicable U.S. government regulations and may be precluded from being awarded new contracts with the U.S. government unless our accounting and estimating systems are improved sufficiently to meet government standards.

        In order to enter into certain contracts with the U.S. military, a contractor's accounting and estimating systems must generally meet the standards established by the FAR, and, with regard to certain types of contracts, CAS. Compliance is usually reviewed by the DCAA, an arm of the DoD. Contractors who do not meet these standards generally are not eligible to win certain new contracts from the U.S. government.

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        Because we previously were a small business within the meaning of applicable federal regulations, we were not required to comply with the accounting and estimating requirements in order to enter into contracts with the U.S. military. However, as a result of the growth of our business, as of November 14, 2007, we are no longer considered a small business and we therefore will be required to meet these additional accounting and estimating standards to the extent that they apply to new contracts that we are awarded. We have been advised by the DCAA that our accounting and estimating systems do not meet these requirements and, although we have been seeking to improve these systems, we have extensive work remaining in order to meet these standards. There can be no assurance as to when we will be able to meet these standards and, until we are able to do so, we may not be eligible for new contract awards by the U.S. military. Accordingly, any failure to meet these standards will likely have a material adverse effect on our business. In that regard, we have recently implemented a new accounting system and there is some uncertainty as to whether this system will be capable of generating the data necessary to comply with these standards. If our new accounting system is inadequate for these purposes, we could incur substantial delays and additional expenses through efforts to remedy those deficiencies or acquire and implement a new accounting system.

        Moreover, CAS differs from generally accepted accounting principles in the United States of America ("GAAP"), which means that we will be required to maintain accounting records in sufficient detail to comply with both CAS and GAAP. Given the material weaknesses in our internal control over financial reporting and other deficiencies in our accounting system described below under Item 9A, Controls and Procedures, the requirement to comply with CAS will be a considerable challenge and there can be no assurance that we will be successful in complying with CAS.

        The CAS are designed to achieve uniformity and consistency in the measurement, assignment, and allocation of costs to U.S. government contracts. CAS-covered contractors must complete a disclosure statement, which is a written description of the contractor's cost accounting practices and procedures. The purpose of the disclosure statement is to determine whether the contractor's cost accounting practices and procedures are consistently applied and whether they comply with CAS provisions. If the contractor fails to comply with CAS provisions, the U.S. government may withhold up to ten percent of each payment due until the necessary corrections are made. If a contractor fails to provide accurate information, under certain circumstances, the U.S. government can make unilateral adjustments. Additionally, DCAA may require more frequent updates if audits reveal non-compliant CAS submissions and accounting. We submitted a CAS disclosure statement to DCAA on May 19, 2008 with an effective date of June 1, 2008. To the extent that CAS requirements apply to future contracts awarded to us, we will be required to satisfy more difficult U.S. government accounting requirements than have previously applied, and a failure by us to comply with these new requirements may have consequences that would have a material adverse effect on our business.

If we fail to comply with complex procurement laws and regulations, we could lose business and be liable for various penalties or sanctions.

        We must comply with laws and regulations relating to the formation, administration and performance of federal government contracts. These laws and regulations affect how we conduct business with our federal government contracts. In complying with these laws and regulations, we may incur additional costs, and non-compliance may also allow for the assignment of additional fines and penalties, including contractual damages. Among the more significant laws and regulations affecting our business are the following:

•

The Federal Acquisition Regulation, which comprehensively regulates the formation, administration and performance of federal government contracts;



•

The Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;

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•

The Cost Accounting Standards and Cost Principles, which impose accounting requirements that govern our right to reimbursement under certain cost-based federal government contracts; and



•

Laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the export of certain products, services and technical data. We engage in international work falling under the jurisdiction of U.S. export control laws. Failure to comply with these control regimes can lead to severe penalties, both civil and criminal, and can include debarment from contracting with the U.S. government.

        Our contracting agency customers periodically review our performance under and compliance with the terms of our federal government contracts. If a government review or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including

•

Termination of contracts;



•

Forfeiture of profits;



•

Cost associated with triggering of price reduction clauses;



•

Suspension of payments;



•

Fines; and



•

Suspension or debarment from doing business with federal government agencies.

        Additionally, the civil False Claims Act provides for potentially substantial civil penalties where, for example, a contractor presents a false or fraudulent claim to the government for payment or approval. Actions under the civil False Claims Act may be brought by the government or by other persons on behalf of the government (who may then share a portion of any recovery).

        If we fail to comply with these laws and regulations, we may also suffer harm to our reputation, which could impair our ability to win awards of contracts in the future or receive renewals of existing contracts. If we are subject to civil and criminal penalties and administrative sanctions or suffer harm to our reputation, our current business, future prospects, financial condition, or operating results could be materially harmed.

        The government may also revise its procurement practices or adopt new contracting rules and regulations, including cost accounting standards, at any time. Any new contracting methods could be costly to satisfy, be administratively difficult for us to implement and could impair our ability to obtain new contracts.

The DCAA has issued audit reports that have been highly critical of our accounting and price estimating systems, and have questioned our ability to track and report our government contract costs appropriately. As a result, the DCAA could question or disallow our proposed costs under some of our government contracts, and our profits may be adversely affected. In addition, other governmental agencies may audit or issue reports about the status of our contracts.

        U.S. government agencies, generally through the DCAA, routinely audit and investigate government contracts and government contractors' administrative processes and systems. The audits may review the costs we incur on our U.S. government contracts, including allocated indirect costs. The auditor may also review our compliance with applicable laws, government regulations, policies and standards and the adequacy of our internal control systems and policies. An adverse finding under a DCAA audit could result in the disallowance of our costs under a U.S. government contract, termination of U.S. government contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. If any audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative

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sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. In addition, responding to governmental audits may involve significant expense and divert management attention.

        Moreover, if any of our administrative processes and systems are found not to comply with the applicable requirements, we may be subjected to increased government scrutiny or required to obtain additional governmental approvals that could delay or otherwise adversely affect our ability to compete for or perform contracts. Therefore, an unfavorable outcome to an audit by the DCAA or another government agency, could materially adversely affect our competitive position and result in a substantial reduction of our revenues.

        The DCAA issued at least eight audit reports on our operations and contracts from May of 2004 through October of 2007; in addition, the U.S. Army Tank-Automotive and Armaments Command audited our quality system of control in early 2006, and the Inspector General of the DoD issued a report in June 2007 questioning the award of sole source contracts to us and criticizing our performance under them. These reports have generally been highly critical of the areas covered by the audits, including our job cost accounting and price estimating systems, the timeliness of the delivery of vehicles, and our financial condition. The DCAA has issued two reports, one on January 29, 2008 stating that our estimating system is inadequate and another on March 21, 2008 stating that there was insufficient data due to a lack of 2007 financial reports to perform financial statement and ratio analysis. As a result, the DCAA could question or disallow our proposed costs under some of our government contracts, and our profits may be adversely affected. In addition, other governmental agencies may audit or issue reports about the status of our contracts.

Our results of operations may be adversely affected by the "definitization" of our contracts if we are unable to reserve adequately for payments on these contracts and if we do not maintain accounting systems effective enough to capture all costs incurred under these contracts.

        Many of the contracts we have previously received from the U.S. military have been sole source and/or "not to exceed" contracts. Both types of contracts are subject to "definitization," meaning that the contract price is not agreed upon at contract inception. Instead, following award of the contract, we and the U.S. government seek to agree upon a contract price based upon our cost of performing the contract. During the definitization process, we are required to perform the contract work, make deliveries and receive payments from the U.S. military before the final contract price has been established. For this reason, as part of the original award, we provide a not to exceed ("NTE"), price to be used for invoicing and accounting purposes pending definitization. As a result, at the completion of the contract, we may have received overpayments during the course of the contract and will be required to return any overpayments to the U.S. military.

        As result of the potential adjustments related to the definitization process, we maintain a separate account for payments received for contracts that may be subject to definitization. The definitization process can be time-consuming and can take months or even years to complete. Although we work diligently with our customers to proceed with significant work when we have a fully definitized task order, we cannot assure you that there will not be withholdings on future task orders.

        Accordingly, there can be no assurance that the actual prices we receive under contracts subject to definitization will not be substantially less than our estimates, which would adversely affect our operating results and could result in losses. At the end of 2007, we had definitized all outstanding contracts. However, in 2008 we have been awarded eight delivery orders that are still subject to the definitization process.

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We rely on subcontractors to manufacture or perform some of the assembly of our vehicles and the loss of any critical subcontractors could delay our manufacturing operations, which could affect our ability to meet our contract delivery requirements to our customers; in addition subcontractors may attempt to increase the amounts they charge us, adversely affecting our operating results.

        Some of the major work processes performed in our vehicle manufacturing are done by subcontractors. For example, a portion of the capsules of our Cougars are shipped to Spartan Chassis, Inc. ("Spartan") in Charlotte, Michigan, which supplies and installs the engine, transmission, transfer case, drive shafts, differentials, axle assemblies, tires, fuel tank, steering, and associated mechanical and electrical hardware. Additionally, under our GDLS Subcontract, GDLS and Spartan (as a subcontractor to GDLS) perform the final assembly of a portion of these vehicles (windows, doors, external appurtenances, hatches, seats, fenders, lights, paint, and other final assembly hardware). If these, or any other critical subcontractor, cease doing business with us (whether voluntarily or due to other events), we would be required to locate a substitute subcontractor or perform the work ourselves. Further, any inability of these subcontractors to perform these services in a timely manner may result in a delay in deliveries to our customers.

        The amounts we pay to some of these subcontractors represent a very significant portion of the overall costs of our Cougar vehicles. However, certain of our subcontractors have not entered into subcontracts with us to provide these services, although in some cases we do have purchase orders covering basic terms such as price or quantities but other terms and conditions have yet to be agreed upon. This means that we may have issues regarding some terms and conditions, any of which could have a material adverse affect on our business and results of operations.

We may require additional capital to provide for our working capital needs.

        We may require substantial additional capital to provide for our working capital and other cash needs. We currently anticipate that we may be required to obtain additional capital in 2009 and, to the extent that our cash needs are greater than we anticipate, we may require additional capital before that time. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources, contained elsewhere herein. We may seek to obtain this additional capital through, among other things, borrowings or the issuance of debt or equity securities. There can be no assurance that we will be able to obtain any such additional capital on acceptable terms or at all. Any inability to obtain additional capital as and when required could have a material adverse effect on our business, prospects and results of operations.

        We currently have a $30 million credit facility that expires on October 31, 2008 that provides us with the ability to obtain capital if cash available from other sources is insufficient to meet our needs. In the event that we are not able to renew this credit facility or obtain another credit facility, we will not have the ability to make revolving credit borrowings to finance our business, which could have a material adverse effect on our financial position, results of operations, and cash flows. To date, we have not borrowed any funds under this credit facility.

        Borrowings under our existing credit facility bear interest at variable rates, and borrowings we incur in the future may also bear interest at variable rates, which exposes us to the risk of increased interest rates. In addition, our existing credit facility is secured by an interest in all of our personal property and fixtures, and any debt instruments we enter into in the future may also be secured by our assets, which may make it more difficult for us to obtain additional debt financing.

Our U.S. government contracts generally are not fully funded at inception and may be terminated or adversely modified prior to completion, which could adversely affect our business.

        Congress funds the vast majority of the federal budget on an annual basis, and Congress often does not provide agencies with all the money requested in their budget. Many of our contracts cover

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multiple years and, as such, are not fully funded at contract award. If Congress or one of our agency customers chooses to spend money on other programs, our contracts may be terminated for convenience. Federal laws, collectively called the Anti-Deficiency Act, prohibit involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. Therefore, the Anti-Deficiency Act indirectly regulates how the agency awards our contracts and pays our invoices.

        Federal government contracts generally contain provisions, and are subject to laws and regulations, that provide the federal government rights and remedies not typically found in commercial contracts, including provisions permitting the federal government to, among other provisions: terminate our existing contracts; modify some of the terms and conditions in our existing contracts; subject the award to protest or challenge by competitors; suspend work under existing multiple year contracts and related delivery orders; and claim rights in technologies and systems invented, developed or produced by us.

        The federal government may terminate a contract with us either "for convenience" (for instance, due to a change in its perceived needs) or if we default due to our failure or the failure of a workshare partner or subcontractor to perform under the contract. If the federal government terminates a contract with us for convenience, we generally would be entitled to recover only our incurred or committed costs, settlement expenses and profit on the work completed prior to termination. However, under certain circumstances, our recovery costs upon termination for convenience of such a contract may be limited. If the federal government terminates a contract with us based upon our default, we generally would be denied any recovery for undelivered work, and instead may be liable for excess costs incurred by the federal government in procuring undelivered items from an alternative source. As is common with government contractors, we have experienced and continue to experience occasional performance issues under some of our contracts. We have in the past received and may in the future receive show-cause or cure notices under contracts that, if not addressed to the federal government's satisfaction, could give the government the right to terminate those contracts for default or to cease procuring our services under those contracts.

        In addition, U.S. government contracts and subcontracts typically involve long purchase and payment cycles, competitive bidding, qualification requirements, delays or changes in funding, extensive specification development, price negotiations and milestone requirements. Each U.S. government agency often also maintains its own rules and regulations with which we must comply and which can vary significantly among agencies.

Our backlog is subject to uncertainties, and we may not sell or receive payment for all of the vehicles we have included in backlog, which would reduce our revenue in future periods.

        Our backlog reflects the number of vehicles for which we have received orders as of the measurement date. Our backlog includes vehicles to be manufactured by GDLS pursuant to the terms of our GDLS Subcontract described in Item I, Business and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation, contained elsewhere herein.

        Our backlog is subject to uncertainties, and there can be no assurance that we will deliver or receive payment for the vehicles we have included in our backlog. As a result, there is no certainty about our future revenues because the timing of any of these vehicles sales and revenues is subject to various contingencies, such as production difficulties, raw material shortages and quality acceptance. If we fail to sell vehicles included in our backlog, our revenues and operating results could be materially adversely affected.

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We must comply with numerous miscellaneous federal national security laws, regulations, and procedures, and our failure to comply could adversely affect our business.

        We must observe laws and regulations relating to the formation, administration and performance of federal government contracts that affect how we do business with our clients and impose added costs on our business. For example, the FAR and the industrial security regulations of the DoD and related laws include provisions that:

•

allow our federal government clients to terminate or not renew our contracts if we come under foreign ownership, control or influence;



•

require us to prevent unauthorized access to classified information; and



•

require us to comply with laws and regulations intended to promote various social or economic goals.

        We are subject to industrial security regulations of the DoD and other federal agencies that are designed to safeguard against foreigners' access to classified information. If we were to come under foreign ownership, control or influence, we could lose our facility security clearances, which could result in our federal government customers terminating or deciding not to renew our contracts, and could impair our ability to obtain new contracts.

        Our failure to comply with applicable laws, regulations or procedures, including federal regulations regarding the protection of classified information, could result in contract termination, loss of security clearances, suspension or prohibition from contracting with the federal government, civil fines and damages and criminal prosecution and penalties, any of which could materially adversely affect our business.

Most of our contracts are on a fixed-price basis, which could subject us to losses if there are cost overruns.

        Under a fixed-price contract, we receive only the amount indicated in the contract, regardless of the actual cost to produce the goods. While firm fixed-price contracts allow us to benefit from potential cost savings, they also expose us to the risk of cost overruns. If the initial estimates that we use to calculate the contract price and the cost to perform the work prove to be incorrect, we could incur losses. This risk is enhanced because of the deficiencies in our accounting systems described above. In addition, some of our contracts have specific provisions relating to cost, scheduling, and performance. If we fail to meet the terms specified in those contracts, then our cost to perform the work could increase or our price could be reduced, which would adversely affect our financial position and results of operations. We may incur losses on fixed-price contracts that we had expected to be profitable, or such contracts may be less profitable than expected, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We are presently subject to a number of legal proceedings and claims and we may become subject to additional legal proceedings and claims in the future.

        We have been named in several purported class actions brought by shareholders who purchased or otherwise acquired our securities between 2006 and 2008, alleging violations of the Exchange Act, and making false and misleading public statements and/or omissions. Other shareholders have named us and certain current and former officers and directors in derivative suits alleging breaches of fiduciary duties. We have also been subject to a variety of other lawsuits, including claims involving the use of our confidential information and trade secrets, contractual claims, claims related to our common shares, OSHA claims and claims by the Department of State, Directorate of Defense Trade Controls ("DDTC"). Litigation and regulatory inquiries of these types are often expensive and time consuming and their outcome is uncertain.

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        Such claims and regulatory inquiries, whether successful or not, could require us to devote significant amounts of monetary or human resources to defend ourselves and could harm our reputation. We may need to spend significant amounts on our legal defense, senior management may be required to divert their attention from other portions of our business, new product launches may be deferred or canceled as a result of any proceedings, and we may be required to make changes to our present and planned products or services. If, as a result of any proceedings, a settlement is reached, a judgment is rendered or a decree is entered against us, it could materially and adversely affect our business, financial condition and results of operations and harm our reputation.

        We are also a party to other litigation which we consider routine and incidental to our business. We may be involved from time to time in other litigation that could have a material effect on our operations or finances. Other than the litigation described above, we are not aware of any pending or threatened litigation against us that could have a material adverse effect on our business or financial position, results of operations, or cash flows.

        See Item 3, Legal Proceedings in Part I of this Annual Report on Form 10-K.

We are currently under directives to improve our compliance policies and procedures concerning activity regulated by the International Traffic in Arms Regulations ("ITAR").

        In early November 2007, the DDTC advised us of a site visit planned for December 2007. In advance of that site visit, the DDTC requested, and we provided, certain documents and materials relating to our policies and procedures concerning company activity regulated by the ITAR. The site visit took place in mid-December 2007 and included a meeting with certain of our officers and interviews of certain of our employees involved with security, training, business development, human resources, information technology, empowered officials, engineering, contracts, manufacturing, program management, shipping, supply chain integrated logistics support and quality. Following the site visit, we received a letter from the DDTC regarding certain weaknesses it identified in our compliance program with respect to training, treatment of foreign visitors, overseas travel by personnel, export manuals, identifying data regarding ITAR hardware and services, and license tracking and requesting certain specific measures be undertaken. Although, we cannot assure you we are in the process of addressing those specific measures.

        In early December 2007, we submitted a voluntary disclosure to the DDTC regarding the shipment of technical manuals, Cheetah spare parts, armored vest plates, parts not listed on our license and transfers of technical data to and by our vendors without proper authorization or identification of the appropriate exemption. The DDTC responded in mid-January 2008 and requested additional information and documentation for each specific shipment of these items within sixty days. In addition, the DDTC directed us to undertake certain specific measures, including, but not limited to, that we hire a full time senior export control compliance officer, implement certain procedures, conduct comprehensive ITAR training, immediately conduct a comprehensive export compliance audit, and institute a plan to conduct periodic audits of the export compliance program. Although, we cannot assure you we are in the process of addressing these directives. As a result of the export compliance audit, we have identified additional unauthorized transfers internally at our facility and in support of U.S. operations in Iraq and Afghanistan as well as issues associated with the execution of our licenses and agreements. We have reported these matters to DDTC.

        Compliance with the directives of the DDTC may result in substantial expenses and diversion of management. Any failure to adequately address the directives of DDTC could result civil fines and/or suspension or loss of our export privileges, any of which could have a material adverse effect on our business or financial position, results of operations, or cash flows.

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Our products are subject to export limitations and we may be prevented from shipping our products to certain nations or buyers.

        We are subject to federal licensing requirements with respect to the sale and support in foreign countries of certain of our products and the importation of components for our products. In addition, we are obligated to comply with a variety of federal, state and local regulations, both domestically and abroad, governing certain aspects of our international sales and support, including regulations promulgated by, among others, the U.S. Departments of Commerce, Defense and State and the U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms and Explosives.

        Such licenses may be denied for reasons of U.S. national security or foreign policy. In the case of certain large orders for exports of defense equipment, the Department of State must notify Congress at least 15 to 30 days, depending on the size and location of the sale, prior to authorizing certain sales of defense equipment and services to foreign governments. During that time, Congress may take action to block the proposed sale. We can give no assurance that we will continue to be successful in obtaining the necessary licenses or authorizations or that Congress will not prevent or delay certain sales. Any significant impairment of our ability to sell products outside of the U.S. could negatively impact our results of operations and financial condition.

        For products and technology exported from the U.S. or otherwise subject to U.S. jurisdiction, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to ITAR, EAR, or FMS, program and trade sanctions against embargoed countries and destinations administered by OFAC, U.S. Department of the Treasury. We have discovered shortcomings in our export compliance procedures. We are currently analyzing product shipments and technology transfers, working with U.S. government officials to ensure compliance with applicable U.S. export laws and regulations, and enhancing our export compliance system. We have made voluntary disclosures to the Department of State and provided additional documentation to the U.S. Department of State regarding compliance issues. The State Department personnel visited our facilities in December 2007 as part of the State Department company visit program for a further review of our export control policies and procedures, as well as their implementation. The voluntary disclosures that have been finally adjudicated by the U.S. Department of State did not result in any monetary fines or restrictions on exports. The U.S. Department of State recommended enhancements to our compliance program, some of which we have implemented and others which we are implementing. Two voluntary disclosures remain outstanding. The State Department is now treating one of these matters as a directed disclosure, a more serious category of disclosures. The State Department has asked to review additional information and we have provided the State Department with all of the requested information. We are currently reviewing additional compliance information and will file voluntary disclosures if warranted. A determination by the U.S. government that we have failed to comply with one or more of these export controls or trade sanctions, as a consequence of the results of the directed disclosure or any other violations that may be determined, could result in civil or criminal penalties, including the imposition of significant fines, denial of export privileges, loss of revenues from certain customers, and debarment from participation in U.S. government contracts. Any one or more of these sanctions could have a material adverse effect on our business, financial condition and results of operations.

        We are subject to the FCPA and other laws which prohibit improper payments to foreign governments and their officials by U.S. and other business entities. We operate in countries known to experience corruption. Our operations in such countries create the risk of an unauthorized payment by one of our employees or agents which would be in violation of various laws including the FCPA. Violations of the FCPA may result in severe criminal penalties which could have a material adverse effect on our business, financial condition and results of operations. In that regard, we do not have a formal FCPA compliance program.

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        Additionally, the failure to obtain applicable governmental approval and clearances could materially adversely affect our ability to continue to service the government contracts we maintain. Exports of some of our products to certain international destinations may require shipment authorization from U.S. export control authorities, including the U.S. Departments of Commerce and State, and authorizations may be conditioned on end-use restrictions. Failure to receive these authorizations may materially adversely affect our revenues and in turn our business, financial condition, results of operations, and cash flows.

        Our international business may pose greater risks than our domestic business due to the greater potential for changes in foreign economic and political environments. Our international business is also highly sensitive to changes in foreign national priorities and government budgets. Sales of military products are affected by defense budgets (both in the U.S. and abroad) and U.S. foreign policy.

        Sales of our products and services internationally are subject to U.S. and local government regulations and procurement policies and practices including regulations relating to import-export control.

We may experience supply interruptions for certain components used in the manufacture and sustainment of our products, which could cause delays in production, product deliveries and the sustainment of our vehicles.

        In the event that we are unable to obtain required components from our existing suppliers, and if we are unable to mitigate the impact or find an alternate supplier in a timely manner, it could have a material adverse effect on our ability to produce our vehicles and provide sustainment. Significant interruptions in the supply of components may occur for a variety of reasons, including capacity constraints at our suppliers, competition for components with other manufacturers of vehicles, insolvency of a supplier, work stoppages at suppliers and transportation interruptions, which could involve significant additional costs and result in delays in production, product deliveries and sustainment and could have a material adverse effect on our results of operations. In addition, the unavailability or scarcity of certain components or raw material could result in increased costs, which could adversely affect our results of operations.

We may not be able to adequately safeguard our intellectual property rights and trade secrets from unauthorized use, and we may become subject to claims that we infringe on others' intellectual property rights.

        We rely on a combination of patents, trade secrets, trademarks, and other intellectual property laws, licensing agreements, nondisclosure agreements with employees and customers and other protective measures to preserve our proprietary rights to our products and production processes. Our pending patent applications may not be granted by the various patent offices examining them. Even if our patent applications are granted and issued as patents, these measures afford only limited protection and may not preclude competitors from developing products or processes similar or superior to ours. Moreover, the laws of certain foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

        Although we implement protective measures and intend to defend our proprietary rights, these efforts may not be successful. From time to time, we may litigate within the United States or abroad to enforce our issued or licensed patents, to protect our trade secrets and know-how or to determine the enforceability, scope and validity of our proprietary rights and the proprietary rights of others. For example, we are currently involved in a lawsuit in which we allege misappropriation of our intellectual property. See Item 3, Legal Proceedings. Enforcing or defending our proprietary rights could be expensive, requires management's attention and might not bring us timely or effective relief.

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        We are party to two long-term intellectual property agreements pursuant to which we have the exclusive right to use certain intellectual property technology relating to blast- and ballistic-protected vehicles through 2011 and 2012, respectively. See Item 1, Business—Intellectual Property for a further discussion of these agreements with CSIR and Mechem. In the event that the license agreements expire without renewal, CSIR and Mechem may permit other parties to use the licensed technology, including our competitors. The loss of these intellectual property rights may adversely affect our operations.

        Furthermore, third parties may assert that our products or processes infringe their patent or other intellectual property rights. Our patents may be challenged, invalidated or circumvented. Infringement claims against us could result in substantial costs and diversion of our resources even if we ultimately prevail. A third party claiming infringement may also obtain an injunction or other equitable relief, which could effectively block the distribution or sale of allegedly infringing products. Although we may seek licenses from third parties covering intellectual property that we are allegedly infringing, we may not be able to obtain any such licenses on acceptable terms, if at all.

Our ability to operate effectively could be impaired if we were to lose the services of our key personnel, or if we are unable to recruit qualified managers and key personnel in the future. Moreover, a number of our officers and other key employees have joined our Company recently, and therefore have only limited experience with our business.

        Our success depends on the continued service of our management team and key personnel. If one or more of these individuals were unable to continue working due to health reasons, or were to resign or otherwise terminate their employment with us, we could experience a loss of sales, delays in new product development and diversion of management resources, and we may have difficulty replacing any of these individuals. We do not have key person insurance on any of our executive employees. Competition for qualified managers and key personnel is intense and we may not be able to recruit and retain such personnel. If we are unable to retain our existing managers and employees or hire and integrate new personnel, we may experience operating inefficiencies, production delays and reduced profitability or losses.

        In addition, a number of our officers and key employees have joined our company recently, and therefore have limited experience with our business, personnel, and administrative systems. For example, our executive vice president of finance joined our Company in July 2008; our interim chief financial officer joined in February 2008; our chief strategy officer and general counsel joined in November 2007; and our president was appointed in September 2007 and appointed as chief executive officer in January 2008. The ability of new management to articulate and implement their strategic vision, and to integrate effectively into the Company's business, personnel, and administrative systems, is critical to our success.

We have lacked robust managerial processes, which must be upgraded to make a successful transition to a mature business.

        In the past, we did not have robust internal systems in place for our managerial processes. As a result, our rapid growth placed a great strain on the managerial and compliance processes in place at that time, and has subjected the Company to increased risk of regulatory enforcement proceedings and private litigation. We have developed and started to implement new business and compliance plans that seek to address these issues and to transition our Company into a mature operating business. However, we cannot provide you with any assurances that we will be able to implement these new processes and successfully make that transition.

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Risks Related to our Common Stock

Our articles of incorporation authorize the issuance of shares of blank check preferred stock.

        Under the terms of our articles of incorporation, our board of directors is authorized to issue from time to time, without any need for approval by our shareholders but subject to any limitations prescribed by law, shares of our preferred stock in one or more series. Each series shall consist of such number of shares and have the rights, preferences, powers and restrictions, such as dividend rights and preferences, conversion rights, voting rights, terms of redemption and liquidation rights and preferences, as our board of directors shall determine. Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. The board of directors may issue preferred stock with voting, conversion or other rights that may have the effect of delaying, deferring or preventing a change in control of the Company and that could adversely affect the market price of the common stock and the voting and other rights of the holders of common stock.

Our common stock may be delisted from the Nasdaq Capital Market and transferred to the National Quotation Service Bureau ("Pink Sheets"), which may, among other things, reduce the price of our common stock and the levels of liquidity available to our stockholders.

        As a result of our inability to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2008 and June 30, 2008, we received Nasdaq Staff Determination Notices stating that our common stock may be delisted from the Nasdaq Capital Market. We appealed the determination with the Nasdaq Listing Qualification Panel and received a stay from delisting until September 15, 2008 in order to file such annual and quarterly reports and any required restatements with the SEC. We subsequently requested an extension from the Nasdaq Listing Qualification Panel to file our Quarterly Reports on Form 10-Q for the periods ended March 31, 2008 and June 30, 2008 on or before September 30, 2008.

        Although we have now filed our Annual Report on Form 10-K for our fiscal year ended December 31, 2007 which includes restated condensed consolidated financial statements and other financial information for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007 and plan on promptly filing amended and restated Quarterly Reports on Form 10-Q for such periods to reflect the condensed consolidated financial statements, we have not yet filed our Quarterly Reports on Forms 10-Q for the periods ended March 31, 2008 and June 30, 2008 and we have not yet received formal notification from Nasdaq that our request for an extension to file such quarterly reports has been granted or that our common stock will continued to be listed on the Nasdaq Capital Market pending those filings.

Our stock price has been volatile, and the value of an investment in our common stock may decline.

        The market price and trading volume of our common stock has been subject to significant volatility, and this trend may continue. For example, in the last quarter of fiscal year 2007, the price of our common stock ranged from $3.89 to $25.25. The value of our common stock may decline regardless of our operating performance or prospects. Factors affecting our market price include, but are not limited to, our failure to meet expectations regarding new orders or sales of our vehicles; differences between our reported results and those expected by investors and securities analysts; announcements of new contracts or orders by us or our competitors; and market reaction to any future acquisitions, joint ventures or strategic investments announced by us or our competitors.

        Recent events have caused stock prices for many companies, including ours, to fluctuate in ways unrelated or disproportionate to their operating performance. The general economic, political and stock market conditions that may affect the market price of our common stock are beyond our control. The market price of our common stock at any particular time may not remain the market price in the future. In the past, securities class action litigation has been instituted against companies following

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periods of volatility in the market price of their securities. Any such litigation, if instituted against us, could result in substantial costs and a diversion of management's attention and resources.

Anti-takeover provisions in our articles of incorporation and by-laws, as well as Nevada Corporation Law, could make it difficult for our shareholders to replace or remove our current board of directors or have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.

        As discussed above, our board of directors is empowered to issue preferred stock in one or more series without shareholder approval. Any issuance of this "blank check" preferred stock could materially limit the rights of holders of the common stock and render more difficult or discourage an attempt to obtain control of us by means of a tender offer, merger, proxy contest or otherwise. In addition, our articles of incorporation and by-laws contain a number of provisions that could impede a takeover or change in control of us, including our staggered board, limitation on the ability of our shareholders to act by written consent, advance notice provisions and the ability for the board of directors to fill a vacancy on our board of directors.

        Certain provisions of the Nevada Revised Statutes Law could also discourage takeover attempts that have not been approved by our board of directors or shareholders. These provisions relate to, among other things, the acquisition of a controlling interest in a Nevada corporation meeting certain requirements or certain business combinations and other transactions between a Nevada corporation and certain "interested stockholders."

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

        Our space is more than adequate for our current needs. We currently have excess manufacturing capacity. See Item 1A, Risk Factors for a discussion of our excess manufacturing capacity.

        We currently have five leases for approximately 543,000 square feet of space in four buildings located on a single campus in Ladson, South Carolina, for our executive offices and to manufacture our Buffalo and Cougar vehicles, designated Building #1 (office), Building #1 (industrial), Building #2, Building #3 and Building #6. Each lease contains four five-year options that must be exercised six months prior to expiration. The current leases expire June 30, 2009.

        On March 9, 2007, we purchased a blast range of approximately 306 acres in Edgefield County, South Carolina, along with the purchase of selected assets, and acquired a lease of an office building with a lease term ending December 31, 2008. We use these facilities for our own research and development activities and may also contract with selected governmental and commercial customers to use our facilities.

        On March 22, 2007, we entered into an asset purchase agreement including an assignment and assumption of the lease for an approximately 60,000 square foot facility in Summerville, South Carolina, for the intended purpose of expanding research and development operations and to facilitate increased customer training requirements of products and applications. We moved the research and development operations previously housed in Building #3 in Ladson, South Carolina, to this facility.

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        On July 12, 2007, we purchased an approximately 430,000 square foot facility in Roxboro, North Carolina, which we had intended to utilize to manufacture our Cheetah vehicle. We currently intend to use this facility for training and sustainment purposes.

        On January 14, 2008, we leased an approximately 4,900 square foot furnished office space facility from KUKA Systems in Sterling Heights, Michigan for an offsite engineering office with a 12-month term.

        On January 30, 2008, we executed a lease with College Park Center in Ladson, South Carolina for approximately 8,450 square feet for an office orientation and training facility with a 12-month term.

ITEM 3.    LEGAL PROCEEDINGS

Shareholder Class Action and Derivative Complaints

        On March 10, 2008, the first of ten related class action lawsuits was filed against us and certain of our former and current board members or officers in the United States District Court for the District of South Carolina Charleston Division on behalf of a proposed class of investors who purchased or otherwise acquired our securities during the period between August 14, 2006 and February 29, 2008. The complaints seek class certification, and the allegations include but are not limited to allegations that the defendants violated the Exchange Act and made false or misleading public statements and/or omissions concerning our business, internal controls, and financial results. The plaintiffs assert that as a result of the defendants' allegedly wrongful acts and omissions, members of the proposed class have suffered significant losses and damages. The individual class action lawsuits were consolidated on June 10, 2008 under caption 'In Re Force Protection, Inc. Securities Litigation, Action No. 2:08-cv-845-CWH.' On June 20, 2008 a group of investors consisting of the Laborers' Annuity and Benefit System of Chicago, Gary Trautman, David J. Jager, Bhadra Shah, Panteli Poulikakos, George Poulikakos, and Niki Poulikakos was appointed lead plaintiff.

        Between March 27, 2008 and May 28, 2008, various alleged shareholders filed derivative lawsuits against former and current officers or board members wherein the plaintiff shareholders are seeking damages for the Company. The Company has been named a nominal defendant in each derivative lawsuit. Four (4) derivative lawsuits are pending in the United States District Court for the District of South Carolina Charleston Division; two (2) derivative lawsuits are pending in Charleston, South Carolina Circuit Court; and one (1) derivative lawsuit is pending in Clark County, Nevada District Court. The plaintiff shareholders' allegations include and are not limited to allegations of breach of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment in connection with the Company's public statements regarding its operations and financial results, internal controls, compensation of certain defendants, and alleged insider stock sales by certain defendants.

Other Disputes

        On August 21, 2007, we filed suit against Protected Vehicles, Inc. ("PVI") and Garth Barrett, Thomas Thebes, and Paul Palmer, three of PVI's employees (all of whom were former employees of Force Protection) in the United States District Court for the District of South Carolina. In the complaint, we allege that the named defendants used our confidential information and trade secrets to create a competing business. We seek injunctive relief, unspecified damages, attorneys' fees and costs. The defendants have answered our complaint and filed counterclaims against us. In their answers and counterclaims, the defendants allege, among other things, that we and several of our current and former officers and directors engaged in: certain transactions (including transactions with Force Protection) in which such officers and directors maintained a financial interest; backdating and certain other improper acts in connection with certain stock issuances; allegedly wrongful acts with respect to a procurement contract with a foreign government; and other transactions involving alleged self-dealing

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and engaged in certain allegedly retaliatory acts in connection with defendants' prior attempts to bring such activities to the attention of the Company's personnel or governmental agencies. Defendants seek unspecified monetary damages, attorneys' fees and costs. Defendants filed an amended counterclaim withdrawing three (3) of their causes of action, and have recently indicated they intend to file a second amended counterclaim. On January 18, 2008, the district court entered an order staying the litigation in light of an involuntary bankruptcy petition filed on January 15, 2008, in the United States Bankruptcy Court for the District of South Carolina with respect to PVI. On February 5, 2008, PVI filed a voluntary Chapter 7 petition. On March 28, 2008, the Chapter 7 proceeding was converted to a Chapter 11 proceeding. On June 20, 2008, the Bankruptcy Court remanded the litigation back to the District Court, and on September 3, 2008, the bulk of PVI's assets, including certain rights and liabilities with respect to our suit against it, were sold to a third party. On July 31, 2008, we settled our claim against Paul Palmer. Our claims against PVI and the third party (who we will be seeking to have joined in the suit) are currently set to be tried in early 2009; the counterclaims against us have not been set for trial.

        From February 2007 through April 2008, we received a total of 68 complaints from current and former employees filed with the United States Equal Employment Opportunity Commission alleging, among other things, race and/or gender discrimination. We have responded to the complaints as such responses have become due, and are investigating the allegations.

        We are subject to a number of claims relating to our common shares. In one such claim, certain investors have issued to Force Protection a demand for 481,492 shares of our common stock in connection with the investors' conversion of their shares of our preferred stock and other damages relating to warrants the investors allege were granted but never distributed to them. In addition, on November 13, 2007 we were served with a lawsuit filed by former senior employee Murray Hammick against Force Protection Industries, Inc. and former Force Protection officers Gordon McGilton, Scott Ervin, and Frank Kavanaugh. The complaint, filed in the Charleston (South Carolina) County Court of Common Pleas, alleges, among other things, that Mr. Hammick is owed options to acquire approximately 83,000 shares of our common stock and certain back wages and sets forth claims for, inter alia, breach of contract, violation of the South Carolina Payment of Wages Act, retaliatory wrongful discharge, and defamation. We answered the complaint on January 25, 2008.

        During the period from August 1, 2007 to November 23, 2007, Force Protection Industries, Inc. entered into three IT hosting and consulting agreements. A series of disputes arose from these contracts. Force Protection, Inc. has entered into settlement agreements for these claims totaling $2,275,362.

        In early November 2007, DDTC advised us of a site visit planned for December 2007. In advance of that site visit, the DDTC requested, and we provided, certain documents and materials relating to our policies and procedures concerning company activity regulated by ITAR. The site visit took place in mid-December 2007 and included a meeting with certain of our officers and interviews of certain of our employees involved with security, training, business development, human resources, information technology, empowered officials, engineering, contracts, manufacturing, program management, shipping, supply chain integrated logistics support and quality. Following the site visit, we received a letter from the DDTC regarding certain weaknesses it identified in our compliance program with respect to training, treatment of foreign visitors, overseas travel by personnel, export manuals, identifying data regarding ITAR hardware and services, and license tracking and requesting certain specific measures be undertaken. We are in the process of addressing those specific measures.

        In early December 2007, we submitted a voluntary disclosure to DDTC regarding the shipment of technical manuals, Cheetah spare parts, armored vest plates, parts not listed on our license and transfers of technical data to and by our vendors without proper authorization or identification of the appropriate exemption. On January 22, 2008, the DDTC requested additional information and

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documentation for each specific shipment of these items within sixty days. In addition, the DDTC directed us to undertake certain specific measures, including, but not limited to, that we hire a full time senior export control compliance officer, implement certain procedures, conduct comprehensive ITAR training, immediately conduct a comprehensive export compliance audit, and institute a plan to conduct periodic audits of the export compliance program. On February 11, 2008, we provided DDTC with the job description for the Director of Export Controls, draft Export Controls Manual, ITAR presentation provided in new orientation training and the attendance logs for annual ITAR training provided to executives and other employees having ITAR responsibilities. On March 11, 2008, we provided DDTC with our draft audit plan and on June 2, 2008, we provide the final audit report. On July 14, 2008 we provided DDTC with supplemental information to our previous voluntary disclosure and other information identified in the audit. We have developed and implemented an Export Control Policies and Procedures Manual and ITAR Product Classification Guide, established an Export Control Council, and revised our Technology Control Plan and Code of Conduct and Ethics. As a result of the export compliance audit, we have identified additional unauthorized transfers internally at our facility and in support of U.S. operations in Iraq and Afghanistan as well as issues associated with the execution of our licenses and agreements. We have reported these matters to DDTC.

        On February 8, 2008, a temporary independent contractor whose services we had terminated filed a complaint with OSHA which alleges a violation under the employee protection provisions of Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1514A. The former independent contractor alleges that we terminated his engagement in retaliation for his allegation of certain corporate governance, government contracting, accounting and other irregularities. On April 18, 2008 we responded to the allegations, and are awaiting a recommendation and report from the OSHA investigator. In August 2008 the claimant submitted a proposed amended complaint which seeks to add additional claims and the current and former chief executive officers as defendants.

        On August 15, 2008, we received a $1.1 million notice of claim of lien for the balance of tooling supplied by a vendor to our prime contractor on the Roxboro Facility. We have demanded that the prime contractor resolve this matter with its vendor and indemnify us for this claim of lien.

        Although we intend to defend ourselves in connection with the foregoing legal proceedings and claims, there can be no assurance that we will ultimately prevail in any of these matters. Moreover, the defense of these claims and proceedings may result in substantial legal expenses and diversion of our management, and any settlement or adverse judgment may require us to make substantial payments, any of which could have a material adverse effect on our business or financial position, results of operations, or cash flows.

        In addition, compliance with the directives of the DDTC discussed above may result in substantial expenses and diversion of management. Any failure to adequately address the directives of DDTC could result in civil fines and/or suspension or loss of our export privileges, any of which could have a material adverse effect on our business or financial position, results of operations, or cash flows.

        We are also a party to other litigation which we consider routine and incidental to our business. We may be involved from time to time in other litigation that could have a material effect on our operations or finances. Other than the litigation described above, we are not aware of any pending or threatened litigation against us that could have a material adverse effect on our business or financial position, results of operations, or cash flows.

        See Item 1A, Risk Factors in Part I of this Annual Report of Form 10-K.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of security holders during the fourth quarter of 2007.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Registrant's Common Equity

        Our common stock has been listed on the Nasdaq Capital Market under the trading symbol "FRPT" since January 18, 2007. Prior to that time, our common stock was traded on the OTC Bulletin Board under the symbol "FRCP.OB" and subsequently changed to "FRPT.OB."

        The following table reflects, for periods from and after January 18, 2007, the last reported high and low sales prices of our common stock on the Nasdaq Capital Market and, for periods prior to that date, the last reported high and low bid prices as reported on the OTC Bulletin Board. While listed on the OTC Bulletin Board, bid and ask quotations for our common shares were submitted by certain broker dealers who are members of the Financial Industry Regulatory Authority ("FINRA"), or its predecessor, the National Association of Securities Dealers, Inc. These quotations of our stock price while listed on the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

	High		Low
2006
First Quarter	$	2.30	$	0.70
Second Quarter	$	6.68	$	1.27
Third Quarter	$	9.43	$	5.07
Fourth Quarter	$	18.35	$	6.35
2007
First Quarter (through January 17, 2007)	$	24.30	$	17.48
First Quarter (commencing January 18, 2007)	$	22.95	$	14.55
Second Quarter	$	31.16	$	18.40
Third Quarter	$	24.50	$	13.92
Fourth Quarter	$	25.25	$	3.89
2008
First Quarter	$	5.74	$	1.03
Second Quarter	$	4.80	$	2.00

        We estimate that there were approximately 186 holders of record of our common stock as of June 30, 2008.

Dividend Policy

        We have never paid nor declared any cash dividends on our common stock. We currently intend to retain earnings, if any, to finance the growth and development of our business, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the board of directors and will depend on our financial position, results of operations, capital requirements, restrictions contained in current or future financing instruments, and other factors the board deems relevant.

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Performance Graph

Comparison of five-year cumulative return among FPI, S&P 500, the Dow Jones Industrial Average, the S&P 600 Small Cap and the S&P Small Cap Aerospace and Defense Indices

        The annual changes for the five-year period shown in the graph below are based on the assumption that $100 had been invested in our common stock, the Dow Jones Industrial Average, the Standard & Poor's 500 Stock Index, S&P 600 Small Cap Index, and the S&P 600 Small Cap Aerospace and Defense Index on December 31, 2002, and that all quarterly dividends were reinvested at the average of the closing stock prices at the beginning and end of the quarter. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2007, assuming reinvestment of all dividends.

Date	Force Protection		S&P 500		Dow Jones Industrial Average		S&P 600 Small Cap		S&P 600 Small Cap Aerospace and Defense
December 2002	$	100.00	$	100.00	$	100.00	$	100.00	$	100.00
December 2003	$	58.33	$	128.63	$	128.25	$	138.75	$	122.72
December 2004	$	231.67	$	142.59	$	135.34	$	170.12	$	161.70
December 2005	$	54.17	$	149.58	$	137.70	$	183.15	$	163.47
December 2006	$	1,209.03	$	173.15	$	163.85	$	210.81	$	190.63
December 2007	$	325.00	$	182.64	$	178.37	$	210.19	$	253.92

        We decided to use two new peer groups, the S&P 600 Small Cap Index, and the S&P 600 Small Cap Aerospace and Defense Index, for the year ended December 31, 2007. We believe the new peer groups more closely reflect our business and, as a result, provide a more meaningful comparison of our stock performance. Last year, we used the S&P 500 Stock Index and the Dow Jones Industrial Average. In accordance with rules and regulations of the SEC, the graph includes the old peer group, the S&P 500 Stock Index and the Dow Jones Industrial Average, and the new peer groups, the S&P Small Cap 600 Index and the S&P 600 Small Cap Aerospace and Defense Index.

47

        The peer issuers included in S&P 600 Small Cap Aerospace and Defense Index are set forth below:

•

AAR Corp



•

Applied Signal Technology, Inc.



•

Ceradyne, Inc.



•

Cubic Corporation



•

Curtiss-Wright Corporation



•

Esterline Technologies Corporation



•

GenCorp Inc.



•

Moog Inc.



•

Teledyne Technologies Incorporated



•

Triumph Group, Inc.

        The comparison for each of the periods assumes that $100 was invested on December 31, 2002 in our common stock, the stocks included in the S&P 500 Index and the stocks included in each peer group index and that all dividends were reinvested. The stock performance shown on the graph above is not necessarily indicative of future price performance.

Recent Sales of Unregistered Securities

        The following are our issuances of unregistered securities for the years ended December 31, 2005, 2006 and 2007.

        In January 2005, we issued a total of 188,400 shares of our common stock at an average price of $2.76 per share, generating $520,069 in net proceeds pursuant to the Investment Agreement between the Company and Dutchess Private Equities Fund, L.P., dated January 26, 2004.

        On July 24, 2006, we completed a private placement of 8,250,000 shares of our common stock to investors, resulting in gross proceeds of approximately $41.3 million. The net proceeds, net of expenses, were approximately $39.2 million. We subsequently registered these shares within thirty days of the closing of the private placement by filing a Form S-3 Registration Statement with the SEC pursuant to the terms of the purchase agreement.

        On December 20, 2006, we completed a private placement of 13,000,000 shares of our common stock to institutional investors at $11.75 per share, resulting in gross proceeds of $152,750,000. The proceeds, net of commissions, were $146,640,261. We subsequently registered these shares within thirty days of the closing of the private placement by filing a Form S-3 Registration Statement with the SEC pursuant to the terms of the purchase agreement.

        With respect to the sales of our common stock described above, we relied on the Section 4(2) exemption from securities registration under the federal securities laws for transactions not involving any public offering. No advertising or general solicitation was employed in offering the shares. The shares were sold to accredited investors. The shares were offered for investment purposes only and not for the purpose of resale or distribution, and the transfer thereof was appropriately restricted by us.

ITEM 6.    SELECTED FINANCIAL DATA

        We derived the selected historical consolidated financial data presented below from our audited consolidated financial statements and related notes included elsewhere in this Annual Report on

48

Form 10-K. You should refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in Part I of this Annual Report on Form 10-K and the notes to our accompanying consolidated financial statements for additional information regarding the financial data presented below, including matters that might cause this data not to be indicative of our future financial condition or results of operations. In addition, you should note the following information regarding the selected historical consolidated financial data presented below.

•

The net income (loss) available to common shareholders for the years ended December 31, 2006 and 2005 was impacted by dividends and accretion for our Series D 6% convertible preferred stock. For additional information see Note 12, Earnings (Loss) Per Share, to our accompanying consolidated financial statements.



•

As of December 31, 2006, we removed the valuation allowance from the deferred tax asset as we expect to be able to utilize our net operating loss carry-forwards for federal income tax purposes. For additional information see Note 11, Income Taxes, to our accompanying consolidated financial statements.

As of and for the year ended December 31,		2007			2006		2005			2004			2003
		(In thousands, except share and per share data)
Results of operations
Net sales		$	890,672		$	196,017	$	49,713		$	10,273		$	6,247
Income (loss) from continuing operations			9,373			5,870		(14,405	)		(11,954	)		(5,156	)
Loss from discontinued operations(a)			—			—		—			—			(2,932	)
Income tax (expense) benefit			(1,721	)		12,327		—			—			—
Net income (loss)			7,652			18,197		(14,405	)		(11,954	)		(8,088	)
Net income (loss) available to common shareholders			7,652			16,574		(17,225	)		(11,954	)		(8,088	)
Basic earnings (loss) per common share			0.11			0.37		(0.51	)		(0.62	)		(0.63	)
Diluted earnings (loss) per common share			0.11			0.36		(0.51	)		(0.62	)		(0.63	)
Weighted average common shares outstanding:
	Basic		68,054,477			44,786,083		33,926,573			19,357,939			8,185,153
	Diluted		68,403,942			50,428,466		33,926,573			19,357,939			8,185,153
Financial Position at Year-End
Property and equipment, net		$	66,707		$	8,964	$	2,139		$	1,037		$	309
Total assets			474,670			280,414		39,777			13,627			1,620
Current liabilities			242,746			62,392		38,372			10,958			1,894
Long-term obligations			295			168		—			111			32
Convertible preferred stock(b)			—			—		7,901			—			—
Shareholders' equity (deficit)			231,629			217,854		(6,497	)		2,558			(306	)

(a)

We recognized a loss from discontinuing and disposing of our former boat division during the year ended December 31, 2003.

(b)

We recorded the Series D 6% convertible preferred stock as mezzanine equity on our consolidated balance sheet as of December 31, 2005.

49

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide information that is supplemental to, and should be read together with, our consolidated financial statements and the accompanying notes contained in this Annual Report on Form 10-K. Information in this Item 7 is intended to assist the reader in obtaining an understanding of our consolidated financial statements, the changes in certain key items in those financial statements from year to year, the primary factors that accounted for those changes, and any known trends or uncertainties that we are aware of that may have a material effect on our future performance, as well as how certain accounting principles affect our consolidated financial statements. MD&A includes the following sections:

•

Highlights and Executive Summary



•

Overview



•

Our Business


•

Business Model and Key Concepts



•

Key Challenges



•

Strategy and Key Trends



•

Results of Operations—an analysis of our consolidated results of operations, for the three years presented in our consolidated financial statements



•

Liquidity and Capital Resources—an analysis of the effect of our operating, financing and investing activities on our liquidity and capital resources



•

Off-Balance Sheet Arrangements—a discussion of such commitments and arrangements



•

Contractual Obligations—a summary of our aggregate contractual obligations



•

Dividends—our dividend history



•

Critical Accounting Policies and Estimates—a discussion of accounting policies that require significant judgments and estimates



•

New Accounting Pronouncements—a summary and discussion of our plans for the adoption of new accounting standards relevant to us



•

2007 Quarterly Financial Information—(unaudited).

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in "Special Note Regarding Forward-Looking Statements," "Market Data" and "Risk Factors."

        References herein to the term "Force Protection, Inc." refers to Force Protection, Inc. only, and references to the "Company," "Force Protection," "we," "our" or "us" refer to Force Protection, Inc. and its subsidiaries unless the context specifically indicates otherwise.

Highlights and Executive Summary

        We are an important provider of blast- and ballistic-protected products used to support armed forces and security personnel in harm's way. We design, manufacture, test, deliver and support our blast- and ballistic-protected products with the purpose to increase survivability of the users of the

50

products. Our specialty vehicles, which we believe are at the forefront of blast- and ballistic-protected technology, are designed to protect their occupants from landmines, hostile fire, and improvised explosive devices ("IEDs"). We are an important provider of vehicles for the U.S. military's Mine Resistant Ambush Protected ("MRAP") vehicle program, which is currently one of the highest priority acquisition programs for the U.S. Department of Defense ("DoD"), according to a memorandum from Secretary of Defense Robert Gates dated May 2, 2007.

        Through an acquisition in 2002, we began shifting our principal focus from our then existing recreational watercraft production business to the production of mine clearing and armored vehicles. Our business began to grow exponentially when we were awarded contracts by the U.S. military in 2005 and each year after that. By 2007, substantially all of our net sales were derived from work performed directly or indirectly under U.S. government contracts. For the years ended December 31, 2007, 2006 and 2005, our net sales totaled $890.7 million, $196.0 million and $49.7 million, respectively, and our net income (loss) totaled $7.7 million, $18.2 million and $(14.4) million, respectively.

Overview

        We design, manufacture, test, deliver and support our blast- and ballistic-protected products to increase survivability of the users of the products. These vehicles require ongoing life cycle support in the areas of spare parts, maintenance, and training. As a consequence, we believe that we have a substantial business opportunity to provide life cycle support to our existing and future fleet of vehicles. In addition, as the fleet ages, we have the opportunity to offer upgrades and product improvements for our fleet designed to further enhance the operability and capability of the vehicles.

        Our specialty vehicles, which we believe are at the forefront of blast- and ballistic-protected technology, are designed to protect their occupants from landmines, hostile fire and IEDs. We currently have three vehicle types aimed at fulfilling different operational or mission requirements: the Buffalo, the Cougar and the Cheetah. The Buffalo has six wheels, is our largest vehicle and is designed primarily for use in conducting mine clearance operations. The Cougar is a medium-sized vehicle and is available in 4-wheeled and 6-wheeled variants and in a variety of configurations for troop transport, command and control, route reconnaissance, convoy escort and ambulance duty. The Cheetah has four wheels and is designed specifically for reconnaissance, forward command and control and urban operations. At present, we have not sold any Cheetah vehicles.

        We are headquartered, and have manufacturing facilities, in Ladson, South Carolina. In March 2007, we purchased a blast range in Edgefield, South Carolina, and leased a related office building. We use these facilities for our own research and development activities and may also contract with selected governmental and commercial customers to use our facilities. We also purchased, in March 2007, a facility in Summerville, South Carolina, for the intended purpose of expanding research and development operations and to facilitate our increased customer training requirements of products and applications. In July 2007, we purchased an additional facility in Roxboro, North Carolina. We intend to use this facility for training and sustainment purposes. In January 2008, we leased a small furnished office space in Sterling Heights, Michigan, for use as an offsite engineering office.

Our Business

Business Model and Key Concepts

        Our business is heavily influenced by the needs of the U.S. military for blast- and ballistic-protected wheeled vehicles. The DoD is our largest customer. For the past several years, substantially all of our net sales were derived from the U.S. government. To meet the requirements of the MRAP Competitive Contract, on September 10, 2007 we entered into a subcontract ("GDLS Subcontract") with General Dynamics Land Systems Inc. ("GDLS") pursuant to which GDLS manufactures approximately 50% of the Cougar vehicles to be manufactured under, and performs approximately 50%

51

of the life cycle support required by, the MRAP Competitive Contract based on revenues. We previously entered into a joint venture with GDLS on December 15, 2006 ("Workshare Agreement") pursuant to which we and GDLS would fulfill the obligations of the MRAP Competitive Contract. We formed a Delaware limited liability company, Force Dynamics, LLC ("Force Dynamics"), to govern the terms of the joint venture. However, the MRAP Competitive Contract was awarded to us and not to Force Dynamics or GDLS. We have attempted to novate this contract to Force Dynamics, although the U.S. government has not yet agreed to the novation. If the contract is novated, we and GDLS may be required to guarantee payment of all liabilities and performance of all obligations that Force Dynamics will assume under the novated contract.

        Because this contract was awarded to Force Protection and has not yet been novated to the joint venture, we include 100% of the revenues from the MRAP Competitive Contract (including revenue from vehicles manufactured by GDLS) in Net sales in our consolidated statement of operations, and will continue to include them until such time as the MRAP Competitive Contract is novated to Force Dynamics, at which point we will recognize revenues only from vehicles subcontracted by Force Dynamics that we actually manufacture. In addition, during the year ended December 31, 2007 we include in Cost of sales, an amount equal to 100% of revenues from vehicles manufactured by GDLS. Notwithstanding the inclusion of revenues from vehicles manufactured by GDLS in Net sales, GDLS is entitled to all of the revenue from vehicles manufactured by GDLS. Activities under the GDLS Subcontract continue to evolve and after 2007 certain activities performed by GDLS result in a gross profit to us.

        To meet the needs of other government contracts, in 2007 we significantly expanded our work force and invested heavily in additional production facility capacity. However, beginning at the end of the first quarter of 2008, we began to scale back our work force to be more in line with current demand. In the future, we intend to utilize partners and subcontractors to further expand our capacity and capability to fulfill government contracts. This is especially key as U.S. government contracts permit the government to terminate the contract, in whole or in part, without prior notice, at the government's convenience or for default, usually based on performance. Therefore, if the federal government terminates a contract with us or if we default due to our failure or the failure of our partner to perform under the contract, we would be entitled to recover only our incurred or committed costs, settlement expenses and profit on the work completed prior to the termination at best or could even be liable for excess costs incurred by the federal government in procuring undelivered items from an alternative source.

Key Challenges

        Our rapid growth has come with numerous challenges. Coupled with our reliance on the U.S. military for substantially all of our business, we have identified the following key challenges to continued success:

•

being awarded additional orders or contracts for our vehicles in a volatile marketplace;



•

driving a business in an environment where U.S. military contracts, which represent substantially all of our business, may be terminated in whole or in part at any time; and



•

remediating internal control weaknesses over financial reporting and disclosure.

        As discussed in Item 1A, Risk Factors, the main uncertainty about our future operations is whether we will continue to receive additional orders or contracts for our vehicles. We estimate that orders for MRAP vehicles allow us to continue production through the first part of 2009 and for our Buffalo vehicles to extend production until 2012. It is impossible to predict with certainty whether future orders or contracts will be placed by new or existing customers for our existing products. If we do not receive

52

future orders or contracts for production beyond such dates, it is unlikely that our vehicle business will continue and our business will be materially affected.

        As discussed in Item 1A, Risk Factors, we derive substantially all of our revenue from contracts and subcontracts with the U.S. government and its agencies, primarily the DoD. We expect that U.S. government contracts, particularly with the DoD, will continue to be our primary source of revenue for the foreseeable future. The continuation and renewal of our existing government contracts and new government contracts are, among other things, contingent upon the availability of adequate funding for various U.S. government agencies, including the DoD. Changes in U.S. government spending could directly affect our operating performance and lead to an unexpected loss of revenue. The loss or significant reduction in government funding of a large program in which we participate could also result in a material decrease to our future sales, earnings and cash flows.

        As discussed in Item 1A, Risk Factors, we have identified material weaknesses in our internal control over financial reporting and have concluded that our disclosure controls were not effective as of December 31, 2007, and although we have taken steps to correct our material weaknesses, we may still be subject to risks. If we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our business evolves, we may be unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures. There can be no assurance that, as a result of these remediation efforts or otherwise, we will not identify other inaccuracies in either our previous or future financial statements that will require amendments and restatements to those financial statements, which could have a material adverse effect on us and the price of our common stock.

        We experienced substantial growth in net sales during 2007 and 2006. As a result, our general and administrative expenses and certain other expenses increased substantially as well. We expect that general and administrative expenses and certain other expenses will continue to increase. However, we are unable to predict whether general and administrative expenses, cost of sales and other expenses, expressed as a percentage of our net sales, will increase or decrease.

        During the first six months of 2008, we sought to stabilize our business to match our contract delivery order requirements. We recognized that our business was changing, and in response, we are attempting to rebalance our workforce and manufacturing capacity. We may incur costs as a result of our efforts to recalibrate our business to meet the needs of our customers. In addition, in the past three years we had sought to rapidly expand and develop our operations and production capacity. We have incurred costs and are continuing to incur significant costs associated with our rapid expansion based on the expectation of future contract revenues. We are still experiencing and may continue to experience certain effects from this rapid growth, such as payments under severance arrangements and the costs associated with excess manufacturing capacity and inventory. This growth had placed significant demands on our management and our administrative, operating, manufacturing and financial resources. In addition, our accounting and financial systems need to be substantially improved in order to accommodate our current and projected production levels and to support our government compliance requirements now that we are classified as a large business under applicable federal contracting regulations. We continue to face challenges in improving our administrative, operating, managerial, accounting and financial systems to accommodate our current and projected production levels.

53

Strategy and Key Trends

Strategy

        We plan to leverage our investments in product development and production facilities. To accomplish this we will:

•

identify new products and markets to meet evolving customer requirements;



•

capitalize on demand for blast- and ballistic-protected vehicles and other survivability solutions;



•

expand our service and support network;



•

focus on core competencies; and



•

leverage key relationships to grow our business.

Key Trends

        For periods subsequent to 2007, certain factors are expected to affect our results of operations as compared to results reported herein for 2005 through 2007. Some of these factors are:

•

stabilizing our growth and expansion to match our contract delivery order requirements;



•

the GDLS Subcontract, under which during 2007 we purchased vehicles produced by GDLS from GDLS at the same sales price at which we sold the vehicles to the U.S. military, resulting in a zero gross profit for such sales, and under which after 2007 certain activities performed by GDLS will result in a gross profit to us;



•

additional partnering to increase our offerings in designing survivability solutions, gaining insight into customer needs and shifting away from manufacturing;



•

costs of the Roxboro, North Carolina facility purchased in 2007 initially intended to be used to expand our manufacturing capacity that in the first quarter of 2008 was determined to be excess capacity and for which we began to develop a plan for alternative use for the facility and for which we incurred an impairment charge of $4.9 million; and



•

potential additional business activities and full year carrying costs related to 2007 purchase of blast range and lease of a facility primarily for research and development activities and customer training.

Results of Operations

        The following discussion and analysis is based on our consolidated statements of operations, which reflect our results of operations for the years ended December 31, 2007, 2006 and 2005, as prepared in accordance with GAAP.

        The following tables present our vehicle sales and our results of operations for the three years ended December 31, 2007, 2006 and 2005, as well as the percentage changes from year to year:

								Percentage Change
		For the year ended December 31,
								2007 vs. 2006			2006 vs. 2005
Units Sold		2007		2006		2005
Buffalo			85		28		31		204	%		(10	)%
Cougar (all variants)			1,572		257		40		512	%		543	%
Cheetah			—		—		—		—			—
	Total units sold		1,657		285		71		481	%		301	%

54

											Percentage Change
		For the year ended December 31,
											2007 vs. 2006			2006 vs. 2005
(in thousands)		2007			2006			2005
Net sales		$	890,672		$	196,017		$	49,713			354	%		294	%
Cost of sales			786,803			158,994			46,429			395	%		242	%
	Gross profit		103,869			37,023			3,284			181	%		1,027	%
General and administrative expenses			84,044			27,183			17,256			209	%		58	%
Research and development expenses			14,052			3,204			1,658			339	%		93	%
	Operating income (loss)		5,773			6,636			(15,630	)		(13	)%		142	%
Other income, net			4,209			963			103			337	%		835	%
Interest expense			(609	)		(1,729	)		(1,708	)		(65	)%		(1	)%
Realized gain on derivative liability			—			—			2,830			—			n/m
	Income (loss) before income tax expense (benefit)		9,373			5,870			(14,405	)		60	%		141	%
Income tax (expense) benefit			(1,721	)		12,327			—			114	%		n/m
	Net income (loss)		7,652			18,197			(14,405	)		(58	)%		226	%
Accretion of Series D 6% convertible preferred stock			—			(1,297	)		(2,042	)		n/m			36	%
Preferred stock dividend			—			(326	)		(778	)		n/m			58	%
	Net income (loss) available to common shareholders	$	7,652		$	16,574		$	(17,225	)		(54	)%		196	%

n/m—not meaningful

Results of Operations for the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

Units sold

        The increase in vehicles sold in 2007 compared to 2006 is primarily due to vehicles sold pursuant to the contracts awarded to us under the MRAP program. The vehicles sold under such contracts, which started shipping in the first quarter of 2007, represent approximately 86% of the vehicles sold in 2007.

Net sales

        The increase in net sales for the year ended December 31, 2007 compared with the year ended December 31, 2006 is attributable to an increase in volume of vehicle deliveries, spare parts, and logistics services (field service representatives and technical publications). The mix of vehicles delivered and spare parts and logistics sales are set forth in the following table:

	For the year ended December 31,
					Percentage Change
(in thousands)	2007		2006
Buffalo	$	58,360	$	28,127		107	%
Cougar (all variants)		754,820		149,759		404	%
Spare parts and logistics		77,492		18,131		327	%
	$	890,672	$	196,017		354	%

55

Cost of sales and Gross profit

	For the year ended December 31,
(in thousands)	2007			2006
Cost of sales	$	786,803		$	158,994
Gross margin percentage		11.7	%		18.9	%

        The gross margin decreased by 7.2 percentage points for the year ended December 31, 2007 compared with the year ended December 31, 2006. The gross margin was impacted by 4.1 percentage points as a result of GDLS Subcontract activity, whereby we recognized no gross profit on $231.9 million of vehicles sold that were produced by GDLS. We also incurred a write-down of our raw material and supplies to their net realizable values in the amount of $15.8 million, and we incurred a loss of $5.9 million on firm commitments to acquire raw materials and supplies. See Note 3, Inventories, in the accompanying consolidated financial statements. The remainder of the decrease was primarily due to operational inefficiencies, and the use of contract labor in the production process. We define the gross margin percentage as net sales less cost of sales divided by net sales.

General and administrative expenses

	For the year ended December 31,
	2007			2006
As a percentage of net sales		9.4	%		13.9	%

        General and administrative expenses as a percentage of net sales decreased 4.5 percentage points for the year ended December 31, 2007 compared with the year ended December 31, 2006. The decrease was primarily due to leveraging selling and administrative support functions over an increasing business base, partially offset by a liquidated damage charge of $7.2 million, and a reserve for unsettled litigation as of December 31, 2007. See Note 6, Other Current Liabilities, in the accompanying consolidated financial statements. Significant year-over-year cost increases included salary, wages and fringe benefits, consultant and temporary labor, depreciation and information technology expenses to support the increased size of the business.

Research and development expenses

	For the year ended December 31,
	2007			2006
As a percentage of net sales		1.6	%		1.6	%

        Research and development expense increased by approximately $10.8 million primarily due to increased expenditures related to the development of the Cheetah vehicle. We also increased research and development spending on upgrades and variants of the Buffalo and Cougar vehicles.

Other income

        Other income increased approximately $3.2 million for the year ended December 31, 2007 as compared with the year ended December 31, 2006 primarily due to the interest income earned on investment of the funds received from our December 2006 private placement of common stock.

56

Interest expense

        Interest expense decreased $1.1 million for the year ended December 31, 2007 primarily due to the repayment of a short-term loan in August 2006 and the termination of an accounts receivable factoring agreement in June 2006 facilitated by the sale of common stock through private placements, partially offset by the bank fees associated with the line of credit.

Income tax (expense) benefit

        We incurred income tax expense for the year ended December 31, 2007 as a result of the increase in our net sales and profitability compared to the year ended December 31, 2006. The effective income tax rate for the year ended December 31, 2007 was 18.4%. See Note 11, Income Taxes, in the accompanying consolidated financial statements. In addition, as of December 31, 2006, the valuation allowance for deferred tax assets of $12.3 million was eliminated as we expect to realize future earnings sufficient to fully utilize the accumulated income tax benefit.

Series D 6% convertible preferred stock dividends and accretion

        There are no preferred stock dividends or accretion of preferred stock in 2007 as all preferred stock was converted to common stock by year-end 2006.

Net Income available to common shareholders

	For the year ended December 31,
	2007		2006
Diluted earnings per share	$	0.11	$	0.36

        Net income available to common shareholders for the year ended December 31, 2007 decreased over the comparable period in 2006 primarily due to decreased gross margins and increased selling, administrative, development, research, and income tax expenses partially offset by increased interest income and decreased preferred stock dividends and accretion.

Backlog

        The following table sets forth the number of vehicles included in our backlog as of December 31, 2007 and as of June 30, 2008, including vehicles to be manufactured by GDLS under the GDLS Subcontract. No vehicles were manufactured under the GDLS Subcontract prior to the third quarter of 2007. The backlog shown in the following table is "funded" backlog, meaning that it reflects vehicles for which we have received orders and for which funding has been appropriated and authorized for expenditure by the applicable agency. We cannot assure you that we will deliver or sell all of the vehicles included in our backlog. See Item 1A, Risk Factors in Part I of this Annual Report on Form 10-K. If and when the MRAP Competitive Contract is novated to Force Dynamics, our backlog

57

reports will no longer include vehicles to be made by GDLS pursuant to the GDLS Subcontract. See Item 1, Business—Major Contracts in Part I of this Annual Report on Form 10-K.

		Vehicle Funded Backlog
		As of December 31, 2007		As of June 30, 2008
Buffalo			51		22
Cougar MRAP (Competitive)*			1,702		412
Cougar (all other variants)			29		329
	TOTAL		1,782		763

*

Refers to Cougar vehicles manufactured under the GDLS Subcontract pursuant to which we and GDLS fulfill the MRAP Competitive Contract.

Results of Operations for the Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Units sold

        The increase in vehicles sold in 2006 compared to 2005 is primarily due to the sale of Cougar JERRVs and Cougars sold pursuant to our subcontract with BAE. Such vehicle sales represent approximately 59% and 20%, respectively, of the vehicles sold in 2006.

Net sales

        The increase in net sales for the year ended December 31, 2006 compared with the year ended December 31, 2005 is attributable to both an increase in volume of vehicle deliveries to the U.S. government under our government contracts as well as the mix of vehicles delivered as set forth in the following table:

	For the year ended December 31,
					Percentage Change
(in thousands)	2006		2005
Buffalo	$	28,127	$	24,058		17	%
Cougar (all variants)		149,759		21,162		608	%
Spare parts and logistics		18,131		4,493		304	%
	$	196,017	$	49,713		294	%

58

Cost of sales and Gross profit

	For the year ended December 31,
(in thousands)	2006			2005
Cost of sales	$	158,994		$	46,429
Gross margin percentage		18.9	%		6.6	%

        The gross margin increased by 12.3 percentage points for the year ended December 31, 2006, as compared with the year ended December 31, 2005. The increase was primarily due to volume growth, improved material and labor cost performance as a result of implementation of new and improved manufacturing processes, and leveraging of fixed costs over an increased production volume. We define the gross margin percentage as net sales less cost of sales divided by net sales.

General and administrative expenses

	For the year ended December 31,
	2006			2005
As a percentage of net sales		13.9	%		34.7	%

        As a percentage of net sales for the year ended December 31, 2006, general and administrative expenses decreased 20.8 percentage points, as compared to general and administrative expenses as a percentage of net sales for the year ended December 31, 2005. The decrease was primarily due to leveraging selling and administrative support functions over an increasing business base.

Research and development expenses

	For the year ended December 31,
	2006			2005
As a percentage of net sales		1.6	%		3.3	%

        Research and development expense increased overall by approximately $1.5 million primarily due to increased expenditures related to the development of the Cheetah vehicle as well as the Buffalo and Cougar vehicles.

Other income

        Other income increased for the year ended December 31, 2006 as compared with the year ended December 31, 2005 primarily due to earnings on significantly higher cash balances.

Interest expense

        Interest expense increased for the year ended December 31, 2006 due to interest on debt that was outstanding for more months in 2006 than 2005. The debt was incurred in November 2005 and repaid in August 2006.

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Realized gain on derivative liability

        The warrants issued in conjunction with the Series D 6% convertible preferred stock were initially recorded at fair value as a liability, as liquidating damages were paid as a result of a late SEC registration of the underlying common stock. The Black-Scholes method was used to determine the fair value at issuance using a three-year holding period. Each reporting period, these warrants were adjusted to the new fair value using the Black-Scholes method until the registration was accepted by the SEC. At that point, the fair value using the Black-Scholes method was reclassified into equity. A realized gain on derivative liability in the amount of $2.8 million was recorded in 2005 as a result of the change in fair value at issuance to reclassification to equity for these warrants.

Income tax (expense) benefit

        As of December 31, 2006, the valuation allowance for deferred tax assets of $12.3 million was eliminated since we expect to realize future earnings sufficient to fully utilize the accumulated income tax benefit.

Series D 6% convertible preferred stock dividends and accretion

        Preferred stock dividends and accretion of preferred stock decreased during the year ended December 31, 2006 as a result of the conversion of all preferred stock to common stock during 2006.

Net Income available to common shareholders

	For the year ended December 31,
	2006		2005
Diluted earnings (loss) per share	$	0.36	$	(0.51	)

        Net income available to common shareholders for the year ended December 31, 2006 increased over the comparable period in 2005 primarily due to increased gross margins and decreased preferred stock dividends and accretion, partially offset by increased selling, administrative, development, research, and income tax expenses. The impact of recognizing an income tax benefit in 2006 was a $12.3 million increase to our net income available to common shareholders.

Liquidity and Capital Resources

        Our liquidity and available capital resources are impacted by operating, financing and investing activities. Our principal sources of liquidity are cash on hand and cash from operations, primarily from the U.S. government.

Sources and Uses of Cash

        Our primary sources of funding are cash flows from operations and from financing activities. Over the past three years, our funds were used primarily to fund working capital requirements and to make

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capital expenditures. The following chart shows the cash flows provided by or used in operating, investing, and financing activities for 2007, 2006, and 2005 (in thousands):

		For the year ended December 31,
		2007			2006			2005
Net cash used in operating activities		$	(9,075	)	$	(25,920	)	$	(18,588	)
Net cash used in investing activities			(59,717	)		(7,537	)		(1,356	)
Net cash provided by financing activities			3,470			188,559			18,897
	Increase (decrease) in cash and cash equivalents	$	(65,322	)	$	155,102		$	(1,047	)

        We ended 2007 with $91.0 million of cash and cash equivalents, a decrease from $156.3 million at the end of 2006 and an increase from $1.2 million at the end of 2005.

Cash Flow from Operating Activities

        Cash used in operating activities decreased by $16.8 million during the year ended December 31, 2007. This change was primarily due to an increase in advance payments on contracts partially offset by an increase in working capital and a decrease in deferred income taxes. Our advance payments on contracts increased due to the receipt of performance-based payments on the MRAP program. Working capital usage increased $26.7 million (accounts receivable, inventories, and accounts payable) to support increased sale volumes. Deferred income taxes decreased due to the elimination of the valuation allowance for deferred tax assets of $12.3 million as of December 31, 2006.

        Cash used in operating activities increased by $7.3 million during the year ended December 31, 2006. This change was primarily due to increased business volumes that led to increased accounts receivable and inventory levels. Working capital usage increased $28.5 million (accounts receivable, inventories, and accounts payable) to support increased sales volumes. Deferred income taxes decreased due to an increase in earnings.

Cash Flow from Investing Activities

        As our business has grown, we have made several significant acquisitions and expanded our manufacturing capacity and infrastructure. In March 2007, we purchased the research and developmental testing facility of NEWTEC Services Group, Inc., located near Edgefield, South Carolina, for $5.5 million, $5.1 million of which was in cash. In March 2007, we purchased real and personal property located in Summerville, South Carolina, for $4.1 million in cash to use as a product development and logistic services training center. In July 2007, we purchased land and an approximately 430,000 square foot building in Roxboro, North Carolina, for $3.5 million that we intend to use for training and sustainment purposes. Also, in July 2007, we completed construction on and placed into service a 90,000 square foot warehouse facility at our corporate headquarters in Ladson, South Carolina, at a cost of approximately $3.5 million in cash. During 2007, we began to construct additional assembly lines. Construction in progress for the year ended December 31, 2007 totaled $31.3 million. Additionally, we made leasehold improvements totaling $10.2 million and purchased computer equipment and software totaling $4.0 million.

        During 2006, we acquired a paint booth, overhead cranes and welding equipment to expand our manufacturing capacity. We also acquired computers, furniture and a more robust accounting system to support our business growth.

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Cash Flow from Financing Activities

        During the year ended December 31, 2007, we did not issue common stock (except for exercised employee options) or debt to fund business activities. During the year ended December 31, 2006, we issued common stock for two private placements in public equity and exercised common stock warrants, totaling $196.2 million to fund the expansion of the business and retired $7.5 million of short-term debt. See Note 9, Shareholders' Equity, in the accompanying consolidated financial statements.

Current Liquidity and Capital Resources

        During the first six months of 2008, we expended approximately $9 million to complete the expansion of our manufacturing capability and capacity and to upgrade our information technology infrastructure. We will continue to expand capital for research and development and business development activities.

        The amount of capital that we will require depends on several factors, including without limitation, the extent and timing of sales of our products, inventory costs, costs of raw material and components, labor costs, costs of improving our financial and accounting systems, the timing and costs associated with the expansion of our manufacturing, development, engineering and customer support capabilities, the timing and cost of our product development and enhancement activities and our operating results. We currently estimate that the cash flow that we anticipate will be generated by our business plus the $30 million available under our line of credit and our expected renewal of it will be sufficient to meet our presently budgeted capital expenditures and our other presently anticipated cash needs for the year ending December 31, 2008. We expect that we may require additional sources of capital after that time. We may therefore be required to obtain additional sources of capital, which may include borrowings or the issuance of debt or equity securities, including common stock, and there can be no assurance that such financing will be available to us when we need it or, if available, that the terms of any such financing will be satisfactory to us and not dilutive to our shareholders. Any failure to obtain necessary capital as and when required could have a material adverse effect on our business, prospects, financial position, results of operations, and cash flows.

Off-Balance Sheet Arrangements

        In accordance with the definition under SEC rules, the following qualify as off-balance sheet arrangements:

•

any obligation under certain guarantees or contracts;



•

a retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity, or market risk support to that entity for such assets;



•

any obligation under certain derivative instruments; and



•

any obligation under a material variable interest held by the registrant in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the registrant, or engages in leasing, hedging, or research and development services with the registrant.

        The following discussion addresses each of the above items for the Company.

        As of December 31, 2007, we do not have any obligation under certain guarantees or contracts as defined above.

        As of December 31, 2007, we do not have any retained or contingent interest in assets as defined above.

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        As of December 31, 2007, we do not hold derivative financial instruments, as defined by FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended.

        As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities ("SPEs"), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2007 and 2006, we were not involved in any unconsolidated SPE transactions.

Contractual Obligations

        Achieving optimal returns on cash often involves making long-term commitments. SEC regulations require that we present our contractual obligations, and we have done so in the table that follows. However, our future cash flow prospects cannot reasonably be assessed based on such obligations, as the most significant factor affecting our future cash flows is our ability to earn and collect cash from our customers. Future cash outflows, whether they are contractual obligations or not, will vary based on our future needs. While some such outflows are completely fixed (for example, commitments to repay principal and interest on fixed-rate borrowings), most will depend on future events (for example, payments to subcontractors under long-term contracts). Further, normal operations involve significant expenditures that are not based on "commitments" (for example, amounts paid for income taxes or for payroll).

        Our consolidated contractual obligations as of December 31, 2007, are as follows (in thousands):

	Total		2008		2009 - 2010		2011 - 2012		2013 and Thereafter
Operating lease obligations(a)(b)(d)	$	3,459	$	2,176	$	1,261	$	22	$	—
Purchase obligations(b)(c)(d)		128,329		128,329		—		—		—
Other long-term liabilities(d)(e)		556		229		327		—		—
Total	$	132,344	$	130,734	$	1,588	$	22	$	—

(a)

We lease most of our facilities as well as other property and equipment under operating leases in the normal course of business. Some of our facility leases contain escalation clauses. The minimum lease payments do not include contingent rental expense. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease agreements. For more information, see Note 4, Property and Equipment, to our accompanying consolidated financial statements.

(b)

Future operating lease obligations and purchase obligations are not recognized in our consolidated balance sheet.

(c)

Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Force Protection and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.

(d)

Because our future cash outflows are uncertain, the following liabilities are excluded from the table above: workers' compensation risks, deferred income taxes, warranty reserve, and our estimated liability for unsettled litigation. For more information, see Note 11, Income Taxes, and Note 14, Contingencies and Other Commitments, to our accompanying consolidated financial statements.

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(e)

Includes accreted interest at 7.25% for the non-compete agreement portion and at 11.25% for the equipment note portion of other long-term liabilities.

Dividends

        We have never paid or declared any cash dividends on our common stock. We currently intend to retain earnings, if any, to finance the growth and development of our business, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments, and other factors the board deems relevant.

Critical Accounting Policies and Estimates

        Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with GAAP. In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors we believe to be relevant at the time we prepared our consolidated financial statements. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

        The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are used for, but are not limited to: (1) revenue recognition; (2) allowance for doubtful accounts; (3) definitization and advance payments on contracts; (4) inventory costs and reserves; (5) asset impairments (6) depreciable lives of assets; (7) economic lives and fair value of leased assets; (8) income tax reserves and valuation allowances; (9) fair value of stock options; (10) allocation of direct and indirect cost of sales; and (11) litigation reserves. Future events and their effects cannot be predicted with certainty, and accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. Actual results could differ from the estimates we have used.

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        Our significant accounting policies are discussed in Note 1, Summary of Significant Accounting Policies, to our accompanying consolidated financial statements. We believe the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, as they require management to make difficult, subjective or complex judgments, and to make estimates about the effect of matters that are inherently uncertain. We have reviewed these critical accounting policies and related disclosures with the Audit Committee of our board of directors.

Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Inventories
We state our inventories at the lower of cost or market value and net of the cost of excess and obsolete items.	The determination of inventory valuation reserves requires management to make estimates and judgments on the future salability of inventories. Valuation reserves for excess, obsolete, and slow-moving inventory are estimated by comparing the inventory levels of individual parts to both future sales forecasts or production requirements and historical usage rates in order to identify inventory for which the resale value or replacement value is less than the inventoriable cost. Other factors that management considers in determining these reserves include whether individual inventory parts meet current specifications and can be substituted for a part currently being sold or used as a service part, overall market conditions, and other inventory management initiatives.	Our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventories. In the future, if our inventories are determined to be overvalued, we would be required to recognize such costs in our cost of sales at the time of such determination. Likewise, if our inventories are determined to be undervalued, we may have over-reported our costs of sales in previous periods and would be required to recognize such additional operating income at the time of sale.
Income taxes
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their	A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. Since December 31, 2006, we have not had a valuation allowance recorded against our deferred tax asset.	Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in income taxes that could be material.

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Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
respective tax bases. Deferred tax assets are also recorded with respect to net operating losses and other tax attribute carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income of the period that includes the enactment date. In addition, we establish reserves for tax contingencies in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.	Contingent tax liabilities are based on our assessment of the likelihood that we have incurred a liability. Such liabilities are reviewed based on recent changes in tax laws and regulations, including judicial rulings.
Assessment of Loss Contingencies
We have legal and other contingencies, including product warranties, which could result in significant losses upon the ultimate resolution of such contingencies.	We have provided for losses in situations where we have concluded that it is probable that a loss has been or will be incurred and the amount of the loss is reasonably estimable. A significant amount of judgment is involved in determining whether a loss is probable and reasonably estimable due to the uncertainty involved in determining the likelihood of future events and estimating the financial statement impact of such events.	If further developments or resolution of a contingent matter are not consistent with our assumptions and judgments, we may need to recognize a significant charge in a future period related to an existing contingency.

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New Accounting Pronouncements

        In May 2008, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles. FASB Statement No. 162 defines the order in which accounting principles that are generally accepted should be followed. FASB Statement No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board ("PCAOB") amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We have not yet commenced evaluating the potential impact, if any, of the adoption of FASB Statement No. 162 on our consolidated financial position, results of operations, and cash flows.

        In April 2008, the FASB issued Staff Position ("FSP") No. FAS 142-3, Determination of Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Earlier adoption is prohibited. We have not yet commenced evaluating the potential impact, if any, of the adoption of FSP FAS 142-3 on our consolidated financial position, results of operations, and cash flows.

        In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. FASB Statement No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations and (iii) how derivative instruments and related hedged items affect an entity's financial position, results of operations, and cash flows. FASB Statement No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. FASB Statement No. 161 permits, but does not require, comparative disclosures for earlier periods at initial adoption. We have not yet commenced evaluating the potential impact, if any, of the adoption of FASB Statement No. 161 on our consolidated financial position, results of operations, cash flows or disclosures related to derivative instruments and hedging activities.

        In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations, which establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FASB Statement No. 141(R) applies to fiscal years beginning after December 15, 2008. Earlier adoption is prohibited.

        In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, which establishes accounting and reporting standards that require (i) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within shareholder's equity, but separate from the parent's equity, (ii) the amount of consolidated net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations, and (iii) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently. FASB Statement No. 160 applies to fiscal years beginning after December 15, 2008. Earlier adoption is prohibited.

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        In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which provides companies with an option to report selected financial assets and liabilities at fair value. FASB Statement No. 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company's choice to use fair value on its earnings. FASB Statement No. 159 also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. FASB Statement No. 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. FASB Statement No. 159 is effective as of the beginning of an entity's first fiscal year beginning after November 15, 2007. We adopted FASB Statement No. 159 and we did not elect the fair value option for any other financial instruments or certain other financial assets and liabilities that were not previously required to be measured at fair value.

        In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. FASB Statement No. 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. We adopted FASB Statement No. 157 on January 1, 2008 and it did not have an impact on our consolidated financial position, results of operations, and cash flows.

        We have determined that all other recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations, and cash flows, or do not apply to our operations.

2007 Quarterly Financial Information (unaudited)

        Certain selected quarterly financial information for the year ended December 31, 2007 include the following:

•

Summary of increases (decreases) in Net income for the three months ended March 31, 2007, the three and six months ended June 30, 2007, and the three and nine months ended September 30, 2007.



•

Condensed consolidated balance sheets as of March 31, 2007, June 30, 2007 and September 30, 2007.



•

Condensed consolidated statements of operations for the three months ended March 31, 2007, the three and six months ended June 30, 2007, the three and nine months ended September 30, 2007 and the three months ended December 31, 2007.



•

Condensed consolidated statements of cash flows for the three months ended March 31, 2007, for the six months ended June 30, 2007 and for the nine months ended September 30, 2007.

        The selected quarterly financial information for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 have been restated from previously reported results. See Note 16, Summarized Quarterly Unaudited Financial Data, to the accompanying consolidated financial statements.

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Summary of increases (decreases) in Net income (unaudited)*

				March 31, 2007			June 30, 2007						September 30, 2007
(in thousands, except per share amounts)				Three months ended			Three months ended			Six months ended			Three months ended			Nine months ended
Net income, as previously reported				$	2,513		$	9,627		$	12,105		$	11,362		$	23,517
Net adjustments
	Revenue recognition				4,666			3,957			8,623			502			9,125
	Liability recognition				(8,779	)		(21,157	)		(29,936	)		(11,588	)		(41,524	)
	Inventory burden calculation				769			2,849			3,618			(5,207	)		(1,589	)
	Stock-based compensation				(947	)		(61	)		(1,008	)		(61	)		(1,069	)
	Income tax expense				1,908			5,238			7,146			7,407			14,553
	Other				(610	)		210			(365	)		(3,214	)		(3,629	)
		Effect of restatement adjustments			(2,993	)		(8,964	)		(11,922	)		(12,161	)		(24,133	)
Net income (loss), restated				$	(480	)	$	663		$	183		$	(799	)	$	(616	)
Basic earning (loss) per common share:
Net income, as previously reported				$	0.04		$	0.14		$	0.18		$	0.17		$	0.35
	Net adjustments
		Revenue recognition			0.07			0.06			0.13			0.01			0.14
		Liability recognition			(0.14	)		(0.31	)		(0.45	)		(0.17	)		(0.62	)
		Inventory burden calculation			0.01			0.04			0.05			(0.08	)		(0.03	)
		Stock-based compensation			(0.01	)		Nil			(0.01	)		Nil			(0.01	)
		Income tax expense			0.03			0.08			0.11			0.11			0.22
		Other			(0.01	)		Nil			(0.01	)		(0.05	)		(0.06	)
			Effect of restatement adjustments		(0.05	)		(0.13	)		(0.18	)		(0.18	)		(0.36	)
	Net income (loss), restated			$	(0.01	)	$	0.01		$	0.00		$	(0.01	)	$	(0.01	)
Diluted earning (loss) per common share:
	Net income, as previously reported			$	0.04		$	0.14		$	0.18		$	0.16		$	0.34
	Net adjustments
		Revenue recognition			0.07			0.06			0.13			0.01			0.14
		Liability recognition			(0.14	)		(0.31	)		(0.45	)		(0.16	)		(0.61	)
		Inventory burden calculation			0.01			0.04			0.05			(0.08	)		(0.03	)
		Stock based compensation			(0.01	)		Nil			(0.01	)		Nil			(0.01	)
		Income tax expense			0.03			0.08			0.11			0.11			0.22
		Other			(0.01	)		Nil			(0.01	)		(0.05	)		(0.06	)
			Effect of restatement adjustments		(0.05	)		(0.13	)		(0.18	)		(0.17	)		(0.35	)
	Net income (loss), restated			$	(0.01	)	$	0.01		$	0.00		$	(0.01	)	$	(0.01	)

*

The sum of net income, as previously reported, for the individual quarterly periods does not total to the year-to-date net income, as previously reported. Correcting adjustments are included in "Other" net adjustments above.

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2007 Quarterly Condensed Consolidated Balance Sheets (unaudited)

			As of March 31, 2007						As of June 30, 2007						As of September 30, 2007
(in thousands)			As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Assets
Current assets:
	Cash and cash equivalents		$	113,441		$	113,441		$	37,871		$	37,874		$	72,274		$	72,274
	Accounts receivable, net(a)			43,791			53,494			91,239			107,829			37,758			66,094
	Inventories			97,923			98,218			148,366			143,309			182,473			167,153
	Advances to subcontractor			—			—			—			—			16,277			20,740
	Deferred income tax assets			7,762			12,693			8,850			12,373			7,473			12,759
	Income tax receivable			—			—			—			75			—			225
	Other current assets			2,574			2,653			1,723			9,977			—			15,040
		Total current assets		265,491			280,499			288,049			311,437			316,255			354,285
Property and equipment, net				23,388			23,590			30,303			31,107			47,630			51,511
Intangible assets, net				1,962			1,882			1,836			1,706			1,582			1,531
Deferred income tax assets				2,764			2,764			—			2,764			60			2,764
		Total assets	$	293,605		$	308,735		$	320,188		$	347,014		$	365,527		$	410,091
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	54,811		$	62,538		$	68,022		$	99,536		$	47,856		$	103,144
	Due to United States government(a)			—			7,007			—			11,213			—			15,751
	Warranty reserve(b)			1,850			—			4,398			—			4,943			—
	Deferred income tax liabilities			—			—			3,708			—			8,985			—
	Other current liabilities (b)			—			13,634			—			9,910			—			12,040
	Advance payments on contracts			5,173			3,376			5,872			2,800			52,303			55,937
	Other accrued liabilities(b)			9,284			—			5,405			—			6,884			—
	Current portion of long-term liabilities(b)			204			—			222			—			222			—
		Total current liabilities		71,322			86,555			87,627			123,459			121,193			186,872
Other long-term liabilities				463			446			429			412			77			334
Long-term debt				—			—			—			—			268			—
				71,785			87,001			88,056			123,871			121,538			187,206
Shareholders' equity:
	Common stock			68			68			68			68			68			68
	Additional paid-in capital			250,705			255,397			251,332			256,143			251,813			256,684
	Accumulated deficit			(28,953	)		(33,731	)		(19,268	)		(33,068	)		(7,892	)		(33,867	)
		Total shareholders equity		221,820			221,734			232,132			223,143			243,989			222,885
		Total liabilities and shareholders' equity	$	293,605		$	308,735		$	320,188		$	347,014		$	365,527		$	410,091

(a)

Adjustments related to the definitization process, which were previously reported as part of the allowance for doubtful accounts, have been reclassified to report them as a liability, Due to United States government.

(b)

Other accrued liabilities, warranty reserve, and current portion of long-term liabilities have been reclassified to Other current liabilities.

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2007 Quarterly Condensed Consolidated Statements of Operations (unaudited)*

		March 31, 2007						June 30, 2007
		Three months ended						Three months ended						Six months ended
(in thousands)		As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Net sales		$	100,159		$	104,825		$	134,702		$	138,659		$	234,861		$	243,484
Cost of sales			78,404			85,125			101,945			118,090			179,575			203,215
	Gross profit		21,755			19,700			32,757			20,569			55,286			40,269
General and administrative			14,379			17,066			15,501			17,339			30,663			34,405
Research and development			4,842			5,001			3,306			3,503			8,148			8,504
	Operating income (loss)		2,534			(2,367	)		13,950			(273	)		16,475			(2,640	)
Other income, net			1,788			1,788			1,107			1,106			2,895			2,894
Interest expense			(9	)		(9	)		(44	)		(22	)		(79	)		(31	)
	Income (loss) before income tax (expense) benefit		4,313			(588	)		15,013			811			19,291			223
Income tax (expense) benefit			(1,800	)		108			(5,386	)		(148	)		(7,186	)		(40	)
	Net income (loss)	$	2,513		$	(480	)	$	9,627		$	663		$	12,105		$	183

2007 Quarterly Condensed Consolidated Statements of Operations (unaudited)* (continued)

		September 30, 2007
														December 31, 2007
		Three months ended						Nine months ended
(in thousands)		As Previously Reported			As Restated			As Previously Reported			As Restated			Three months ended
Net sales		$	206,291		$	206,794		$	441,152		$	450,278		$	440,394
Cost of sales			165,678			184,260			345,252			387,475			399,328
	Gross profit		40,613			22,534			95,900			62,803			41,066
General and administrative			20,030			21,708			50,642			56,113			27,931
Research and development			2,526			2,344			10,674			10,848			3,204
	Operating income (loss)		18,057			(1,518	)		34,584			(4,158	)		9,931
Other income, net			594			594			3,489			3,488			721
Interest expense			(62	)		(55	)		(142	)		(86	)		(523	)
	Income (loss) before income tax (expense) benefit		18,589			(979	)		37,931			(756	)		10,129
Income tax (expense) benefit			(7,227	)		180			(14,414	)		140			(1,861	)
	Net income (loss)	$	11,362		$	(799	)	$	23,517		$	(616	)	$	8,268

*

The sum of certain amounts, as previously reported, for the individual quarterly periods do not total to the year-to-date amounts, as previously reported.

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2007 Quarterly Condensed Consolidated Statements of Cash Flows (unaudited)

		Three months ended March 31, 2007						Six months ended June 30, 2007						Nine months ended September 30, 2007
(in thousands)		As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Net cash used in operating activities		$	(27,169	)	$	(29,356	)	$	(94,622	)	$	(96,480	)	$	(40,903	)	$	(39,887	)
Net cash from investing activities
	Capital expenditures		(16,698	)		(16,820	)		(25,513	)		(25,538	)		(44,354	)		(47,706	)
	Net cash used in investing activities		(16,698	)		(16,820	)		(25,513	)		(25,538	)		(44,354	)		(47,706	)
Cash flows from financing activities
	Proceeds from the issuance of common stock		1,012			1,012			1,277			1,277			1,336			1,336
	Income tax benefit realized from stock option exercises		—			2,276			—			2,276			—			2,276
	Net increase (decrease) in other long-term liabilities		(23	)		10			410			20			(124	)		(64	)
	Net cash provided by financing activities		989			3,298			1,687			3,573			1,212			3,548
	Increase (decrease) in cash and cash equivalents		(42,878	)		(42,878	)		(118,448	)		(118,445	)		(84,045	)		(84,045	)
Cash and cash equivalents at:
	Beginning of year		156,319			156,319			156,319			156,319			156,319			156,319
	End of year	$	113,441		$	113,441		$	37,871		$	37,874		$	72,274		$	72,274

Quarter Ended March 31, 2007, as Restated

Comparison of Results of Operations for the Three Months Ended March 31, 2007 and 2006

Units sold

        The increase in vehicles sold in the comparative periods is primarily due to an increase in ILAV vehicles sold and the vehicles sold pursuant to the MRAP program. The vehicles sold under such program, which started shipping in the first quarter of 2007, represent approximately 17% of the vehicles sold in the three months ended March 31, 2007.

		For the three months ended March 31,
Units Sold		2007 (As restated)		2006		Percentage Change
Buffalo			18		3		500	%
Cougar (all variants)			181		45		302	%
Cheetah			—		—		—
	Total units sold		199		48		315	%

Net sales

        The increase in net sales for the comparative periods is attributable to an increase in volume of vehicle deliveries, spare parts, and logistics services (field service representatives and technical

72

publications). The mix of vehicles delivered and spares parts and logistics sales and the percentage change in the comparative periods are set forth in the following tables:

	For the three months ended March 31,
(in thousands)	2007 (As restated)		2006		Percentage Change
Buffalo	$	10,996	$	1,489		638	%
Cougar (all variants)		74,947		32,098		133	%
Spare parts and logistics		18,882		1,216		1,453	%
	$	104,825	$	34,803		201	%

Cost of sales and Gross profit

	For the three months ended March 31,
(in thousands)	2007 (As restated)			2006
Cost of sales	$	85,125		$	28,165
Gross margin percentage		18.8	%		19.1	%

        Gross margins decreased by .3 percentage points for the three months ended March 31, 2007 compared with the three months ended March 31, 2006. The decrease was primarily due to operating inefficiencies. We define the gross margin percentage as net sales less cost of sales divided by net sales.

General and administrative expenses

	For the three months ended March 31,
	2007 (As restated)			2006
As a percentage of net sales		16.3	%		17.1	%

        General and administrative expenses as a percentage of net sales decreased .8 percentage points for the three months ended March 31, 2007 compared with the three months ended March 31, 2006. The decrease was primarily due to leveraging selling and administrative support functions over an increasing business base, partially offset by a liquidated damage charge of $4.9 million resulting from the delayed registration of a private placement of public equity. See Note 6, Other Current Liabilities, in the accompanying consolidated financial statements.

Research and development expenses

	For the three months ended March 31,
	2007 (As restated)			2006
As a percentage of net sales		4.8	%		1.9	%

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        Research and development expenses increased by approximately $4.3 million primarily due to increased expenditures related to the development of the Cheetah vehicle.

Other income

        Other income increased for the 2007 period as compared with the similar period in 2006 due to the interest income earned on investment of the funds received from our December 2006 private placement of common stock.

Interest expense

        Interest expense decreased for the 2007 period due to the repayment of a short-term loan in August 2006 and the termination of an accounts receivable factoring agreement in June 2006. Termination of these short-term financing arrangements was facilitated by the sale of common stock through private placements.

Income tax (expense) benefit

        We recorded an income tax benefit for the 2007 period as a result of our pre-tax loss. The effective income tax rate for the 2007 period was 18.4%. No income tax benefit was recorded as a result of the pre-tax loss for the comparable 2006 period. See Note 11, Income Taxes, in the accompanying consolidated financial statements.

Series D convertible preferred stock dividends and accretion

        There were no preferred stock dividends or accretion of preferred stock in the 2007 period since all preferred stock was converted to common stock in 2006.

Net income (loss) available to common shareholders

	For the three months ended March 31,
(in thousands, except per share)	2007 (As restated)			2006
Net (loss) available to common shareholders	$	(480	)	$	(1,413	)
Diluted (loss) per common share	$	(0.01	)	$	(0.04	)

        Net loss available to common shareholders for the 2007 period decreased over the comparable period in 2006 due to decreased interest expense and decreased preferred stock dividends and accretion, partially offset by lower gross margins.

Quarter Ended June 30, 2007, as Restated

Comparison of Results of Operations for the Three Months Ended June 30, 2007 and 2006

Units sold

        The increase in vehicles sold in the comparative periods is primarily due to the vehicles sold pursuant to the MRAP program. The vehicles sold under such program, which started shipping in the first quarter of 2007, represent approximately 76% of the vehicles sold in the three months ended June 30, 2007.

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		For the three months ended June 30,
Units Sold		2007 (As restated)		2006		Percentage Change
Buffalo			17		5		240	%
Cougar (all variants)			212		59		260	%
Cheetah			—		—		—
	Total units sold		229		64		258	%

Net sales

        The increase in net sales for the comparative periods is attributable to an increase in volume of vehicle deliveries, spare parts, and logistics services (field service representatives and technical publications). The mix of vehicles delivered and spares parts and logistics sales and the percentage change in the comparative periods are set forth in the following tables:

	For the three months ended June 30,
(in thousands)	2007 (As restated)		2006		Percentage Change
Buffalo	$	11,820	$	9,561		24	%
Cougar (all variants)		109,989		38,071		189	%
Spare parts and logistics		16,850		8,443		100	%
	$	138,659	$	56,075		147	%

Cost of sales and Gross profit

	For the three months ended June 30,
(in thousands)	2007 (As restated)			2006
Cost of sales	$	118,090		$	45,918
Gross margin percentage		14.8	%		18.1	%

        Gross margins decreased by 3.3 percentage points for the three months ended June 30, 2007 compared with the three months ended June 30, 2006. The decrease was primarily due to operating inefficiencies. We define the gross margin percentage as net sales less cost of sales divided by net sales.

General and administrative expenses

	For the three months ended June 30,
	2007 (As restated)			2006
As a percentage of net sales		12.5	%		13.8	%

        General and administrative expenses as a percentage of net sales decreased 1.3 percentage points for the three months ended June 30, 2007 compared with the three months ended June 30, 2006. The decrease was primarily due to leveraging selling and administrative support functions over an increasing business base, partially offset by a liquidated damage charge of $1.8 million. See Note 6, Other Current Liabilities, in the accompanying consolidated financial statements.

75

Research and development expenses

	For the three months ended June 30,
	2007 (As restated)			2006
As a percentage of net sales		2.5	%		1.1	%

        Research and development expenses increased by approximately $2.9 million primarily due to increased expenditures related to the development of the Cheetah vehicle.

Other income

        Other income increased for the 2007 period as compared with the similar period in 2006 due to the interest income earned on investment of the funds received from our December 2006 private placement of common stock.

Interest expense

        Interest expense decreased for the 2007 period due to the repayment of a short-term loan in August 2006 and the termination of an accounts receivable factoring agreement in June 2006. Termination of these short-term financing arrangements was facilitated by the sale of common stock through private placements.

Income tax (expense) benefit

        We recorded income tax expense for the 2007 period as a result of our pre-tax income. The effective income tax rate for the 2007 period was 18.3%. No income tax expense was recorded as a result of pre-tax income for the comparable 2006 period. See Note 11, Income Taxes, in the accompanying consolidated financial statements.

Series D convertible preferred stock dividends and accretion

        There were no preferred stock dividends or accretion of preferred stock in the 2007 period since all preferred stock was converted to common stock in 2006.

Net income (loss) available to common shareholders

	For the three months ended June 30,
(in thousands, except per share)	2007 (As restated)		2006
Net income available to common shareholders	$	663	$	424
Diluted earnings per common share	$	0.01	$	0.01

        We realized higher net income available to common shareholders for the 2007 period compared to net income available to common shareholders for the comparable period in 2006 due to decreased interest expense and decreased preferred stock dividends and accretion, partially offset by lower gross margins.

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Quarter Ended September 30, 2007, as Restated

Comparison of Results of Operations for the Three Months Ended September 30, 2007 and 2006

Units sold

        The increase in vehicles sold in the comparative periods is primarily due to the vehicles sold pursuant to the MRAP program. The vehicles sold under the program, which started shipping in the first quarter of 2007, represent approximately 98% of the vehicles sold in the three months ended September 30, 2007.

		For the three months ended September 30,
Units Sold		2007 (As restated)		2006		Percentage Change
Buffalo			21		3		600	%
Cougar (all variants)			353		55		542	%
Cheetah			—		—		—
	Total units sold		374		58		545	%

Net sales

        The increase in net sales for the comparative periods is attributable to an increase in volume of vehicle deliveries, spare parts, and logistics services (field service representatives and technical publications). The mix of vehicles delivered and spares parts and logistics sales and the percentage change in the comparative periods are set forth in the following tables:

	For the three months ended September 30,
(in thousands)	2007 (As restated)		2006		Percentage Change
Buffalo	$	15,676	$	4,355		260	%
Cougar (all variants)		176,865		34,357		415	%
Spare parts and logistics		14,253		3,449		313	%
	$	206,794	$	42,161		390	%

Cost of sales and Gross profit

	For the three months ended September 30,
	2007 (As restated)			2006
Cost of sales	$	184,260		$	34,243
Gross margin percentage		10.9	%		18.8	%

        The gross margin decreased by 7.9 percentage points for the three months September 30, 2007 compared with the three months ended September 30, 2006. The gross margin was impacted by 2.1 percentage points as a result of GDLS Subcontract activity, whereby we recognized no gross profit on $33.3 million of vehicles sold that were produced by GDLS. The remainder of the decrease was

77

primarily due to operational inefficiencies and the use of contract labor in the production process. We define the gross margin percentage as net sales less cost of sales divided by net sales.

General and administrative expenses

	For the three months ended September 30,
	2007 (As restated)			2006
As a percentage of net sales		10.5	%		15.9	%

        General and administrative expenses as a percentage of net sales decreased 5.4 percentage points for the three months ended September 30, 2007 compared with the three months ended September 30, 2006. The decrease was primarily due to leveraging selling and administrative support functions over an increasing business base, partially offset by a liquidated damage charge of $830 thousand. See Note 6, Other Current Liabilities, in the accompanying consolidated financial statements.

Research and development expenses

	For the three months ended September 30,
	2007 (As restated)			2006
As a percentage of net sales		1.1	%		1.3	%

        Research and development expenses increased by approximately $1.8 million primarily due to increased expenditures related to the development of the Cheetah vehicle. We also increased research and development spending on upgrades and variants of the Buffalo and Cougar vehicles.

Other income

        Other income increased for the 2007 period as compared with the similar period in 2006 due to the interest income earned on investment of the funds received from our December 2006 private placement of common stock.

Interest expense

        Interest expense decreased for the 2007 period due to the repayment of a short-term loan in August 2006 and the termination of an accounts receivable factoring agreement in June 2006. Termination of these short-term financing arrangements was facilitated by the sale of common stock through private placements.

Income tax (expense) benefit

        We recorded an income tax benefit for the 2007 period as a result of the increase in manufacturing costs, related decreased gross margins and operating loss compared to the 2006 period. The effective income tax rate for the 2007 period was 18.4%. No income tax expense was recorded as a result of pre-tax income for the comparable 2006 period. See Note 11, Income Taxes, in the accompanying consolidated financial statements.

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Series D convertible preferred stock dividends and accretion

        There were no preferred stock dividends or accretion of preferred stock in the 2007 period since all preferred stock was converted to common stock in 2006.

Net income (loss) available to common shareholders

	For the three months ended September 30,
(in thousands, except per share)	2007 (As restated)			2006
Net income (loss) available to common shareholders	$	(799	)	$	240
Diluted earnings (loss) per common share	$	(0.01	)	$	0.00

        We incurred a net loss available to common shareholders for the 2007 period compared to net income available to common shareholders for the comparable period in 2006 due to decreased gross margins partially offset by decreased interest expense and decreased preferred stock dividends and accretion.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Prices

        We are exposed to market risk from changes in commodity prices. If the price of steel increases significantly, the cost of our products could increase. It is unlikely we will be able to pass on this cost under our current contracts. As a result, if the cost of our raw material increases, our profitability, if any, could decrease.

Foreign Currency

        The majority of our business is denominated in U.S. dollars and as such, movement in the foreign currency markets will have a minimal direct impact on our business.

Interest Rates

        As we do not have a trading portfolio and although our current financing arrangement is at a variable rate, we do not have any borrowings under the arrangement. As a result, we are not currently directly at risk of interest rate fluctuations. As our financing needs change in the future, interest rate risk may become a more significant issue for us.

        Currently, we do not use any derivative financial instruments for the purpose of reducing our exposure to adverse fluctuations in interest rates, foreign currency exchange, or commodity prices. We are not a party to leveraged derivatives nor do we hold or issue financial investments for speculative purposes.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Management's Responsibility Report	81
Report of Independent Registered Public Accounting Firm	82
Report of Independent Registered Public Accounting Firm	84
Report of Independent Registered Public Accounting Firm	85
Consolidated balance sheets as of December 31, 2007 and 2006	86
Consolidated statements of operations for the years ended December 31, 2007, 2006, and 2005	87
Consolidated statements of shareholders' equity for the years ended December 31, 2007, 2006, and 2005	88
Consolidated statements of cash flows for the years ended December 31, 2007, 2006, and 2005	90
Notes to consolidated financial statements	91

80

Management's Responsibility Report

        Force Protection's management is responsible for the preparation, integrity and fair presentation of the consolidated financial statements and other information used in this Annual Report. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include, where appropriate, estimates based on the best judgment of management. Financial and operating data elsewhere in the Annual Report are consistent with that contained in the accompanying consolidated financial statements.

        Force Protection's policy is to maintain systems of controls over financial reporting and disclosure controls and procedures. Such systems are designed to provide reasonable assurance that the financial information is accurate and reliable and Force Protection's assets are adequately accounted for and safeguarded. The Board of Directors oversees Force Protection's systems of controls over financial reporting and disclosure controls and procedures through its Audit Committee, which is comprised of directors who are not employees. The Audit Committee meets regularly with representatives of the Company's independent registered public accounting firm and management, including internal audit staff, to satisfy themselves that Force Protection's policy is being followed. The Audit Committee has engaged Grant Thornton LLP as the independent registered public accounting firm.

        The financial statements have been reviewed by the Audit Committee and, together with the other required information in this Annual Report, approved by the Board of Directors. In addition, the 2007 financial statements have been audited by Grant Thornton LLP whose reports are provided below.

/s/ MICHAEL MOODY	/s/ FRANCIS E. SCHEUERELL, JR.
MICHAEL MOODY Chief Executive Officer	FRANCIS E. SCHEUERELL, JR. Interim Chief Financial Officer

81

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
Force Protection, Inc.

        We were engaged to audit Force Protection, Inc. (a Nevada Corporation) and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

        We were not engaged to perform this audit until April 10, 2008; therefore, we were not able to perform certain tests of internal control over financial reporting as of December 31, 2007, nor were we able to make inquiries of senior financial management in place as of December 31, 2007, as these individuals were no longer employed by the Company at the time of our engagement.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment.

•

Financial statements closing process



•

Accounting for inventory and related accounts



•

Accounting for revenue recognition.



•

Accounting for income taxes



•

Inadequate monitoring of non-routine and non-systematic transactions



•

Information technology controls



•

Insufficient complement of personnel with an appropriate level of accounting knowledge, experience with the Company, and training in the application of GAAP

        Since we were not able to make inquiries of senior financial management in place as of December 31, 2007 and we were unable to apply other procedures to satisfy ourselves as to the

82

effectiveness of Force Protection, Inc. and subsidiaries' internal control over financial reporting, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the effectiveness of Force Protection, Inc. and subsidiaries' internal control over financial reporting.

        We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Force Protection, Inc. and subsidiaries as of December 31, 2007, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the year ended December 31, 2007, and our report dated September 13, 2008 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP
Columbia, SC
September 13, 2008

83

Report of Independent Registered Public Accounting Firm

To The Board of Directors and Shareholders of
Force Protection, Inc.

        We have audited the accompanying consolidated balance sheet of Force Protection, Inc. (a Nevada corporation) and subsidiaries (the Company) as of December 31, 2007, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Force Protection, Inc. and subsidiaries as of December 31, 2007, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

        As discussed in the notes to consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109".

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Force Protection, Inc. and subsidiaries' internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated September 13, 2008 disclaimed an opinion.

/s/ GRANT THORNTON LLP
Columbia, SC
September 13, 2008

84

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Shareholders of Force Protection, Inc.

        We have audited the accompanying consolidated balance sheet of Force Protection, Inc. and subsidiary as of December 31, 2006, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended December 31, 2006 and 2005. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Force Protection Inc., and subsidiary as of December 31, 2006, and the results of its operations and its cash flows for the years ended December 31, 2006 and 2005 in conformity with accounting principles generally accepted in the United States of America.

/S/ JASPERS + HALL, PC
Denver, Colorado
June 5, 2007

85

Force Protection, Inc. and Subsidiaries

Consolidated Balance Sheets

			As of December 31,
			2007			2006
			(In Thousands, Except Share Data)
Assets
Current assets:
	Cash and cash equivalents		$	90,997		$	156,319
	Accounts receivable, net of allowance for doubtful accounts of $323 in 2007 and $45 in 2006			118,794			42,035
	Inventories			140,639			60,396
	Advances to subcontractor			25,106			—
	Deferred income tax assets			14,530			9,563
	Income taxes receivable			6,565			—
	Other current assets			8,481			373
		Total current assets		405,112			268,686
Property and equipment, net				66,707			8,964
Intangible assets, net				1,355			—
Deferred income tax assets				1,496			2,764
		Total assets	$	474,670		$	280,414
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	146,515		$	38,654
	Due to United States government			18,969			6,023
	Other current liabilities			20,710			4,891
	Advance payments on contracts			56,552			12,824
		Total current liabilities		242,746			62,392
Other long-term liabilities				295			168
				243,041			62,560
Commitment and contingencies
Preferred stock Series D, $.001 par value; 20,000 shares authorized; none issued and outstanding				—			—
Shareholders' equity:
Preferred stock, Series A, $.001 par value; 1,600 shares authorized; none issued and outstanding				—			—
Preferred stock Series B, $.001 par value; 25 shares authorized; none issued and outstanding				—			—
Preferred stock Series C, $.001 par value; 150 shares authorized; none issued and outstanding				—			—
Common stock, $.001 par value; 300,000,000 shares authorized; issued and outstanding 68,247,648 in 2007 and 66,762,565 in 2006				68			67
Additional paid-in capital				257,160			251,038
Accumulated deficit				(25,599	)		(33,251	)
		Total shareholders' equity		231,629			217,854
		Total liabilities and shareholders' equity	$	474,670		$	280,414

The accompanying notes to consolidated financial statements are an integral part of these balance sheets.

86

Force Protection, Inc. and Subsidiaries

Consolidated Statements of Operations

		For the year ended December 31,
		2007			2006			2005
		(In Thousands, Except Per Share Data)
Net sales		$	890,672		$	196,017		$	49,713
Cost of sales, including loss on firm purchase commitments of $5,871 in 2007			786,803			158,994			46,429
	Gross profit		103,869			37,023			3,284
General and administrative expenses			84,044			27,183			17,256
Research and development expenses			14,052			3,204			1,658
	Operating income (loss)		5,773			6,636			(15,630	)
Other income, net			4,209			963			103
Interest expense			(609	)		(1,729	)		(1,708	)
Realized gain of derivative liability			—			—			2,830
	Income (loss) before income tax (expense) benefit		9,373			5,870			(14,405	)
Income tax (expense) benefit			(1,721	)		12,327			—
	Net income (loss)		7,652			18,197			(14,405	)
Accretion of Series D 6% convertible preferred stock			—			(1,297	)		(2,042	)
Preferred stock dividend			—			(326	)		(778	)
	Net income (loss) available to common shareholders	$	7,652		$	16,574		$	(17,225	)
Earnings (loss) per common share:
	Basic	$	0.11		$	0.37		$	(0.51	)
	Diluted	$	0.11		$	0.36		$	(0.51	)
Weighted average common shares outstanding:
	Basic		68,054			44,786			33,926
	Diluted		68,404			50,428			33,926

The accompanying notes to consolidated financial statements are an integral part of these statements.

87

Force Protection, Inc. and Subsidiaries

Consolidated Statements of Shareholders' Equity

			For the year ended December 31,
			2007			2006			2005
			(In Thousands, Except Share Data)
NUMBER OF PREFERRED SHARES OUTSTANDING
Balance at beginning of year				—			—			20
	Conversion to common stock			—			—			(20	)
Balance at end of year				—			—			—
SERIES B PREFERRED STOCK
Balance at beginning of the year			$	—		$	—		$	Nil
	Conversion of preferred stock to common stock			—			—			(Nil	)
Balance at end of year			$	—		$	—		$	—
NUMBER OF COMMON SHARES OUTSTANDING
Balance at beginning of year				66,762,565			36,114,216			19,357,938
	Issuance for:
		Cash—Private placement		(27,700	)		21,250,000			—
		Cash—Warrants		—			2,852,140			114,376
		Other		1,512,783			353,581			590,056
	Conversion of:
		Series B preferred stock to common stock		—			—			14,803,750
		Series D preferred stock to common stock		—			6,192,628			1,331,429
	Common share grants cancelled			—			—			(83,333	)
Balance at end of year				68,247,648			66,762,565			36,114,216
COMMON STOCK
Balance at beginning of year			$	67		$	36		$	19
	Issuance for:
		Cash—Private placement		Nil			21			—
		Cash—Warrants		—			3			Nil
		Other		1			1			1
	Conversion of:
		Series B preferred stock		—			—			15
		Series D preferred stock		—			6			1
	Common share grants cancelled			—			—			(Nil	)
Balance at end of year			$	68		$	67		$	36
COMMON STOCK WARRANTS
Balance at beginning of year			$	—		$	5,781		$	2,603
	Issuance for:
	Common stock			—			(5,781	)		(123	)
	Series D preferred stock replacement			—			—			200
	Other purposes, net			—			—			(2,072	)
	Reclassification of Series D warrants from liability			—			—			5,173
Balance at end of year			$	—		$	—		$	5,781

(Continued)

88

Force Protection, Inc. and Subsidiaries

Consolidated Statements of Shareholders' Equity (Continued)

			For the year ended December 31,
			2007			2006			2005
			(In Thousands, Except Share Data)
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year			$	251,038		$	38,808		$	54,977
	Issuance of common stock for:
		Cash—Private placement		—			185,806			—
		Cash—Warrants		—			16,153			334
		Other		1,335			1,125			1,229
	Conversion of:
		Series B preferred stock to common stock		—			—			(15	)
		Series D preferred stock to common stock		—			9,192			1,441
	Accretion of Series D preferred stock			—			(1,297	)		(2,042	)
	Warrants issued:
		Series D preferred stock replacement		—			—			(200	)
		Other, net		—			—			2,303
	Common share grants cancelled			—			—			(210	)
	Conversion of preferred stock at beneficial conversion rate			—			—			(19,102	)
	Stock based compensation			2,511			1,251			93
	Income tax benefit realized from stock options exercised			2,276			—			—
Balance at end of year			$	257,160		$	251,038		$	38,808
ACCUMULATED DEFICIT
Balance at beginning of year			$	(33,251	)	$	(51,122	)	$	(55,041	)
	Net income (loss)			7,652			18,197			(14,405	)
	Series D preferred stock dividends:
		Cash		—			(277	)		(100	)
		Accrued		—			—			(260	)
		Common stock		—			(49	)		(418	)
	Conversion of preferred stock at beneficial conversion rate			—			—			19,102
Balance at end of year			$	(25,599	)	$	(33,251	)	$	(51,122	)

The accompanying notes to consolidated financial statements are an integral part of these statements.

89

Force Protection, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

					For the year ended December 31,
					2007			2006			2005
					(In Thousands)
Cash flows from operating activities:
	Net income (loss)				$	7,652		$	18,197		$	(14,405	)
	Adjustments to reconcile net income (loss) to net cash used in operating activities—
		Depreciation and amortization				5,810			769			386
		Deferred tax benefit				(3,699	)		(12,327	)		—
		Income tax benefit realized from stock options exercised				(2,276	)		—			—
		Stock-based compensation				2,511			1,251			—
		Common stock issued for services and other expenses				—			1,071			81
		Allowance for doubtful accounts				278			45			—
		Provision for inventory obsolescence				15,772			1,925			498
		Provision for loss on firm purchase commitments				5,871			—			—
		Warranty reserve				1,844			164			957
		Realized gain on derivative liability				—			—			(2,831	)
		(Increase) decrease in assets—
			Accounts receivable			(77,037	)		(37,395	)		(3,630	)
			Inventories			(96,015	)		(29,835	)		(23,956	)
			Advances to subcontractor			(25,106	)		—			—
			Income taxes receivable			(4,289	)		—			—
			Other current assets			(8,108	)		(107	)		(25	)
		Increase (decrease) in liabilities—
			Accounts payable			103,060			23,965			12,822
			Due to United States government			12,946			5,006			1,018
			Other current liabilities			7,983			1,126			544
			Advance payments on contracts			43,728			225			9,953
				Total adjustments		(16,727	)		(44,117	)		(4,183	)
	Net cash used in operating activities					(9,075	)		(25,920	)		(18,588	)
Cash flows from investing activities:
	Capital expenditures					(59,717	)		(7,537	)		(1,511	)
	Proceeds from sale of assets					—			—			155
	Net cash used in investing activities					(59,717	)		(7,537	)		(1,356	)
Cash flows from financing activities:
	Proceeds from issuance of common stock:
		Private placement				—			185,828			—
		Warrants				—			10,375			212
		Other				1,336			6			514
	Proceeds from issuance of Series D preferred stock					—			—			15,306
	Dividends on Series D preferred stock					—			(277	)		(100	)
	Proceeds from issuance of debt					—			—			7,500
	Payments on debt					—			(7,500	)		(361	)
	Net increase (decrease) in debt outstanding under revolving credit facility					—			—			(4,000	)
	Income tax benefit realized from stock options exercised					2,276
	Net increase (decrease) in other long-term liabilities					(142	)		127			(174	)
	Net cash provided by financing activities					3,470			188,559			18,897
		Increase (decrease) in cash and cash equivalents				(65,322	)		155,102			(1,047	)
		Cash and cash equivalents at beginning of year				156,319			1,217			2,264
		Cash and cash equivalents at end of year			$	90,997		$	156,319		$	1,217
Supplemental cash flow information:
	Cash paid during the year for
		Interest, net of amounts capitalized			$	616		$	1,722		$	1,010
		Income taxes			$	9,940		$	—		$	—
Supplemental schedule of noncash investing and financing activities:
	Property and equipment additions in accounts payable				$	4,801		$	—		$	—
	Note payable, net of discount, issued as consideration for non-compete agreement				$	390		$	—		$	—

The accompanying notes to consolidated financial statements are an integral part of these statements.

90

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Organization and Description of the Business

        Force Protection, Inc., reincorporated under the laws of Nevada in 2005, and its subsidiaries, is an important provider of blast- and ballistic-protected products used to support armed forces and security personnel in harm's way. We design, manufacture, test, deliver and support our blast- and ballistic-protected products with the purpose to increase survivability of the users of the products. Our specialty vehicles, which we believe are at the forefront of blast- and ballistic-protected technology, are designed to protect their occupants from landmines, hostile fire, and improvised explosive devices ("IEDs"). Our primary customer is the United States Department of Defense ("DoD") where we service two principal services, the U. S. Army and U. S. Marine Corps.

        References herein to "Force Protection," the "Company," "we," "our," or "us" refer to Force Protection, Inc. and its subsidiaries unless otherwise stated or indicated by context.

Basis of Presentation and Consolidation

        The accompanying consolidated financial statements of Force Protection and its subsidiaries were prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and include the assets, liabilities, revenues, and expenses of our two wholly owned subsidiaries, Force Protection Industries, Inc. and Force Protection Technologies, Inc. We eliminate from our financial results all significant intercompany accounts and transactions.

Reclassifications

        Certain previously reported financial results have been reclassified to conform to the current year presentation. We increased Accounts receivable and increased Due to United States government by $6.0 million as of December 31, 2006. We increased Additional paid-in capital and increased Accumulated deficit by $1.3 million and $93 thousand as of December 31, 2006 and 2005, respectively.

Use of Estimates

        The preparation of our consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are used for, but are not limited to: (1) revenue recognition; (2) allowance for doubtful accounts; (3) definitization and advance payments on contracts; (4) inventory costs and reserves; (5) asset impairments; (6) depreciable lives of assets; (7) economic lives and fair value of leased assets; (8) income tax reserves and valuation allowances; (9) fair value of stock options; (10) allocation of direct and indirect cost of sales; and (11) contingent liabilities, warranty, and litigation reserves. Future events and their effects cannot be predicted with certainty; accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluation, as considered necessary. Actual results could differ from those estimates.

91

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued)

Risks and Uncertainties

        We are exposed to a number of risks in the normal course of our operations that could potentially affect our financial position, results of operations, and cash flows.

Customer Concentration

        Substantially all of our revenue comes from our DoD contracts either as a prime contractor or as a subcontractor to another prime contractor to the U.S. government. Revenue from those contracts approximated 94%, 82%, and 90% of Net sales for the years ended December 31, 2007, 2006, and 2005, respectively. Our accounts receivable from the U.S. government as of December 31, 2007 and 2006 were 89% and 95% of our accounts receivable, respectively.

Law and Regulations

        As a result of those DoD contracts, we are required to participate in the U.S. government contracting process, which involves extensive statutes, regulations and requirements of the U.S. government agencies and entities that govern these programs, including award, administration, funding, and performance of contracts. These statutes and regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, federal national security, contract pricing and cost, funding, contract termination and adjustment, audit requirements, and protection of classified information. Our failure to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, loss of security clearance, and the assessment of civil or criminal penalties and fines, inability to win new contracts, and lead to suspension or debarment from government contracting or subcontracting for a period of time, any of which could have a material adverse affect on our financial position, results of operations, and cash flows.

        We are also subject to certain unique business risks associated with the defense market, including changes in budget appropriations, procurement policies, political developments both domestically and abroad, and other factors. Any material deterioration in the economic and environmental factors that impact the defense industry could have a material adverse effect on our financial position, results of operations, and cash flows.

        There are certain federal laws that, while not specifically directed at us as a contractor, may affect our U.S. government contracts. The Anti-Deficiency Act is one of the major laws through which Congress exercises its constitutional control of the public purse. The Anti-Deficiency Act indirectly regulates how the agency awards our contracts and pays our invoices. Accounts receivable related to DoD contracts approximated 89% and 95% of our accounts receivable as of December 31, 2007 and 2006, respectively.

        Our operations also are subject to a broad range of environmental, health and safety laws and regulations in the jurisdictions in which we operate. These laws and regulations impose increasingly stringent environmental, health and safety protection standards and permitting requirements regarding, among other things, air emissions, wastewater storage, treatment and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination and working conditions for our employees. Some environmental laws, such as the U.S. Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA or

92

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued)

Superfund, and comparable state laws, impose joint and several liability for the cost of environmental remediation, natural resource damages, third-party claims, and other expenses, without regard to the fault or the legality of the original conduct, on those persons who contributed to the release of a hazardous substance into the environment.

        The costs of complying with these laws and regulations, including participation in assessments and remediation of contaminated sites and installation of pollution control facilities could be significant. In addition, if we are found responsible for any hazardous contamination, we may have to pay expensive fines or penalties or perform costly clean-up. Even if we are charged, and later found not responsible for such contamination and clean-up, the costs of defending the charges could be significant.

Sources and Supply of Materials

        Our products incorporate engines, transmissions, axles and a number of other components that are available only from the source or sources selected by the U.S. military. Identifying additional or replacement suppliers approved by the U.S. military for any of the numerous components used in our products may not be accomplished quickly or on commercially reasonable terms, if at all. In addition to suppliers specified by the U.S. military, we use other suppliers for certain components of our products, some of which are small businesses that are not well capitalized. In the event that we are unable to obtain required components from our existing suppliers, and if we are unable to mitigate the impact or find an alternate supplier in a timely manner, it could have a material adverse effect on our ability to produce our vehicles. Significant interruptions in the supply of components may occur for a variety of reasons, including capacity constraints at our suppliers, competition for components with other manufacturers of vehicles, insolvency of a supplier, work stoppages at suppliers and transportation interruptions, which could involve significant additional costs and result in delays in production and product deliveries and could have a material adverse effect on our results of operations. In addition, the unavailability or scarcity of certain components or raw material could result in increased costs, which could have a material adverse effect on our financial position, results of operations, and cash flows.

        In addition, some of our product components are manufactured in and supplied from foreign countries. If import tariffs or taxes increase for any reason, our cost of goods would increase. Our financial performance could be adversely affected by changes in the political, social and economic environment in these foreign countries. The role of the central and local governments in the economies of these foreign countries may be significant. Policies toward economic liberalization, and laws and policies affecting foreign companies, foreign investment, currency exchange rates and other matters could change, resulting in greater restrictions on our ability to do business with suppliers based in other countries. A foreign government could impose surcharges, increase tax rates, or revoke, terminate or suspend operating licenses without compensating us. In addition, the U.S. government could impose charges and taxes and could take other actions that could make it more expensive or costly for us to obtain components from sources in foreign countries or could prevent us from acquiring those components. Also, other countries, from time to time, experience instances of civil unrest and hostilities and confrontations have occurred between the military, insurgent forces, and civilians. If for these or any other reason, we are unable to obtain required components from foreign sources as and when required, or at all, it could have a material adverse effect on our financial position, results of operations, and cash flows.

93

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued)

Revenue Recognition

        Substantially all of our revenues from the U.S. government and certain of our revenues from others are earned pursuant to written contractual arrangements to design, develop, manufacture and/or modify blast- and ballistic-protected products and to provide related engineering and technical or other services according to the specifications of the buyers (customers). These contracts are generally fixed-price, cost-reimbursable, or time and material based. We recognize revenues and earnings on fixed-production contracts, whose units are produced and delivered in a continuous or sequential process, based upon the unit's contract selling price as we deliver it and the customer's formal acceptance of the unit. We charge the actual unit cost to Cost of sales.

        We define formal acceptance under the U.S. government contract as taking place when a representative of the U.S. government signs the United States Form DD250 entitled "Material Inspection and Receiving Report." Under the Federal Acquisition Regulation ("FAR"), a signed Form DD250 signifies contractual inspection and acceptance by the United States of the work performed by Force Protection. A signed Form DD250 also is the event contractually obligating the U.S. government to pay us for the approved goods or services (subject to any "definitization" contractual adjustment(s), as discussed below).

        In accordance with standard industry practice, there is a representative from the United States Defense Contract Management Agency ("DCMA") acting as a contractual representative of the U.S. government present at our facilities. This DCMA representative inspects each vehicle as it is delivered by us, and upon confirmation of the vehicle's conformity with the contractual specifications, the inspector or other contractually designated official signs the Form DD250 and formally accepts delivery of the vehicle. We only recognize revenues arising from our U.S. government contracts upon execution of the Form DD250 by the DCMA inspector.

        Under some of our U.S. government contracts, we receive performance-based payments based on completion of specific milestones stipulated under the contract (for example, delivery of raw material to our Ladson, South Carolina facility). We report these payments as Advance payments on contracts in our consolidated balance sheets until the final delivery of the products and formal acceptance by the U.S. government as evidenced by an executed Form DD250. As discussed above, upon acceptance of the products and the execution of the Form DD250, we recognize the full sale price of the product as revenue.

        We recognize revenue from other items, such as foreign and domestic user training, field support (including vehicle repairs), performing vehicle modifications, and providing test support to the U.S. government for its vehicle testing, when we meet four basic criteria: (i) persuasive evidence that a customer arrangement exists; (ii) the price is fixed or determinable; (iii) collectibility is reasonably assured; and (iv) delivery of product has occurred or services have been rendered.

        We negotiate contracts with our customers that may include revenue arrangements with multiple deliverables. We account for each deliverable under a contract separately. Historically, we negotiate and sign contracts with our customers that provide a contract amount and specific terms and conditions associated with each deliverable.

        Shipping and handling costs are expensed as incurred and included in Cost of sales.

94

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued)

Definitization / Due to United States government

        Our contracts with the U.S. government are negotiated as either a "sole source" or "open competition" bid process. A sole source process is one in which we are the sole bidder for the contract. An open competition could involve various bidders. Once a bid is accepted, the U.S. government usually expects work to commence immediately. An open competition results in a final agreed-upon contract price to which the U.S. government has agreed. A sole source process results in an agreed-upon contract with the U.S. government, subject to an adjustment process at a later date, termed the "definitization process." The definitization process commences upon awarding of a contract, whereby the U.S. government undertakes a detailed review of our costs involved in the manufacturing and delivery process. We then work with the U.S. government to determine an adequate and fair final contract price. We have the right to submit proposed prices, but they are subject to final review and approval by the contracting officer, who may require that we use different prices. Although both parties make an effort to definitize the contract as quickly as possible, the process is time consuming and can take months to complete. In addition, if an agreement is not reached as to price by a specific date, the contracting officer may unilaterally determine a price. During definitization, we are usually required to perform the contract work and make deliveries before the final contract price has been established. For this reason, as part of the original award, we bill the U.S. government at a predetermined price that is used for invoicing and accounting purposes pending final definitization.

        As a result of the adjustments related to the definitization process, we recognize a liability, Due to United States government, and reduce gross sales to arrive at net sales. As of December 31, 2007, our liability for contracts subject to the definitization process have been determined based upon subsequent settlement with the United States government. As of December 31, 2006, our liability for contracts subject to the definitization process has been estimated based upon a expected adjustment percentage.

Sales Returns and Allowance for Doubtful Accounts

        Historically, we have not encountered sales returns or significant uncollectible accounts receivable and we do not anticipate them in the near future. The majority of our accounts receivable are with the U. S. government and we do not maintain an allowance for doubtful accounts for those accounts due to the credit-worthiness of the U. S. government. We do maintain an allowance for doubtful accounts for our non-governmental customers, which is based upon specific identification.

Cash and Cash Equivalents

Cash and cash equivalents includes investments that are highly liquid and have maturities of three months or less when purchased. The carrying values of cash and cash equivalents approximate their fair value due to the short-term nature of these instruments.

        We maintain amounts on deposit with various financial institutions, which may at times exceed federally insured limits. However, management periodically evaluates the credit-worthiness of those institutions, and we have not experienced any losses on such deposits.

Inventories

        We carry our inventories at the lower of their cost or market value, reduced by reserves for excess and obsolete items. Cost is determined using the first-in, first-out ("FIFO") method. Market is

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determined based on net realizable value. Appropriate consideration is given to obsolescence, excess quantities, and other factors in evaluating net realizable value.

Property and Equipment

        We report land, buildings, leasehold improvements, and machinery and equipment, including tooling and pattern equipment, at cost, net of depreciation and asset impairments, if applicable. We report assets under capital lease obligations at the lower of their fair value or the present value of the aggregate future minimum lease payments as of the beginning of the lease term. We depreciate our assets using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets.

        The ranges of estimated useful lives are as follows:

	Years
Buildings		29
Leasehold improvements		2-5
Machinery and equipment, including tooling and molds		7
Computer equipment and software		3
Furniture and fixtures		3
Demonstration vehicles		5
Manuals		5
Vehicles		5

        The carrying amounts of all long-lived assets are evaluated periodically to determine if adjustment to the depreciation and amortization period or to the unamortized balance is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets.

        Maintenance and repairs of property and equipment are expensed as incurred. We capitalize replacements and improvements that increase the estimated useful life of an asset and we capitalize interest on major construction and development projects while in progress.

        We retain fully depreciated assets in property and accumulated depreciation accounts until we remove them from service. In the case of sale, retirement, or disposal, the asset cost and related accumulated depreciation balance is removed from the respective account, and the resulting net amount, less any proceeds, is included as a component of income from operations in the consolidated statements of operations.

        We recognize escalated rents, including any rent holidays, on a straight-line basis over the term of the lease for those lease agreements where we receive the right to control the use of the entire leased property at the beginning of the lease term.

        We test for impairment of long-lived assets, including intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group (hereinafter referred to as "asset group") may not be recoverable by comparing the sum of the estimated undiscounted future cash flows expected to result from use of the asset group and its eventual disposition to the carrying value. If the sum of the estimated undiscounted future cash flows is less than the carrying value, an impairment determination is required. The amount of impairment is calculated by subtracting the fair

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value of the asset group from the carrying value of the asset group. An impairment charge, if any, is recognized within Operating income (loss).

Intangible Assets

        We amortize the cost of intangible assets over their respective estimated useful lives on a straight-line basis. The amortization periods are as follows:

		Years
Licenses			3
Non-compete agreement			4
Customer base			2
Special expertise			2
	Weight-average useful lives		3

Investments in and Advances to Non-consolidated Affiliates

        Equity method investments are recorded at original cost and adjusted periodically to recognize (i) our proportionate share of the investees' net income or losses after the date of investment; (ii) additional contributions made and dividends or distributions received; and (iii) impairment losses resulting from adjustments to net realizable value. However, for contracts not yet novated to an equity method investee, we continue to recognize the revenues and expenses from those contracts in our consolidated financial statements.

        We assess the potential impairment of our equity method investments. We determine fair value based on valuation methodologies, as appropriate, including the present value of estimated future cash flows, estimates of sales proceeds, and external appraisals. If an investment is determined to be impaired and the decline in value is other than temporary, we record a write-down.

Force Dynamics LLC

        On September 10, 2007 we entered into a subcontract ("GDLS Subcontract") with General Dynamics Land Systems Inc. ("GDLS") pursuant to which GDLS manufactures approximately 50% of the Cougar vehicles to be manufactured under, and performs approximately 50% of the life cycle support required by, the Mine Resistant Ambush Protected ("MRAP") Competitive Contract based on revenues. We previously entered into a joint venture with GDLS on December 15, 2006 ("Workshare Agreement") pursuant to which we and GDLS would fulfill the obligations of the MRAP Competitive Contract. We formed a Delaware limited liability company, Force Dynamics, LLC ("Force Dynamics"), to govern the terms of the joint venture. However, the MRAP Competitive Contract was awarded to us and not to Force Dynamics or GDLS. We have attempted to novate this contract to Force Dynamics, although the U.S. government has not yet agreed to the novation. If the contract is novated, we and GDLS may be required to guarantee payment of all liabilities and performance of all obligations that Force Dynamics will assume under the novated contract.

        We will not fund and Force Dynamics will remain inactive until such time the MRAP Competitive Contract is assigned to Force Dynamics. Because this contract was awarded to Force Protection and has not yet been novated to the joint venture, we include 100% of the revenues from the MRAP Competitive

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Contract (including revenue from vehicles manufactured by GDLS) in Net sales in our consolidated statement of operations, and will continue to include them until such time as the MRAP Competitive Contract is novated to Force Dynamics, at which point we will recognize revenues only from vehicles subcontracted by Force Dynamics that we actually manufacture. In addition, during the year ended December 31, 2007 we include in Cost of sales, an amount equal to 100% of revenues from vehicles manufactured by GDLS. Notwithstanding the inclusion of revenues from vehicles manufactured by GDLS in Net sales, GDLS is entitled to all of the revenue from vehicles manufactured by GDLS. Amounts included in our consolidated statement of operations for the year ended December 31, 2007 from vehicles manufactured by GDLS are as follows (in thousands):

	2007
Net sales	$	231,892
Cost of sales		231,892

Advances to subcontractor consist of amounts paid to GDLS on the MRAP Competitive Contract based upon the achievement of contractual performance milestones. These advances are a flow through from our contract with the U.S. government.

        In connection with our joint venture arrangement with GDLS, we entered into a technology license agreement with Force Dynamics and GDLS. The agreement provides that we grant Force Dynamics and GDLS a non-exclusive license without the right to sublicense. Force Dynamics and GDLS will pay us a vehicle fee for each MRAP vehicle produced. The term of this technology agreement is the later of completion or complete termination of the MRAP program or the Workshare Agreement.

Stock-Based Compensation

        Force Protection does not have a formal stock option plan. However, we provided some of our employees stock-based compensation in the form of stock options and shares of our common stock. Prior to July 1, 2005, we accounted for those stock-based compensation awards using the recognition and measurement principles of the intrinsic value method of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretations, and applied the disclosure-only provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation. Under the intrinsic value method, we recognized compensation expense on the date of grant only if the current market price of the underlying stock on the grant date exceeded the exercise price of the stock-based award.

        In December 2004, the FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which revises FASB Statement No. 123 and supersedes APB Opinion No. 25. FASB Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first interim or annual period after June 15, 2005. Subsequent to the effective date, the pro forma disclosures previously permitted under FASB Statement No. 123 are no longer an alternative to financial statement recognition.

        In March 2005, the Staff of the United States Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 107, Share-Based Payment. SAB No. 107 expresses the view of the SEC Staff regarding the interaction between FASB Statement No. 123(R) and certain SEC

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rules and regulations and provides the SEC Staff's views regarding the valuation of share-based payment arrangements for public companies. The SEC Staff believes the guidance in SAB No. 107 will assist public companies in their initial implementation of FASB Statement No. 123(R) beginning with the first interim or annual period of the first fiscal year that begins after June 15, 2005.

        Effective July 1, 2005, we adopted FASB Statement No. 123(R) using the modified prospective method. Under this method, compensation cost recognized during 2006 included: (1) compensation cost for the portions of all share-based payments granted prior to, but not yet vested as of July 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123 amortized on a straight-line basis over the options' remaining vesting period beginning July 1, 2005, and (2) compensation cost for all share-based payments granted subsequent to July 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of FASB Statement No. 123(R) amortized on a straight-line basis over the options' requisite service period. Pro forma results for prior periods have not been restated. No tax benefit and deferred tax asset were recognized on the compensation cost because of our full valuation allowance against deferred tax assets as of December 31, 2005.

        As a result of adopting FASB Statement No. 123(R) on July 1, 2005, our Net loss is $92,671 higher for the year ended December 31, 2005 than had we continued to account for stock-based compensation under APB Opinion No. 25, and there was no change to the calculated basic and diluted Net loss per common share. The adoption of FASB Statement No. 123(R) had no material impact on the consolidated statement of cash flows for the year ended December 31, 2005.

        The following table illustrates the effect on Net loss available to common shareholders and Net loss per common share had we applied the fair value recognition provisions of FASB Statement No. 123 to account for our stock-based compensation during the period January 1, 2005 through June 30, 2005, since stock-based compensation was not accounted for using the fair value recognition method during that period. For purposes of pro forma disclosure, the estimated fair value of the stock awards, as prescribed by FASB Statement No. 123, is amortized to expense over the vesting period of such awards for the year ended December 31, 2005 (in thousands, except per share amounts):

		2005
Net loss available to common shareholders, as reported		$	(17,225	)
	Add: Stock-based employee compensation expense included in reported net loss		93
	Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(132	)
Pro forma net loss available to common shareholders		$	(17,264	)
Net loss per common share:
	Basic and diluted—as reported	$	(0.51	)
	Basic and diluted—pro forma	$	(0.51	)

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Warranty

        Our sales contracts generally include a warranty that our products are free from defects in design, material, and workmanship for a period of one year from the acceptance date. The warranty does not apply to any damage or failure to perform caused by the misuse or abuse of the vehicle, combat damage, fair wear-and-tear items (brake shoes, wiper blades, etc.), or by the customer's failure to perform proper maintenance or service on the supplies. We base our warranty accruals on estimates of the expected warranty costs that incorporate historical information and forward assumptions about the nature, frequency, and average cost of warranty claims. Warranty costs are included in Cost of sales.

Litigation Reserve

        We accrue for loss contingencies associated with outstanding litigation, claims and assessments for which management has determined it is probable that a loss contingency exists and the amount of loss can be reasonably estimated. We expense professional fees associated with litigation claims and assessments as incurred.

Research and development

        We incur costs in connection with research and development programs that are expected to contribute to future earnings, and charge such costs against income as incurred. Research and development costs consist primarily of payroll and personnel related costs, contractor fees, infrastructure costs, materials to assemble prototype vehicles, and administrative expenses directly related to research and development support.

Advertising Costs

        We expense costs of print and other advertisements as incurred. Advertising expenses, included in General and administrative expenses within the accompanying consolidated statements of operations, approximated $0.8 million in 2007, $0.3 million in 2006, and $0.2 million in 2005.

Income Taxes

        We provide for income taxes using the asset and liability method. This approach recognizes the amount of federal, state, and local taxes payable or refundable for the current year, as well as deferred tax assets and liabilities for the future tax consequence of events recognized in the consolidated financial statements and income tax returns. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates. In addition, we establish reserves for tax contingencies in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.

        A valuation allowance is required when it is more likely than not that some portion of the deferred tax assets will not be realized. Realization is dependent on generating sufficient future taxable income.

        Force Protection and its subsidiaries file a consolidated federal income tax return. State income tax returns are filed on a separate, combined, or consolidated basis in accordance with relevant state laws and regulations.

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Earnings (Loss) Per Common Share

        The calculation of basic earnings (loss) per common share is based on the weighted-average number of our common shares outstanding during the applicable period. The calculation for diluted earnings (loss) per common share recognizes the effect of all potential dilutive common shares that were outstanding during the respective periods, unless their impact would be anti-dilutive.

Fair Value of Financial Instruments

        FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosures of the fair value of financial instruments. Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings, and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, advances to subcontractors, accounts payable and due to the United States government, approximate their fair value because of the short-term maturity and highly liquid nature of these instruments. We determine the fair value of our short-term borrowings and long-term debt based on various factors including maturity schedules, call features and current market rates. The carrying values of our financial instruments approximate their fair value as of December 31, 2007 and 2006.

Recent Accounting Pronouncements

        In May 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles. FASB Statement No. 162 defines the order in which accounting principles that are generally accepted should be followed. FASB Statement No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board ("PCAOB") amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We have not yet commenced evaluating the potential impact, if any, of the adoption of FASB Statement No. 162 on our consolidated financial position, results of operations, and cash flows.

        In April 2008, the FASB issued Staff Position ("FSP") No. FAS 142-3, Determination of Useful Life of Intangible Assets, (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Earlier adoption is prohibited. We have not yet commenced evaluating the potential impact, if any, of the adoption of FSP FAS 142-3 on our consolidated financial position, results of operations, and cash flows.

        In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. FASB Statement No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations, and (iii) how derivative instruments and related hedged items affect an entity's financial position, results of operations, and cash flows. FASB Statement No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. FASB Statement No. 161 permits, but does not

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require, comparative disclosures for earlier periods at initial adoption. We have not yet commenced evaluating the potential impact, if any, of the adoption of FASB Statement No. 161 on our consolidated financial position, results of operations, cash flows or disclosures related to derivative instruments and hedging activities.

        In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations, which establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FASB Statement No. 141 (R) applies to fiscal years beginning after December 15, 2008. Earlier adoption is prohibited.

        In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, which establishes accounting and reporting standards that require (i) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within shareholders' equity, but separate from the parent's equity; (ii) the amount of consolidated net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations; and (iii) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently. FASB Statement No. 160 applies to fiscal years beginning after December 15, 2008. Earlier adoption is prohibited.

        In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which provides companies with an option to report selected financial assets and liabilities at fair value. FASB Statement No. 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company's choice to use fair value on its earnings. FASB Statement No. 159 also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. FASB Statement No. 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. FASB Statement No. 159 is effective as of the beginning of an entity's first fiscal year beginning after November 15, 2007. We adopted FASB Statement No. 159 on January 1, 2008 and we did not elect the fair value option for any other financial instruments or certain other financial assets and liabilities that were not previously required to be measured at fair value.

        In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. FASB Statement No. 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods

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within those fiscal years. We adopted FASB Statement No. 157 on January 1, 2008 and it did not have an impact on our consolidated financial position, results of operations, and cash flows.

        We have determined that all other recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations, and cash flows, or do not apply to our operations.

2. Accounts Receivable

        Accounts receivable consists of the following (in thousands):

		As of December 31,
		2007			2006
U. S. government		$	106,021		$	39,770
Other accounts receivable			13,096			2,310
			119,117			42,080
	Less: Allowance for doubtful accounts		(323	)		(45	)
	Accounts receivable, net	$	118,794		$	42,035

        Other accounts receivable primarily relate to the sale of excess raw material to suppliers, parts, and others. Any gain or loss on these sales is included in Other income, net in the accompanying consolidated statement of operations. As of December 31, 2007, our accounts receivable from the U.S. government includes $8.2 million of earned and unbilled accounts receivable.

        The following is the activity related to our allowance for doubtful accounts (in thousands):

For the year ended December 31,	Balance at Beginning of Period		Additions and Charges to Expense		Deductions and Accounts Written Off		Balance at End of Period
2007	$	45	$	278	$	—	$	323
2006	$	—	$	45	$	—	$	45

Factoring of Trade Receivables

        We entered into an agreement ("Factoring Agreement") with GC Financial Services, Inc. ("Factor") on June 29, 2005, pursuant to which we agreed to sell accounts receivables under our Joint Explosive Ordinance Disposal Rapid Responsive Vehicle ("JERRV") Contract (M67854-05-D-5091) in an amount not to exceed $63 million. Under the terms of the Factoring Agreement, we received 98.1% of the value of receivables sold to the Factor within 24-48 hours of delivery of the invoice. During June 2006, we exceeded the agreed maximum value of receivable to be factored under the Factoring Agreement. On June 22, 2006, the Factoring Agreement was terminated and no further obligation remained between Force Protection and GC Financial Services, Inc. as of December 31, 2006. We incurred factoring expenses of $0.8 million and $0.3 million for the years ended December 31, 2006 and 2005, respectively. These amounts are included in General and administrative expenses in our consolidated statements of operations.

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3. Inventories

        Inventories consist of the following (in thousands):

		As of December 31,
		2007		2006
Raw material and supplies		$	105,313	$	36,418
Work in process			35,035		23,978
Finished goods			291		—
	Inventories	$	140,639	$	60,396

        Due to excess and obsolete inventory and to account for our inventory at the lower of cost or market, we reduced the cost basis of our raw material and supplies and charged to Cost of Sales $15.8 million and $1.9 million during the years ended December 31, 2007 and 2006, respectively. We also incurred a loss of $5.9 million on firm purchase commitments to acquire raw material during 2007.

4. Property and Equipment

        Property and equipment consist of the following (in thousands):

		As of December 31,
		2007			2006
Land		$	4,419		$	—
Buildings			5,221			—
Leasehold improvements			11,775			1,534
Machinery and equipment; including tooling and molds			6,698			3,795
Computer equipment and software			6,750			2,757
Furniture and fixtures			4,454			1,023
Demonstration vehicles			1,531			1,096
Manuals			705			105
Vehicles			576			143
			42,129			10,453
	Less: Accumulated depreciation		(6,714	)		(1,489	)
			35,415			8,964
Construction in progress			31,292			—
	Property and equipment, net	$	66,707		$	8,964

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4. Property and Equipment (Continued)

        The amount of fully depreciated assets, depreciation expense, and rent expense under operating leases is as follows (in thousands):

			As of and for the year ended December 31,
			2007		2006		2005
Fully depreciated assets			$	134	$	57	$	20
Depreciation expense			$	5,225	$	769	$	386
Rent expense:
	Minimum rent payments		$	1,966	$	1,027	$	693
	Contingent and other rents			846		708		466
		Total rent expense	$	2,812	$	1,735	$	1,159

Significant Asset Acquisitions

        In March 2007, we purchased the research and developmental testing facility of NEWTEC Services Group, Inc., located near Edgefield, South Carolina, for $5.5 million ($5,050,000 in cash and $450,000 note payable, which was discounted using an implied interest rate of 7.25%). We intend to use the facility to expand our research and development activities and support the verification and quality control validation of our armored vehicles used to protect military personnel against explosive threats. The purchase price was allocated as follows (in thousands):

		Amount
Land		$	2,100
Furniture and fixtures			800
Manuals			600
Intangible assets (See Note 5, Intangible Assets)			1,940
	Total	$	5,440

        March 2007, we purchased real and personal property located in Summerville, South Carolina, for $4.1 million in cash. We intend to use the facility as a product development and logistic services training center. The purchase price was allocated as follows (in thousands):

		Amount
Land		$	1,320
Building			2,502
Furniture and fixtures			278
	Total	$	4,100

        In July 2007, we purchased land and an approximately 430,000 square foot building in Roxboro, North Carolina for $3.5 million in cash, which we originally planned to use as a manufacturing plant. We now intend to use the Roxboro facility for sustainment and training purposes (see Subsequent Events—Asset Impairment discussion below). We allocated approximately $0.8 million to land and

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4. Property and Equipment (Continued)

$2.7 million to the building. Also, in July 2007, we completed construction on and placed into service a 90,000 square warehouse facility at our corporate headquarters in Ladson, South Carolina at a cost of approximately $4.4 million, included in leasehold improvements.

Leases

        We lease certain buildings under non-cancelable operating leases expiring on June 30, 2009; with four separate five-year renewal options which must be exercised six months prior to the expiration of the lease term. Our other operating leases generally have 3- to 5-year terms, with one or more renewal options, with terms to be negotiated at the time of renewal. Contingent rents are included in rent expense in the year incurred. The excess of cumulative rent expense (recognized on the straight-line basis) over cumulative rent payments made on leases with fixed escalation terms is recognized as straight-line rental accrual and is included in Other current liabilities in the accompanying consolidated balance sheets, as follows (in thousands):

	As of December 31,
	2007		2006
Straight-line rental accrual	$	200	$	—

        Future minimum lease payments at December 31, 2007, for those leases having an initial or remaining non-cancelable lease term in excess of one year are as follows (in thousands):

For the year ending December 31,		Amount
2008		$	2,176
2009			1,140
2010			121
2011			22
2012			—
2013 and thereafter			—
	Total	$	3,459

Construction in Progress

        Amounts in construction in progress as of December 31, 2007 relate primarily to the construction of assembly lines at our Ladson, South Carolina and Roxboro, North Carolina manufacturing plants. We have entered into construction contracts and other future commitments for the completion of these projects subsequent to 2007 totaling approximately $4.4 million.

Subsequent Event—Asset Impairment

        In March 2008, we decided to suspend the construction of the assembly line at our Roxboro facility and began to develop a plan for an alternative use for the facility. As a result, we charged to operations in the first quarter of 2008 $2.1 million in deposits on services to be provided and $2.8 million in design costs.

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Notes to Consolidated Financial Statements (Continued)

5. Intangible Assets

        Intangible assets consist of the following as of December 31, 2007 (in thousands):

		Gross Carrying Amount		Accumulated Amortization		Net
Licenses		$	800	$	222	$	578
Non-compete agreement			540		113		427
Customer base			200		83		117
Special expertise			400		167		233
	Total	$	1,940	$	585	$	1,355

        As discussed in Note 4, Property and Equipment, we acquired the above intangible assets in March 2007 in connection with the purchase of a research and development testing facility located in Edgefield, South Carolina.

        Amortization expense for intangible assets was $585,000 for the year ended December 31, 2007. Future amortization expense is as follows (in thousands):

For the year ending December 31,		Amount
2008		$	702
2009			452
2010			179
2011			22
	Total	$	1,355

6. Other Current Liabilities

        Other current liabilities consist of the following (in thousands):

		As of December 31,
		2007		2006
Current portion of other long-term liabilities		$	193	$	72
Compensation and benefits			2,721		1,223
Warranty reserves			3,694		1,850
Loss on firm purchase commitments			5,871		—
Vehicle fee payable			4,626		1,139
Litigation reserve (See Note 14, Commitments and Contingencies)			3,147		—
Liquidated damages settlement			258		607
Straight-line rent accrual			200		—
	Other current liabilities	$	20,710	$	4,891

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Notes to Consolidated Financial Statements (Continued)

6. Other Current Liabilities (Continued)

Warranty Reserves

        Warranty reserves consist of the following (in thousands):

		As of December 31,
		2007			2006		2005
Balance at beginning of year		$	1,850		$	1,686	$	729
	Charges to expense		4,779			164		1,764
	Costs paid or otherwise settled		(2,935	)		—		(807	)
Balance at end of year		$	3,694		$	1,850	$	1,686

Vehicle Fee Payable

        We are party to two long-term intellectual property agreements pursuant to which we have the right to use certain intellectual property technology relating to blast- and ballistic-protected vehicles. One agreement is with the CSIR Defencetek ("CSIR"), a division of the Council for Scientific and Industrial Research, a statutory council established in accordance with the Laws of the Republic of South Africa. The other is with Mechem, a division of Denel Pty Ltd, a company established under the Laws of the Republic of South Africa. Under these agreements, we pay a per-vehicle royalty fee in exchange for the exclusive transfer to us of certain technology.

        The agreement with CSIR provides for the license, on an exclusive basis, by CSIR to us of certain technical, scientific and commercial intellectual property rights pertaining to the development of our Cougar and Buffalo vehicles. Under our agreement with CSIR, we pay CSIR a fee for each vehicle sold and/or manufactured by us using the licensed intellectual property during the term of the agreement, including vehicles manufactured by our subcontractors. We are not obligated to pay a fee in respect of our Cheetah vehicle, and the manufacture of the Cheetah vehicles is not dependent upon the technology granted to us under the agreement. The initial term of the agreement was March 8, 2002 through March 7, 2007, and the term of the renewed agreement is March 8, 2007 through March 7, 2012. We have no right to extend the agreement after March 2012 and, if the agreement expires without renewal, after such date CSIR may grant a license to the licensed intellectual property to other parties. However, even upon expiration of the agreement we will have the ability to manufacture and deliver the Cougar and Buffalo vehicles.

        The agreement with Mechem provides for the provision, on an exclusive basis, by Mechem to us of certain technical, scientific and commercial intellectual property rights pertaining to the development of our Cougar and Buffalo vehicles. Under our agreement with Mechem, we pay Mechem a fee for each vehicle sold and/or manufactured by us using the licensed intellectual property during the term of the agreement, including vehicles manufactured by our subcontractors. We are not obligated to pay a fee with respect to our Cheetah vehicle, and the manufacture of the Cheetah vehicle is not dependent upon the technology granted to us under the agreement with Mechem. Our original agreement with Mechem was effective October 15, 2001 and expired October 15, 2006. Our current agreement with Mechem, which we entered into on September 13, 2006, expires on September 12, 2011. We have no right to extend the agreement after September 2011 and, if the agreement expires without renewal, after such date Mechem may license the licensed intellectual property to other parties. However, even

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Notes to Consolidated Financial Statements (Continued)

6. Other Current Liabilities (Continued)

upon expiration of the agreement, we will have the ability to manufacture and deliver the Cougar and Buffalo vehicles.

Liquidated Damages Settlement

        On December 20, 2006, we completed a private placement of 13 million shares of our common stock to institutional investors at $11.75 per share, resulting in gross proceeds of $152.8 million. The proceeds, net of commissions, were $146.6 million. Per the Securities Purchase Agreement, we agreed to file a registration statement to register all 13 million shares of common stock for resale and distribution under the Securities Act of 1933, as amended, within 30 calendar days thereafter (January 19, 2007) and cause the registration statement to be declared effective by the SEC no later than 120 calendar days thereafter (April 19, 2007). If the registration statement registering these shares was not declared effective on or before the applicable date, then we were required to deliver to each purchaser, as liquidated damages, an amount equal to one and one third percent (1¹/3%) for each 30 days (or such lesser pro-rata amount for any period of less than 30 days) of the total purchase price of the securities purchased and still held by such purchaser pursuant to the Securities Purchase Agreement on the first day of each 30 day or shorter period for which liquidated damages were calculable. The registration statement for the shares issued became effective July 26, 2007. On October 15, 2007, we filed a prospectus supplement with respect to the registration statement. Liquidated damage expense for the year ended December 31, 2007 was $7.2 million and is included in General and administrative expenses in the accompanying consolidated statements of operations.

7. Advance Payments on Contracts

        Advance payments on contracts consist of the following (in thousands):

		As of December 31,
		2007		2006
Mine Resistant Ambush Protected ("MRAP") program		$	53,767	$	—
Iraq Light Armored Vehicles ("ILAV")			2,785		4,260
Mastiff Protected Patrol Vehicles ("Mastiff")			—		7,488
Other			—		1,076
	Advance payments on contracts	$	56,552	$	12,824

8. Other Long-term Liabilities

        Other long-term liabilities consist of the follow items.

		As of December 31,
		2007			2006
Non-compete agreement		$	417		$	—
Equipment note payable			71			240
			488			240
Less: Current portion (included in Other current liabilities)			(193	)		(72	)
	Other long-term liabilities	$	295		$	168

109

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Notes to Consolidated Financial Statements (Continued)

8. Other Long-term Liabilities (Continued)

        As discussed above in Note 4, Property and Equipment, we purchased the research and developmental testing facility of NEWTEC Services Group, Inc., located near Edgefield, South Carolina, for $5,500,000 (5,050,000 in cash and $450,000 note payable). We discounted the note using an implied interest rate of 7.25%. The note is payable in annual of installments of $150,000 on January 1, 2008, 2009, and 2010.

        In October 2006, we acquired capital equipment valued at $234,875 using a note with implied interest of 11.25% from the supplier with a repayment based on usage of materials used with the equipment. It is expected that based on usage estimates the note payments in 2008 and 2009 will be $92,608 and $13,838, respectively.

        In April 2007, we acquired capital equipment valued at $52,893 at an interest rate of 8.15% from the supplier with repayments based on a 36-month term.

9. Shareholders' Equity

Authorization of Shares

        We have the authority to issue 310 million shares, in aggregate, consisting of 300 million shares of common stock and 10 million shares of preferred stock, of which 1,600 have been designated "Series A," 25 of which have been designated as "Series B," 150 of which have been designated as "Series C" and 20,000 of which have been designated as "Series D." By shareholder's resolution effective January 1, 2005, all classes of stock were declared to have a par value of $0.001 per share. As of December 31, 2007, we had no shares of preferred stock outstanding.

Preferred Stock

        Our preferred stock has the following characteristics:

Dividends

        Each holder of preferred stock shall be entitled to receive dividends in cash, stock or otherwise, if, when and as declared by our board of directors, with the exception of the preferred stock designated as Series A, which shall not be entitled to receive dividends. However, we will not declare or pay a dividend to common shareholders without first declaring and paying a dividend to the preferred shareholders. Each share of Series D 6% convertible preferred stock is specifically entitled to 6% cumulative dividends, payable semi-annually in cash or common stock.

Liquidation

        In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the assets of the Company available for distribution to its shareholders shall be distributed as follows:

•

Series A Preferred Stock shall rank senior to Series B Preferred Stock, Series C Preferred Stock, Series D 6% convertible preferred stock and common stock;



•

Series B Preferred Stock shall rank junior to Series A Preferred Stock, senior to Series C Preferred Stock, Series D 6% convertible preferred stock and common stock;

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Notes to Consolidated Financial Statements (Continued)

9. Shareholders' Equity (Continued)

•

Series C Preferred Stock shall rank junior to Series A Preferred Stock and Series B Preferred Stock and senior to Series D 6% convertible preferred stock and common stock;



•

Series D 6% convertible preferred stock shall rank junior to Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and senior to common stock; and



•

Common stock shall rank junior to Series A, B, C, and D 6% convertible preferred stock.

        Additionally, upon a liquidation event, holders of Series A Preferred Stock will receive $1,000 per share of Series A Preferred Stock. Holders of Series B Preferred Stock will receive the greater of $2,500 or the pro-rata share of the Company's remaining net assets to be distributed, after rank considerations. Holders of Series C Preferred Stock will receive a 150% return on the face value of the share of Series C Preferred Stock, or $1,500, after rank considerations. In any event whereby the preceding distributions are unable to be met, the rank considerations outlined above shall be considered and the distribution of our net assets shall be determined according to rank and on a pro-rata basis.

Conversion

        Series A Preferred Stock shall convert into common stock at a rate of $4.00 per share, as adjusted accordingly. Each share of Series B Preferred Stock shall convert into 759,167 shares of common stock. Each share of Series C Preferred Stock shall convert into 75,917 shares of common stock. Each share of Series D 6% convertible preferred stock shall convert into common stock at $2.10 per share.

        In connection with the private placement sale of our common stock on January 19, 2005, Force Protection and the holders of Series B and Series C Preferred Stock agreed to convert all shares of the Series B and Series C Preferred Stock outstanding to shares of our common stock. As a result, all shares of Series B and Series C Preferred Stock were converted into common stock effective January 19, 2005. The Series D 6% convertible preferred stock issued in connection with the January 19, 2005 private placement remained outstanding following the conversion of the Series B and Series C Preferred Stock. All outstanding shares of the Series D 6% convertible preferred stock were converted in full in 2006, and no shares of the Series D 6% convertible preferred stock were outstanding as of December 31, 2006. We had classified our Series D 6% convertible preferred stock as Mezzanine Equity.

        On January 18, 2005, our board of directors, acting pursuant to a resolution of our shareholders, approved a reverse split of our common stock whereby each 12 shares of common stock outstanding on the date of record, February 4, 2005, would be exchanged for 1 new share of common stock. All references to common stock refer to post reverse split shares.

Preferred Stock Transactions

        During the year ended December 31, 2006, 13,004 shares of Series D 6% convertible preferred stock were voluntarily converted to 6,192,628 shares of common stock. The fully accreted conversion value of these shares of common stock at the time converted was $9.2 million.

        During the three-month period ended September 30, 2006, 8,351 shares of common stock were issued in lieu of cash dividends for the holders of Series D 6% convertible preferred stock. The shares

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Notes to Consolidated Financial Statements (Continued)

9. Shareholders' Equity (Continued)

issued were valued at $46,448 which was 85% of the average of the lowest market value for three of the prior 10 trading days.

        During the three-month period ended June 30, 2006, 586 shares of common stock were issued in lieu of cash dividends for the holders of Series D Preferred Stock. The shares issued were valued at $2,377 which was 85% of the average of the lowest market value for three of the prior 10 trading days.

        On May 23, 2005, 2,796 shares of the Series D 6% convertible preferred stock were voluntarily converted into 1,331,429 shares of common stock. The conversion value of these shares of common stock at the time of conversion was $1.4 million.

        We issued 14,803,750 shares of unregistered common stock resulting for the mandatory conversion on February 8, 2005 of all the outstanding shares of our Series B Preferred Stock. At the time of conversion, the conversion rate for the Series B Preferred Stock was 2% of fully diluted common stock. The beneficial conversion feature related to the Series B Preferred Stock in the amount of $19.1 million was relieved in full on February 8, 2005.

        On January 19, 2005, we issued 15,800 shares of our Series D 6% convertible preferred stock for net cash of $15.3 million. The issuance of our Series D 6% convertible preferred stock was recorded at $7.3 million which is the net value of the cash received of $15.3 million less the fair value of the associated warrants of $8.0 million. We had classified the Series D 6% convertible preferred stock as mezzanine equity.

Common Stock Transactions

For the year ended December 31, 2007

        During the year ended December 31, 2007, employees exercised stock options to purchase 1,411,133 shares of our common stock valued at $1.4 million. We also issued 4,348 shares of our common stock related to 2006 employee stock option exercises that were identified as shares to be issued in shareholders' equity as of December 31, 2006.

        We cancelled 27,700 shares relating to the December 2006 Private Investment in Public Equity ("PIPE") offering.

        We issued 26,789 shares of common stock to members of the board of directors as 2006 compensation, which were indentified as shares to be issued in shareholders' equity as of December 31, 2006.

        We issued 50,000 shares of common stock granted in June 2006 to an employee which vested and were issued on January 1, 2007.

For the year ended December 31, 2006

        During the year ended December 31, 2006, employees exercised stock options to purchase 5,348 shares of the Company's common stock valued at $6,001. A total of 4,348 shares of our common stock were indentified as shares to be issued in the shareholders' equity as of December 31, 2006 related to employee exercised stock options.

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Notes to Consolidated Financial Statements (Continued)

9. Shareholders' Equity (Continued)

        On December 20, 2006, we closed a private placement sale and issued 13,000,000 shares of common stock to investors for gross proceeds of $152.8 million. Net proceeds received after expenses were $146.6 million.

        On July 24, 2006, we closed a private placement sale and issued 8,250,000 shares of common stock to investors for gross proceeds of $41.3 million. Net proceeds received after expenses were $39.2 million.

        The following issuances of our common stock during 2006 were valued by us using our closing bid price of our common stock as quoted on the OTC Bulletin Board market as of the date of the associated contract or the issuance date if no contract existed:

•

On August 8, 2006, we agreed to issue 30,000 shares of common stock under a settlement agreement with Atlantis Partners, Inc. The shares issued were valued at $187,500.



•

On June 2, 2006, we granted and issued 12,500 shares of our unregistered common stock to a member of our board of directors, valued at $40,500 as compensation due under a previous employment contract with us. During 2006, we granted and issued 165,202 shares of our unregistered common stock valued at $405,786 under various employment agreements. Included within these issuances were common stock issuances related to certain employee agreements which were modified during 2006. A total of 233,418 shares of common stock were rescinded as a result of the modifications to employee agreements. These transactions resulted in a reduction of the total stock-based compensation for 2006 of $224,688.



•

On April 21, 2006, the board of directors adopted a resolution approving payment of annual compensation to each member of our board of directors. Each member was to receive annual cash compensation of $24,000. In addition, each member received a guarantee of an annual grant of 15,353 shares of our unregistered common stock. The shares of our unregistered common stock are required to be held until the individual's service as a member of our board of directors is complete. We awarded 96,149 and issued 69,360 shares of our common stock to the members of our board of directors in 2006. A total of 26,789 shares of our common stock were included in shares to be issued in the shareholders' equity as of December 31, 2006 relating to this award. The value for the 96,149 shares of common stock awarded to the members of the board of directors was recorded as stock based compensation of $445,990.



•

Effective January 1, 2006, our board of directors granted our then chief executive officer 300,000 shares of our unregistered common stock valued at $216,000. The shares were fully vested upon issuance.

        During 2006, warrants associated with Series D 6% convertible preferred stock were exercised and we issued 2,633,333 shares of common stock for gross proceeds of $9.9 million. In addition, various warrants were exercised and we issued 218,807 shares of common stock for gross proceeds of $499,573.

        As of December 31, 2006, all warrants were exercised or expired. No warrants remained outstanding as of December 31, 2006.

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Notes to Consolidated Financial Statements (Continued)

9. Shareholders' Equity (Continued)

For the year ended December 31, 2005

        In January 2005, we issued a total 188,400 shares of our common stock at an average price of $2.76 per share, generating $520,069 in net proceeds pursuant to the Investment Agreement between the Company and Dutchess Private Equities Fund, L.P., dated January 26, 2004.

        The following issuances of our common stock during 2005 were valued by us using our closing bid price of our common stock as quoted on the OTC Bulletin Board market as of the date of the associated contract or the issuance date if no contract existed:

•

We issued 41,666 shares of our common stock valued at $112,499 to a member of the board of directors, for services rendered to Force Protection and was recognized as compensation expense in the accompanying consolidated statement of operations for the year ended December 31, 2005.



•

We issued 9,950 shares of our common stock valued at $12,910, to our former President, for services rendered to Force Protection and was recognized as compensation expense in the accompanying consolidated statement of operations for the year ended December 31, 2005.



•

We issued 53,467 shares of our common stock pursuant to the terms of our agreement with certain third parties and were valued at $144,895, which was recognized as a settlement expense in the accompanying consolidated statement of operations for the year ended December 31, 2005.



•

We issued 14,876 shares of our common stock pursuant to the terms of our agreement with GC Financial Services, Inc. which were valued at $20,641, which was recognized as Interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2005.



•

A former chief executive officer, agreed to rescind 83,333 shares of common stock issued in 2004 valued at $209,999.

        We issued a total of 114,376 shares of common stock for net proceeds of $211,629 in connection with the exercise of warrants issued through a PIPE offering completed on April 10, 2002.

        We issued a warrant to purchase 65,833 shares of our common stock on January 19, 2005 to HPC Company. The warrant was valued at $200,071 using Black-Scholes. We recorded a reduction of shareholders' equity associated with services provided as a placement agent for the Company's Series D 6% convertible preferred stock offering, which closed on January 19, 2005.

        We issued warrants to purchase 75,000 shares of our common stock that can be exercised for $3.75 per share in a settlement agreement with H.C. Wainwright & Co. The value as determined by Black-Scholes was expensed as settlement expense in the amount of $158,071. We also issued a warrant to purchase 41,667 shares of our common stock that can be exercised for $3.96 per share in a settlement agreement with Westor Online. The value as determined by Black-Scholes was expensed as settlement expense in the amount of $72,354. The warrants were exercised in 2006.

        Outstanding warrants to purchase 2,143,085 shares of common stock expired or were cancelled during the year ended December 31, 2005. The warrant valuation of $2.3 million was added to Additional paid-in capital during the year ended December 31, 2005.

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Notes to Consolidated Financial Statements (Continued)

10. Stock-Based Compensation

Stock Options

        On July 1, 2005, we adopted FASB Statement No. 123(R) using the modified prospective method. The modified prospective method requires companies to record compensation cost beginning with the effective date based on the requirements of FASB Statement No. 123(R) for all share-based payments granted after the effective date. All awards granted to employees prior to the effective date of FASB Statement No. 123(R) that remain unvested at the adoption date will continue to be expensed over the remaining service period. The cumulative effect of the accounting change, net of tax, as of July 1, 2005 was approximately $39,128, and was not considered material as to require presentation as a cumulative effect of accounting change in the accompanying consolidated statements of operations. Accordingly, the expense recognized as a result of adopting FASB Statement No. 123(R) was included in General and administrative expenses in our consolidated statement of operations for the year ended December 31, 2005.

        We did not grant stock options during the year ended December 31, 2007. We used the Black-Scholes valuation model to determine the fair value options granted during the years ended December 31, 2006, and 2005. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility. Because our trading history is shorter than the expected life of the options, we used historical stock price volatility data from comparable companies to supplement our own historical volatility to determine expected volatility assumptions. We do not pay a dividend, and we do not include a dividend payment as part of our pricing model. Risk-free interest rates are based on U.S. Treasury Strip yields, compounded daily, consistent with the expected lives of the options. Because we do not have a sufficient history of option exercise or cancellation, we estimated the expected life of the options to be two years, which for a majority of the options was the midway point. Under the Black-Scholes option-pricing model, the weighted-average fair value per share of employee stock options granted during the years ended December 31, 2006 and 2005 was $0.03, and Nil, respectively

        The fair value of our options was estimated using the following assumptions:

	For the year ended December 31,
	2007		2006		2005
Expected volatility		—	45.82% - 70.31	%		48.61	%
Risk-free interest rate		—	4.40% - 4.97	%		3.42	%
Expected forfeiture rate		—	5.00	%		5.00	%
Dividend yield		—	—	%		—	%
Stock price on date of grants		—	$0.77 - $7.48			$1.50
Expected option terms (in years)		—	2			2
Expected duration from grant to expiration (in years)		—	4 and 5			5
Option vesting term (in years)		—	1-day - 14 months			1

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Notes to Consolidated Financial Statements (Continued)

10. Stock-Based Compensation (Continued)

        The following summarizes stock option activity for the years ended December 31:

	2007					2006					2005
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding at beginning of year		1,959,665		$	2.63		456,666		$	1.50		—	$	—
Granted		—					1,508,347			2.97		456,666		1.50
Exercised		(1,411,133	)		0.95		(5,348	)		1.40		—		—
Forfeited/expired		—					—			—		—		—
Options outstanding at end of year		548,532		$	6.96		1,959,665		$	2.63		456,666	$	1.50
Options exercisable at end of year		548,532		$	6.96		1,509,018		$	1.28		325,296	$	1.50
Options available for grant at end of year(a)		—			—		—			—		—		—

(a)

Force Protection did not have a formal stock option plan as of December 31, 2007, 2006, or 2005.

        The following table summarizes information about stock options outstanding and exercisable at December 31, 2007.

Options Outstanding								Options Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
	$1.50 - $7.48		548,532		2.89	$	6.96		548,532	$	6.96

Stock Grants

        The following table summarizes supplemental information about non-vested stock grants activity for the year ended December 31, 2007 and 2006. We did not have stock grant activity for the year ended December 31, 2005.

	Number of Shares			Weighted average per share grant price
Outstanding as of December 31, 2005		—			—
Shares granted		191,026		$	5.48
Shares vested		—			—
Outstanding as of December 31, 2006		191,026		$	5.48
Shares granted		—			—
Shares vested		(70,513	)	$	5.48
Outstanding as of December 31, 2007		120,513		$	5.68

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Notes to Consolidated Financial Statements (Continued)

10. Stock-Based Compensation (Continued)

Stock-based compensation

        Stock-based compensation includes the expense associated with both stock options granted to employees and stock grants issued to employees and is recognized in General and administrative expenses in the consolidated statement of operations as follows (in thousands):

		For the year ended December 31,
		2007		2006		2005
Stock options		$	2,142	$	701	$	93
Stock grants			369		550		—
	Total stock based compensation	$	2,511	$	1,251	$	93

11. Income Taxes

        Force Protection is subject to U.S. federal, state, and local income taxes. Income (loss) before income tax (expense) benefit is as follows (in thousands):

	For the year ended December 31,
	2007		2006		2005
Income (loss) before income tax (expense) benefit	$	9,373	$	5,870	$	(14,405	)

        The significant components of the provision for income tax (expense) benefit are as follows (in thousands):

			For the year ended December 31,
			2007			2006		2005
Current:
	Federal		$	(5,105	)	$	—	$	—
	State and local			(315	)		—		—
		Total current expense		(5,420	)		—		—
Deferred:
	Federal			3,738			10,715		—
	State and local			(39	)		1,612		—
		Total deferred benefit		3,699			12,327		—
Income tax (expense) benefit			$	(1,721	)	$	12,327	$	—

117

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Notes to Consolidated Financial Statements (Continued)

11. Income Taxes (Continued)

        A reconciliation of the statutory federal income tax expense rate to the actual income tax expense rate is as follows:

		For the year ended December 31,
		2007			2006			2005
Tax (expense) benefit at statutory rate			(35.00	)%		(35.00	)%		35.00	%
(Increase) decrease in tax rate resulting from:
	State income taxes, net of federal tax benefit		(4.70	)%		(3.25	)%		3.25	%
	(Increase) decrease in valuation allowance		—			248.23	%		(38.25	)%
	Reversal of other tax accruals no longer required		8.21	%		—			—
	Research and development credit		11.63	%		—			—
	Other		2.55	%		—			—
	Nondeductible items		(1.05	)%		—			—
Income tax (expense) benefit			(18.36	)%		209.98	%		—	%

        The effective tax rate is the provision for income taxes as a percent of income before income taxes. The 2007 effective rate is lower than the expected federal statutory rate of 35% primarily due to the state income taxes, reversal of other tax accruals no longer required, research and development credits, and certain nondeductible items at the statutory rate. The 2006 and 2005 effective rate is lower than the expected federal statutory rate of 35% primarily due to the change in the valuation allowance in those years.

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Notes to Consolidated Financial Statements (Continued)

11. Income Taxes (Continued)

        Deferred income taxes recognize the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes and the impact of available net operating loss ("NOL") carryforwards. The significant components of Force Protection's deferred tax assets and liabilities are as follows (in thousands):

			As of December 31,
			2007		2006
Deferred income tax assets:
	Net operating loss carryforward		$	1,639	$	6,560
	Inventories			8,068		2,545
	Allowance for doubtful accounts			120		328
	Future benefit of offset of alternative minimum tax			—		289
	Warranty reserves			1,379		2,477
	Loss on firm purchase commitments			2,192		—
	Litigation reserve			1,175		—
	Depreciation and amortization			52		—
	Stock-based compensation			1,128		285
	Employee compensation accruals			160		58
	Other			113		52
Net deferred income tax assets				16,026		12,594
Deferred income tax liabilities:
	Depreciation and amortization			—		(267	)
		Total deferred income tax liabilities		—		(267	)
Net deferred income tax assets				16,026		12,327
	Less current deferred tax assets			14,530		9,563
Noncurrent deferred tax assets			$	1,496	$	2,764

        FASB Statement No. 109 requires that we reduce our deferred income tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. We removed our valuation allowance against our previously recognized deferred tax assets as of December 31, 2006 because we expected at that time to realize future earnings to be offset by future tax benefits.

        As of December 31, 2007, we had unused federal net operating loss carryforwards of approximately $4.4 million. Such losses expire in various amounts at varying times through December 31, 2025. However, in accordance with Internal Revenue Code Section 382, some of NOL carryforwards are subject to limitations. These NOL carryforwards result in a deferred tax asset of approximately $1.6 million as of December 31, 2007.

        As a result of the adoption of FASB Statement No. 123(R), our deferred tax assets at December 31, 2007 and 2006 do not include excess tax benefits from stock option exercises. Shareholders' equity will be increased if these excess tax benefits are ultimately realized.

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Notes to Consolidated Financial Statements (Continued)

11. Income Taxes (Continued)

        We adopted FASB Interpretation No. 48, on January 1, 2007. FASB Interpretation No. 48 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FASB Statement No. 109 does not prescribe a recognition threshold or measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. FASB Interpretation No. 48 clarifies the application of FASB Statement No. 109 by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in a company's financial statements. Additionally, FASB Interpretation No. 48 provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

        Tax years ended December 31, 2002 through December 31, 2007 remain open and are subject to examination by the Internal Revenue Service. However, we believe that we have appropriate support for the income tax positions taken and to be taken on our income tax returns and that our income tax receivable and accruals for tax liabilities are adequate for all open years and based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter. Accordingly, we have not recognized a liability as a result of applying the guidance in FASB Interpretation No. 48.

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Notes to Consolidated Financial Statements (Continued)

12. Earnings (Loss) Per Common Share

        The following table shows the information used in the calculation of basic and diluted earnings (loss) per common share (in thousands, except number of shares and per share amounts):

			For the year ended December 31,
			2007		2006			2005
Numerator—Basic:
	Net income (loss)		$	7,652	$	18,197		$	(14,405	)
	Less: Accretion of Series D 6% convertible preferred stock			—		(1,297	)		(2,042	)
	Less: Preferred dividends			—		(326	)		(778	)
	Income (loss) available for common shareholders—basic		$	7,652	$	16,574		$	(17,225	)
Numerator—Diluted:
	Income (loss) available for common shareholders—basic		$	7,652	$	16,574		$	(17,225	)
	Add: Accretion of Series D 6% convertible preferred stock			—		1,297			—
	Add: Preferred dividends			—		326			—
	Income (loss) available for common shareholders—diluted		$	7,652	$	18,197		$	(17,225	)
Denominator:
	Weighted average common shares outstanding—basic			68,054,477		44,786,083			33,926,573
		Add: Series D 6% convertible preferred stock		—		2,369,259			—
		Add: Warrants		—		1,631,822			—
		Add: Stock options		253,163		1,543,458			—
		Add: Stock grants		96,302		97,844			—
	Weighted average common shares outstanding—diluted			68,403,942		50,428,466			33,926,573
Basic earning (loss) per common share:
	Income (loss) available for common shareholders—basic		$	0.11	$	0.37		$	(0.51	)
Diluted earning (loss) per common share:
	Income (loss) available for common shareholders—diluted		$	0.11	$	0.36		$	(0.51	)

        The calculation of earnings (loss) per common share is based on the weighted-average number of our common shares outstanding during the applicable period. The calculation for diluted loss per common share recognizes the effect of all dilutive potential common shares that were outstanding during the respective periods, unless their impact would be anti-dilutive. We use the treasury stock method to calculate the dilutive effect of stock options and other common stock equivalents (potentially dilutive shares). Diluted earnings per common share recognizes the dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. These potentially dilutive shares include: (1) Series D 6% convertible preferred stock, (2) warrants, (3) stock options, and (4) stock grants. For the year ended December 31, 2005, we excluded 8,716,711 of common stock equivalents from the calculation of diluted loss per share because they were anti-dilutive.

13. Related Party Transactions

        Our former Chief Executive Officer, Mr. Gordon McGilton, was a principal of APT Leadership, a consulting firm we hired to provide various business consulting services, training seminars and certain

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Notes to Consolidated Financial Statements (Continued)

13. Related Party Transactions (Continued)

business software. APT Leadership billed Force Protection $0.5 million; $0.6 million; and $0.2 million for the years ended December 31, 2007, 2006 and 2005, respectively. Mr. McGilton disclosed to the board of directors each year that he did not receive any dividends, distributions or other compensation from APT Leadership at any time while an employee of the Company. Further, Mr. McGilton disclosed that as of December 31, 2007 he transferred his interest in APT Leadership to the other owner for $1 in consideration. In addition, as part of the process to determine our income tax expense for the year ended December 31, 2007, we discovered in August 2008 that we did not withhold the proper amount of federal income taxes for Mr. McGilton in connection with his exercise of stock options in January 2007 and, as a result, Mr. McGilton owed us $315,085 as of December 31, 2007, which is included in Other current assets in the accompanying consolidated balance sheets. Mr. McGilton repaid this amount on September 11, 2008.

        On February 18, 2006, we entered into a Modification and Assignment Agreement with Longview Fund, LP and Longview Equity Fund, LP (collectively "Longview") pursuant to which we paid $1.3 million against the principal balance of the secured promissory notes ("Notes") and extended the maturity date of the Notes for an additional 60 days. In addition, we consented to the assignment of $2.5 million of the Notes to Fort Ashford Funds LLC ("Fort Ashford"). Mr. Frank Kavanaugh, a former director of Force Protection, is the principal owner of Fort Ashford and at such time was a substantial shareholder of our common stock. Mr. Kavanaugh's relationship to Fort Ashford Funds LLC was fully disclosed to us and Mr. Kavanaugh did not participate in the negotiations or decision process with respect to the Modification and Assignment Agreement. We paid $87,510 to Longview and $50,000 to Fort Ashford in cash as compensation for the extension of the maturity dates of the Notes.

        On April 20, 2006, we paid $1.0 million against the principal balance of the Notes and extended the maturity date on the Notes and the Note with Fort Ashford for an additional 60 days, through June 20, 2006. We paid $55,000 to Longview and $50,000 to Fort Ashford in cash as compensation for this extension.

        On June 20, 2006, we paid off the principal balance and all applicable accrued interest under the Notes. Additionally, we extended the maturity date of the Ashford Note for an additional 30 days, through July 20, 2006. We paid $50,000 to Fort Ashford in cash as compensation for the extension of the Ashford Note.

        On August 9, 2006, we paid off the principal balance of the Ashford Note, and all applicable accrued interest under the Ashford Note.

14. Commitments and Contingencies

Financing Commitments—Credit Facility

        On July 20, 2007, we entered into a revolving credit agreement with Wachovia Bank. Borrowings under the credit agreement bear interest at a floating rate per annum equal to the one-month London Interbank Offered Rate ("LIBOR") market index plus 2.0%. The original amount of the agreement was $50 million and all amounts payable under this credit agreement were originally due and payable on September 30, 2007. We have entered into several modification agreements with the lender to reduce the principal amount to $30 million and to extend the maturity of the credit agreement to October 31, 2008. Until October 31, 2008, we may borrow, repay, and re-borrow amounts under the

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Notes to Consolidated Financial Statements (Continued)

14. Commitments and Contingencies (Continued)

terms of the note as long as the total principal balance outstanding does not to exceed $30 million. Amounts payable under the credit agreement are secured by a pledge of all of our personal property and fixtures. As of December 31, 2007, no borrowings were outstanding under the credit agreement. There are no assurances that Wachovia will extend the terms of this financing agreement beyond October 31, 2008.

Legal Proceedings

        We are subject to various claims arising in the ordinary course of business, and are parties to various legal proceedings that constitute ordinary, routine litigation incidental to our business. The majority of these claims and proceedings relate to commercial, shareholder and employee matters. In our opinion, apart from the actions set forth below, the disposition of these proceedings and claims, after taking into account accruals recorded in our consolidated balance sheets and the availability and limits of our insurance coverage, will not have a material adverse effect on the business or our financial position, results of operations, or cash flows.

Shareholder Class Action and Derivative Complaints

        On March 10, 2008, the first of ten related class action lawsuits was filed against us and certain of our former and current board members or officers in the United States District Court for the District of South Carolina Charleston Division on behalf of a proposed class of investors who purchased or otherwise acquired our securities during the period between August 14, 2006 and February 29, 2008. The complaints seek class certification, and the allegations include but are not limited to allegations that the defendants violated the Securities Exchange Act of 1934 and made false or misleading public statements and/or omissions concerning our business, internal controls, and financial results. The plaintiffs assert that as a result of the defendants' allegedly wrongful acts and omissions, members of the proposed class have suffered significant losses and damages. The individual class action lawsuits were consolidated on June 10, 2008 under caption 'In Re Force Protection, Inc. Securities Litigation, Action No. 2: 08-cv-845-CWH.' On June 20, 2008, a group of investors consisting of the Laborers' Annuity and Benefit System of Chicago, Gary Trautman, David J. Jagar, Bhadra Shah, Panteli Poulikakos, George Poulikakos, and Niki Poulikakos was appointed lead plaintiff.

        Between March 27, 2008 and May 28, 2008, various alleged shareholders filed derivative lawsuits against former and current officers or board members wherein the plaintiff shareholders are seeking damages for the Company. The Company has been named a nominal defendant in each derivative lawsuit. Four (4) derivative lawsuits are pending in the United States District Court for the District of South Carolina Charleston Division; two (2) derivative lawsuits are pending in Charleston, South Carolina Circuit Court; and one (1) derivative lawsuit is pending in Clark County, Nevada District Court. The plaintiff shareholders' allegations include and are not limited to allegations of breach of fiduciary duties, abuse of control, gross mismanagement, and waste of corporate assets, unjust enrichment in connection with the Company's public statements regarding its operations and financial results, internal controls, compensation of certain defendants, and alleged insider stock sales by certain defendants.

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Notes to Consolidated Financial Statements (Continued)

14. Commitments and Contingencies (Continued)

Other disputes

        On August 21, 2007, we filed suit against Protected Vehicles, Inc. ("PVI") and Garth Barrett, Thomas Thebes, and Paul Palmer, three of PVI's employees (all of whom were former employees of Force Protection) in the United States District Court for the District of South Carolina. In the complaint, we allege that the named defendants used our confidential information and trade secrets to create a competing business. We seek injunctive relief, unspecified damages, attorneys' fees and costs. The defendants have answered our complaint and filed counterclaims against us. In their answers and counterclaims, the defendants allege, among other things, that we and several of our current and former officers and directors engaged in: certain transactions (including transactions with Force Protection) in which such officers and directors maintained a financial interest; backdating and certain other improper acts in connection with certain stock issuances; allegedly wrongful acts with respect to a procurement contract with a foreign government; and other transactions involving alleged self-dealing and engaged in certain allegedly retaliatory acts in connection with defendants' prior attempts to bring such activities to the attention of the Company's personnel or governmental agencies. Defendants seek unspecified monetary damages, attorneys' fees and costs. Defendants filed an amended counterclaim withdrawing three (3) of their causes of action, and have recently indicated they intend to file a second amended counterclaim. On January 18, 2008, the district court entered an order staying the litigation in light of an involuntary bankruptcy petition filed on January 15, 2008, in the United States Bankruptcy Court for the District of South Carolina with respect to PVI. On February 5, 2008, PVI filed a voluntary Chapter 7 petition. On March 28, 2008, the Chapter 7 proceeding was converted to a Chapter 11 proceeding. On June 20, 2008, the Bankruptcy Court remanded the litigation back to the District Court, and on September 3, 2008, the bulk of PVI's assets, including certain rights and liabilities with respect to our suit against it, were sold to a third party. On July 31, 2008, we settled our claim against Paul Palmer. Our claims against PVI and the third party (who we will be seeking to have joined in the suit) are currently set to be tried in early 2009; the counterclaims against us have not been set for trial.

        From February 2007 through April 2008, we received a total of 68 complaints from current and former employees filed with the United States Equal Employment Opportunity Commission alleging, among other things, race and/or gender discrimination. We have responded to the complaints as such responses have become due, and are investigating the allegations.

        We are subject to a number of claims relating to our common shares. In one, certain investors have issued to Force Protection a demand for 481,492 shares of our common stock in connection with the investors' conversion of their shares of our preferred stock and other damages relating to warrants the investors allege were granted but never distributed to them. In addition, on November 13, 2007, we were served with a lawsuit filed by former senior employee Murray Hammick against Force Protection Industries, Inc. and former Force Protection officers Gordon McGilton, Scott Ervin, and Frank Kavanaugh. The complaint, filed in the Charleston (South Carolina) County Court of Common Pleas, alleges, among other things, that Mr. Hammick is owed options to acquire approximately 83,000 shares of our common stock and certain back wages and sets forth claims for, inter alia, breach of contract, violation of the South Carolina Payment of Wages Act, retaliatory wrongful discharge, and defamation. We answered the complaint on January 25, 2008.

        During the period from August 1, 2007 to November 23, 2007, Force Protection Industries, Inc. entered into three IT hosting and consulting agreements. A series of disputes arose from these

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Notes to Consolidated Financial Statements (Continued)

14. Commitments and Contingencies (Continued)

contracts. Force Protection, Inc. has entered into settlement agreements for these claims totaling $2,275,362.

        In early November 2007, the Department of State, Directorate of Defense Trade Controls ("DDTC") advised us of a site visit planned for December 2007. In advance of that site visit, the DDTC requested, and we provided, certain documents and materials relating to our policies and procedures concerning company activity regulated by the International Traffic in Arms Regulations ("ITAR"). The site visit took place in mid-December 2007 and included a meeting with certain of our officers and interviews of certain of our employees involved with security, training, business development, human resources, information technology, empowered officials, engineering, contracts, manufacturing, program management, shipping, supply chain integrated logistics support and quality. Following the site visit, we received a letter from the DDTC regarding certain weaknesses it identified in our compliance program with respect to training, treatment of foreign visitors, overseas travel by personnel, export manuals, identifying data regarding ITAR hardware and services, and license tracking and requesting certain specific measures be undertaken. We are in the process of addressing those specific measures.

        In early December 2007, we submitted a voluntary disclosure to DDTC regarding the shipment of technical manuals, Cheetah spare parts, armored vest plates, parts not listed on our license and transfers of technical data to and by our vendors without proper authorization or identification of the appropriate exemption. On January 22, 2008, the DDTC requested additional information and documentation for each specific shipment of these items within sixty days. In addition, the DDTC directed us to undertake certain specific measures, including, but not limited to, that we hire a full time senior export control compliance officer, implement certain procedures, conduct comprehensive ITAR training, immediately conduct a comprehensive export compliance audit, and institute a plan to conduct periodic audits of the export compliance program. On February 11, 2008, we provided DDTC with the job description for the Director of Export Controls, draft Export Controls Manual, ITAR presentation provided in new orientation training and the attendance logs for annual ITAR training provided to executives and other employees having ITAR responsibilities. On March 11, 2008, we provided DDTC with our draft audit plan and on June 2, 2008, we provide the final audit report. On July 14, 2008, we provided DDTC with supplemental information to our previous voluntary disclosure and other information identified in the audit. We have developed and implemented an Export Control Policies and Procedures Manual and ITAR Product Classification Guide, established an Export Control Council, and revised our Technology Control Plan and Code of Conduct and Ethics. As a result of the export compliance audit, we have identified additional unauthorized transfers internally at our facility and in support of U.S. operations in Iraq and Afghanistan as well as issues associated with the execution of our licenses and agreements. We have reported these matters to DDTC.

        On February 8, 2008, a temporary independent contractor whose services we had terminated filed a complaint with the Occupational Safety and Health Administration ("OSHA") which alleges a violation under the employee protection provisions of Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1514A. The former independent contractor alleges that we terminated his engagement in retaliation for his allegation of certain corporate governance, government contracting, accounting and other irregularities. On April 18, 2008, we responded to the allegations, and are awaiting a recommendation and report from the OSHA investigator. In August 2008 the claimant submitted a proposed amended complaint which seeks to add additional claims and the current and former chief executive officers as defendants.

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Notes to Consolidated Financial Statements (Continued)

14. Commitments and Contingencies (Continued)

        On August 15, 2008, we received a $1.1 million notice of claim of lien for the balance of tooling supplied by a vendor to our prime contractor on the Roxboro Facility. We have demanded that the prime contractor resolve this matter with its vendor and indemnify us for this claim of lien.

        Although we intend to defend ourselves in connection with the foregoing legal proceedings and claims, there can be no assurance that we will ultimately prevail in any of these matters. Moreover, the defense of these claims and proceedings may result in substantial legal expenses and diversion of our management, and any settlement or adverse judgment may require us to make substantial payments, any of which could have a material adverse effect on our business or financial position, results of operations, or cash flows.

        In addition, compliance with the directives of the DDTC discussed above may result in substantial expenses and diversion of management. Any failure to adequately address the directives of DDTC could result in civil fines and/or suspension or loss of our export privileges, any of which could have a material adverse effect on our business or financial position, results of operations, or cash flows.

        We are also a party to other litigation which we consider routine and incidental to our business. We may be involved from time to time in other litigation that could have a material effect on our operations or finances. Other than the litigation described above, we are not aware of any pending or threatened litigation against us that could have a material adverse effect on our business or financial position, results of operations, or cash flows.

15. Employee Benefits

401(k) Plan

        We entered into a 401(k) / Profit Sharing Plan ("Plan") effective January 1, 2004. The Plan, which covered 255 and 143 participants at December 31, 2007 and 2006, respectively, is a defined contribution plan covering all of our full-time and certain part-time employees.

        Prior to October 1, 2005 employees were eligible to participate in the Plan after 90 days of employment and may join or elect deferral percentage or investment election changes on any business day, effective at the next payroll processing date. Effective October 1, 2005, the Plan was amended to permit employees to participate in the Plan effective with the first day of employment. The Plan is participant directed, and, therefore, participants are allowed to select the investment funds to which they wish to contribute. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").

Contributions:    Participants electing to make contributions to the Plan may contribute not less than 1% and no more than 50% of compensation. Contributions are limited in accordance with IRS regulations. Participants may allocate their contributions among the Plan's various funds.

        Prior to March of 2008, the plan did not include Company matching contributions. Effective March 10, 2008, the Plan was amended to include Company matching contributions. For employee contributions up to 6% of compensation, the Company will match 50%. The Plan also provides that the maximum discretionary contribution that may be made by the Company on behalf of any participant is 4% of compensation.

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Notes to Consolidated Financial Statements (Continued)

15. Employee Benefits (Continued)

Participant Accounts:    Each participant's account is credited with the participant's contribution and an allocation of the Company contribution and plan earnings. Gains and losses resulting from market appreciation or depreciation, interest, and dividends are allocated on the basis of participants' account balances.

Vesting:    Participants are immediately vested in their contributions and our contributions, as well as any investment earnings on these contributions.

Gain Sharing Program

        The Gain Sharing Program was authorized by the board of directors on March 1, 2007 and provides for additional compensation that is paid quarterly in arrears to eligible employees for quarters in which we earn net income. Under the Gain Sharing Program, we distribute ten percent of each quarter's net income equally to all eligible employees. However, due to the restatement of our 2007 quarterly results we did not calculate or pay gain sharing for the fourth quarter of 2007 because our total net income for the year ended December 31, 2007 was less than the previously reported net income for the nine-month period ended September 30, 2007. We expensed and distributed $2.4 million under the Gain Sharing Program for the year ended December 31, 2007.

16. Summarized Quarterly Unaudited Financial Data

        On February 29, 2008, we concluded we needed to restate our previously issued consolidated financial statements for the third quarter of 2007 and delay the filing of our Annual Report on Form 10-K for the year ended December 31, 2007. On August 26, 2008, we concluded we needed to restate our previously issued consolidated financial statements for the first and second quarters of 2007. We have concluded that misstatements in those previously issued financial statements were significant enough to warrant the restatement of the first, second, and third quarters of 2007. The misstatements primarily related to the recognition of revenue and liabilities in the proper periods and the determination of deferred incomes taxes. In connection with the restatement, certain presentation reclassifications have been made to conform to the current period presentation.

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Notes to Consolidated Financial Statements (Continued)

16. Summarized Quarterly Unaudited Financial Data (Continued)

        The following tables summarize the effects of the restatement and presentation reclassifications on our previously issued unaudited condensed consolidated financial statements:

Summary of increases (decreases) in Net income (unaudited)*

				March 31, 2007			June 30, 2007						September 30, 2007
(in thousands, except per share amounts)				Three months ended			Three months ended			Six months ended			Three months ended			Nine months ended
Net income, as previously reported				$	2,513		$	9,627		$	12,105		$	11,362		$	23,517
Net adjustments
	Revenue recognition				4,666			3,957			8,623			502			9,125
	Liability recognition				(8,779	)		(21,157	)		(29,936	)		(11,588	)		(41,524	)
	Inventory burden calculation				769			2,849			3,618			(5,207	)		(1,589	)
	Stock-based compensation				(947	)		(61	)		(1,008	)		(61	)		(1,069	)
	Income tax expense				1,908			5,238			7,146			7,407			14,553
	Other				(610	)		210			(365	)		(3,214	)		(3,629	)
		Effect of restatement adjustments			(2,993	)		(8,964	)		(11,922	)		(12,161	)		(24,133	)
Net income (loss), restated				$	(480	)	$	663		$	183		$	(799	)	$	(616	)
Basic earning (loss) per common share:
Net income, as previously reported				$	0.04		$	0.14		$	0.18		$	0.17		$	0.35
	Net adjustments
		Revenue recognition			0.07			0.06			0.13			0.01			0.14
		Liability recognition			(0.14	)		(0.31	)		(0.45	)		(0.17	)		(0.62	)
		Inventory burden calculation			0.01			0.04			0.05			(0.08	)		(0.03	)
		Stock-based compensation			(0.01	)		Nil			(0.01	)		Nil			(0.01	)
		Income tax expense			0.03			0.08			0.11			0.11			0.22
		Other			(0.01	)		Nil			(0.01	)		(0.05	)		(0.06	)
			Effect of restatement adjustments		(0.05	)		(0.13	)		(0.18	)		(0.18	)		(0.36	)
	Net income (loss), restated			$	(0.01	)	$	0.01		$	0.00		$	(0.01	)	$	(0.01	)
Diluted earning (loss) per common share:
	Net income, as previously reported			$	0.04		$	0.14		$	0.18		$	0.16		$	0.34
	Net adjustments
		Revenue recognition			0.07			0.06			0.13			0.01			0.14
		Liability recognition			(0.14	)		(0.31	)		(0.45	)		(0.16	)		(0.61	)
		Inventory burden calculation			0.01			0.04			0.05			(0.08	)		(0.03	)
		Stock based compensation			(0.01	)		Nil			(0.01	)		Nil			(0.01	)
		Income tax expense			0.03			0.08			0.11			0.11			0.22
		Other			(0.01	)		Nil			(0.01	)		(0.05	)		(0.06	)
			Effect of restatement adjustments		(0.05	)		(0.13	)		(0.18	)		(0.17	)		(0.35	)
	Net income (loss), restated			$	(0.01	)	$	0.01		$	0.00		$	(0.01	)	$	(0.01	)

*

The sum of net income, as previously reported, for the individual quarterly periods does not total to the year-to-date net income, as previously reported. Correcting adjustments are included in "Other" net adjustments above.

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Notes to Consolidated Financial Statements (Continued)

16. Summarized Quarterly Unaudited Financial Data (Continued)

Revenue recognition

        We did not recognize revenue in the appropriate quarters in 2007, including some instances when we recognized revenue when billable to the customer rather than at the earlier date when we earned the revenue. We also did not account for our advance payments on contracts in the appropriate quarters in 2007.

Inventory burden calculation

        We did not properly measure our inventory for financial reporting purposes in accordance with GAAP. We inappropriately included costs that were not part of the production process and we omitted other costs because they were not properly classified in cost of sales.

Liability recognition

        We did not recognize our accounts payable in the appropriate quarters in 2007. The impact was a charge to cost of sales because we take a physical inventory at the end of each quarter. In addition, we had overstated our warranty liability and understated our royalties payable.

Stock-based compensation

        We did not properly apply the provisions of FASB Statement No. 123(R) related to determination of the volatility of the options granted in all quarters of 2007 and we did not properly consider the tax effect of options exercised in 2007 in our consolidated financial statements. We also did not appropriately withhold the appropriate payroll taxes for one employee's option exercise.

Income tax (expense) benefit

        As a result of the adjustments, we had to revise our previously calculated Income tax (expense) benefit for each quarter in 2007. We used our annual effective rate of 18.4% (See Note 11, Income Taxes).

Other

        We did not properly account for advances to a subcontractor, prepaid insurance or the acquisition and disposition of property and equipment in the appropriate quarter in 2007. In addition, we did not account for certain of operating lease costs on a straight-line basis in each of the quarters in 2007.

129

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

16. Summarized Quarterly Unaudited Financial Data (Continued)

2007 Quarterly Condensed Consolidated Balance Sheets (unaudited)

			As of March 31, 2007						As of June 30, 2007						As of September 30, 2007
(in thousands)			As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Assets
Current assets:
	Cash and cash equivalents		$	113,441		$	113,441		$	37,871		$	37,874		$	72,274		$	72,274
	Accounts receivable, net(a)			43,791			53,494			91,239			107,829			37,758			66,094
	Inventories			97,923			98,218			148,366			143,309			182,473			167,153
	Advances to subcontractor			—			—			—			—			16,277			20,740
	Deferred income tax assets			7,762			12,693			8,850			12,373			7,473			12,759
	Income tax receivable			—			—			—			75			—			225
	Other current assets			2,574			2,653			1,723			9,977			—			15,040
		Total current assets		265,491			280,499			288,049			311,437			316,255			354,285
Property and equipment, net				23,388			23,590			30,303			31,107			47,630			51,511
Intangible assets, net				1,962			1,882			1,836			1,706			1,582			1,531
Deferred income tax assets				2,764			2,764			—			2,764			60			2,764
		Total assets	$	293,605		$	308,735		$	320,188		$	347,014		$	365,527		$	410,091
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	54,811		$	62,538		$	68,022		$	99,536		$	47,856		$	103,144
	Due to United States government(a)			—			7,007			—			11,213			—			15,751
	Warranty reserve(b)			1,850			—			4,398			—			4,943			—
	Deferred income tax liabilities			—			—			3,708			—			8,985			—
	Other current liabilities(b)			—			13,634			—			9,910			—			12,040
	Advance payments on contracts			5,173			3,376			5,872			2,800			52,303			55,937
	Other accrued liabilities(b)			9,284			—			5,405			—			6,884			—
	Current portion of long-term liabilities(b)			204			—			222			—			222			—
		Total current liabilities		71,322			86,555			87,627			123,459			121,193			186,872
Other long-term liabilities				463			446			429			412			77			334
Long-term debt				—			—			—			—			268			—
				71,785			87,001			88,056			123,871			121,538			187,206
Shareholders' equity:
	Common stock			68			68			68			68			68			68
	Additional paid-in capital			250,705			255,397			251,332			256,143			251,813			256,684
	Accumulated deficit			(28,953	)		(33,731	)		(19,268	)		(33,068	)		(7,892	)		(33,867	)
		Total shareholders equity		221,820			221,734			232,132			223,143			243,989			222,885
		Total liabilities and shareholders' equity	$	293,605		$	308,735		$	320,188		$	347,014		$	365,527		$	410,091

(a)

Adjustments related to the definitization process, which were previously reported as part of the allowance for doubtful accounts, have been reclassified to report them as a liability, Due to United States government.

(b)

Other accrued liabilities, warranty reserve, and current portion of long-term liabilities have been reclassified to Other current liabilities.

130

Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

16. Summarized Quarterly Unaudited Financial Data (Continued)

2007 Quarterly Condensed Consolidated Statements of Operations (unaudited)*

		March 31, 2007						June 30, 2007
		Three months ended						Three months ended						Six months ended
(in thousands)		As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Net sales		$	100,159		$	104,825		$	134,702		$	138,659		$	234,861		$	243,484
Cost of sales			78,404			85,125			101,945			118,090			179,575			203,215
	Gross profit		21,755			19,700			32,757			20,569			55,286			40,269
General and administrative			14,379			17,066			15,501			17,339			30,663			34,405
Research and development			4,842			5,001			3,306			3,503			8,148			8,504
	Operating income (loss)		2,534			(2,367	)		13,950			(273	)		16,475			(2,640	)
Other income, net			1,788			1,788			1,107			1,106			2,895			2,894
Interest expense			(9	)		(9	)		(44	)		(22	)		(79	)		(31	)
	Income (loss) before income tax (expense) benefit		4,313			(588	)		15,013			811			19,291			223
Income tax (expense) benefit			(1,800	)		108			(5,386	)		(148	)		(7,186	)		(40	)
	Net income (loss)	$	2,513		$	(480	)	$	9,627		$	663		$	12,105		$	183

2007 Quarterly Condensed Consolidated Statements of Operations (unaudited)* (continued)

		September 30, 2007
														December 31, 2007
		Three months ended						Nine months ended
(in thousands)		As Previously Reported			As Restated			As Previously Reported			As Restated			Three months ended
Net sales		$	206,291		$	206,794		$	441,152		$	450,278		$	440,394
Cost of sales			165,678			184,260			345,252			387,475			399,328
	Gross profit		40,613			22,534			95,900			62,803			41,066
General and administrative			20,030			21,708			50,642			56,113			27,931
Research and development			2,526			2,344			10,674			10,848			3,204
	Operating income (loss)		18,057			(1,518	)		34,584			(4,158	)		9,931
Other income, net			594			594			3,489			3,488			721
Interest expense			(62	)		(55	)		(142	)		(86	)		(523	)
	Income (loss) before income tax (expense) benefit		18,589			(979	)		37,931			(756	)		10,129
Income tax (expense) benefit			(7,227	)		180			(14,414	)		140			(1,861	)
	Net income (loss)	$	11,362		$	(799	)	$	23,517		$	(616	)	$	8,268

*

The sum of certain amounts, as previously reported, for the individual quarterly periods do not total to the year-to-date amounts, as previously reported.

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Force Protection, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

16. Summarized Quarterly Unaudited Financial Data (Continued)

2007 Quarterly Condensed Consolidated Statements of Cash Flows (unaudited)

		Three months ended March 31, 2007						Six months ended June 30, 2007						Nine months ended September 30, 2007
(in thousands)		As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Net cash used in operating activities		$	(27,169	)	($	29,356	)	$	(94,622	)	$	(96,480	)	$	(40,903	)	$	(39,887	)
Net cash from investing activities
	Capital expenditures		(16,698	)		(16,820	)		(25,513	)		(25,538	)		(44,354	)		(47,706	)
	Net cash used in investing activities		(16,698	)		(16,820	)		(25,513	)		(25,538	)		(44,354	)		(47,706	)
Cash flows from financing activities
	Proceeds from the issuance of common stock		1,012			1,012			1,277			1,277			1,336			1,336
	Income tax benefit realized from stock options exercised		—			2,276			—			2,276			—			2,276
	Net increase (decrease) in other long-term liabilities		(23	)		10			410			20			(124	)		(64	)
	Net cash provided by financing activities		989			3,298			1,687			3,573			1,212			3,548
	Increase (decrease) in cash and cash equivalents		(42,878	)		(42,878	)		(118,448	)		(118,445	)		(84,045	)		(84,045	)
Cash and cash equivalents at:
	Beginning of year		156,319			156,319			156,319			156,319			156,319			156,319
	End of year	$	113,441		$	113,441		$	37,871		$	37,874		$	72,274		$	72,274

        The following tables present selected operating results for the years ended December 31, 2007 and 2006 (in thousands, except per share amounts):

		For the year ended December 31, 2007
		First Quarter (Restated)			Second Quarter (Restated)		Third Quarter (Restated)			Fourth Quarter
Net sales		$	104,825		$	138,659	$	206,794		$	440,394
Gross profit			19,700			20,569		22,534			41,066
Net income (loss)			(480	)		663		(799	)		8,268
Earnings (loss) per share:
	Basic	$	(0.01	)	$	0.01	$	(0.01	)	$	0.12
	Diluted	$	(0.01	)	$	0.01	$	(0.01	)	$	0.12

		For the year ended December 31, 2006
		First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Net sales		$	34,803		$	56,075	$	42,161	$	62,979
Gross profit			6,638			10,157		7,918		12,310
Net income (loss)			(767	)		973		603		17,389
Earnings (loss) per share:
	Basic	$	(0.04	)	$	0.01	$	0.00	$	0.40
	Diluted	$	(0.04	)	$	0.01	$	0.00	$	0.39

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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

        Disclosure controls and procedures are controls and other procedures that are designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms andaccumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

        Our new management, at the direction (and with the participation) of our new chief executive officer and interim chief financial officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of December 31, 2007. Based on that evaluation and the identification of material weaknesses in our internal control over financial reporting as described in this Item 9A below under the heading "Management's Report on Internal Control over Financial Reporting," our new management concluded that our disclosure controls and procedures were not effective as of December 31, 2007. Notwithstanding these material weaknesses, management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, Force Protection's financial position and results of operations, and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles ("GAAP").

Management's Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting at Force Protection. Internal control over financial reporting is a process designed by or under the supervision of our chief executive officer and chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. A company's internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of our management and board of directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

        Our new management assessed the effectiveness of Force Protection's internal control over financial reporting as of December 31, 2007. In making this assessment, our new management used the criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

        In connection with the evaluation of our disclosure controls and procedures, our new management team attempted to identify any "material weakness" in our internal control environment. We defined "material weakness" as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We defined "significant

133

deficiency" as a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

        As stated in the Notification of Late Filing on Form 12b-25 filed on March 3, 2008, as of December 31, 2007, we identified on a preliminary basis the following material weaknesses in internal control over financial reporting:

•

ineffective control over the financial statements closing process;



•

ineffective controls in accounting for inventory and the associated accounts payable expenses related to the receipt of inventory;



•

insufficient complement of personnel with an appropriate level of accounting knowledge, experience with the Company, and training in the application of GAAP; and



•

ineffective controls over the completeness and accuracy of deferred tax balances.

        At the conclusion of management's assessment, our new management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2007.

         Financial Statements Closing Process.    We lacked a sufficient complement of personnel with a level of financial reporting expertise commensurate with our financial reporting requirements, which resulted in our not maintaining effective controls over the financial statements closing and reporting process. Specifically, we lacked sufficient resources to perform properly the quarterly and year-end consolidated financial statement close processes, including the review of certain account reconciliations recognition of certain liabilities in the proper period and consolidated financial statement preparation and disclosures. We also did not maintain physical control over property and equipment. We also did not maintain sufficient written policies and procedures, and support, particularly with respect to the accounting for the reserve for excess and obsolete inventory and this deficiency resulted in material adjustments to our cost of goods sold for the year ended December 31, 2007. This control deficiency contributed to the material weaknesses discussed below and resulted in post-closing adjustments to the 2007 annual consolidated financial statements and restatement of our quarterly condensed consolidated financial statements for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007.

         Accounting for Inventory and related accounts.    We did not maintain effective controls over the completeness, accuracy, valuation and existence of our inventory, accounts payable, and related cost of sales accounts. Specifically, our controls with respect to the accuracy of product costing, work order closeout, accounting for cost accumulation on long-term contracts and certain inventory management processes, including obsolete and slow-moving inventory identification, and net-realizable inventory valuation were not effective. Also, we did not maintain effective controls over the accurate and timely recording of inventory receipts and shipments, including the recognition of accounts payable. Furthermore, we did not maintain effective controls over the accuracy and completeness of perpetual counts of our inventory quantities. This control deficiency resulted in post-closing adjustments to the 2007 annual consolidated financial statements and restatement of our quarterly condensed consolidated financial statements for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007.

         Accounting for revenue recognition.    We did not maintain effective controls over the completeness and accuracy of revenue, accounts receivable, and advance payments on contracts. Specifically, we failed to recognize revenue in the appropriate quarter and effective controls were not designed and in place to ensure that sales orders were complete, accurate and recorded on a timely basis. This control deficiency resulted in post-closing adjustments to the 2007 annual consolidated financial statements and restatement of our quarterly condensed consolidated financial statements for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007.

134

         Accounting for income taxes.    We did not maintain effective controls over the completeness, accuracy, presentation and disclosure of our accounting for income taxes, including the determination of income tax expense, income taxes payable and deferred income tax assets and liabilities. This control deficiency resulted in post-closing adjustments to the 2007 annual consolidated financial statements.

         Inadequate monitoring of non-routine and non-systematic transactions.    We did not have effective controls in place to monitor and accurately record non-routine and non-systematic transactions. This primarily related to our accounting for inventory relating to terminating an agreement with a supplier. This control deficiency resulted in post-closing adjustments to the 2007 annual consolidated financial statements and restatement of our quarterly condensed consolidated financial statements for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007.

         Information Technology Controls.    We did not maintain effective segregation of duties over automated and manual transaction processes. Specifically, we did not maintain effective controls over the granting, maintenance and monitoring of access to financial systems and data. Certain information technology and finance department personnel had unrestricted access to financial applications, programs and data beyond that needed to perform their individual job responsibilities and without any independent monitoring. This control deficiency affects substantially all financial statement accounts. This control deficiency did not result in adjustments to our consolidated financial statements.

        Based on such assessment and the criteria discussed above, our new management, including our chief executive officer and interim chief financial officer, concluded that our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act) was not effective as of December 31, 2007 as a result of the aforementioned material weaknesses.

        Our independent registered public accounting firm, Grant Thornton LLP, has issued a report on our internal control over financial reporting as of December 31, 2007. That report appears on page 82 of this Annual Report on Form 10-K.

Remediation of Material Weaknesses

        We have engaged in, and are continuing to engage in, substantial efforts to improve our internal control over financial reporting and disclosure controls and procedures related to substantially all areas of our financial statements and disclosures. These efforts include the following:

         Efforts to strengthen accounting and finance department through additional professional staff.    We have hired a number of additional professional staff over the past several months with the skills and experience needed for a public company of our size and complexity, including an individual with expertise in and responsibility for government contract compliance. We will continue to seek to strengthen our accounting and finance department and strive to appropriately balance the allocation of full-time staff and consultants. As previously announced, in the second quarter of 2008 we hired Charles Mathis as our new Executive Vice President of Finance. The development of adequate corporate level accounting and finance oversight is still ongoing. We are still recruiting accounting and finance personnel and do not yet have permanent resources in place sufficient to close our books without significant reliance on third-party contractors.

         Use of outside consultants and advisors.    While we ultimately intend to reduce our reliance on outside consultants, for the near term we have engaged additional outside consultants and advisors to assist management in oversight and preparation of our financial statements, periodic reports filed with the SEC and related matters. We are also using outside consultants to function as our internal audit department and overseeing our Section 404 evaluation of internal control over financial reporting, which will include evaluating and recommending improvements in the existing internal controls at both the corporate and business group level and establishing a mechanism to monitor the effectiveness of

135

internal controls on an ongoing basis. As we strengthen our accounting and finance department, we intend to transition more of these functions to full-time staff.

         Increased communication internally and with outside advisors.    We have increased communication by and among senior management, external advisors and other third parties relevant to the disclosure process. Specifically, the chief executive officer meets daily with his management team to review operational developments. Our board of directors receives timely and regular updates on issues of importance. Our chief executive officer also regularly prepares a report to our board of directors highlighting operational and financial results which is also distributed to his executive team.

         Enhanced efforts to identify non-routine transactions.    We have initiated daily meetings with executive leadership to identify non-routine transactions and their related accounting treatment at an early stage. Certain expenditure transactions require approval of the interim chief financial officer. Additionally, we are in the process of assigning finance professionals within each of the operating departments.

         Disclosure controls and procedures improvements.    With respect to the preparation of periodic reports to be filed with the SEC, we have instituted formal meetings of key personnel involved in the process and developed detailed checklists and timetables with appropriate responsibilities and structural processes. In addition, we are utilizing a system of uniform document management (e.g., numbering, dating, and red-lining drafts) and improved coordination of the drafting process with respect to our earnings releases and periodic reports.

        Management will consider the design and operating effectiveness of these actions and will make additional changes it determines appropriate.

        The effectiveness of Force Protection's or any system of disclosure controls and procedures and internal control over financial reporting is subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. As a result, our disclosure controls and procedures and internal control over financial reporting may not prevent all errors or improper acts or ensure that all material information will be made known to appropriate management in a timely fashion.

Changes in Internal Control Over Financial Reporting

        Other than the changes described above in this Item 9A "Management's Report on Internal Control over Financial Reporting" there have not been any changes to our internal control over financial reporting during the fourth quarter of the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        None.

136

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Code of Conduct and Ethics

        Our board of directors has adopted a code of ethics ("Code of Conduct and Ethics") that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of the Code of Conduct and Ethics is available on our website at www.forceprotection.net, under "Investor Relations". A copy of the Code of Conduct and Ethics may also be obtained free of charge from us upon a request directed to the Corporate Secretary of Force Protection, Inc., 9801 Highway 78, Building 1, Ladson, SC 29456. We intend to promptly disclose any substantive changes in or waivers, along with the reasons for the waivers, of the Code of Conduct and Ethics granted to our executive officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and our directors by posting such information on our website at www.forceprotection.net, under "Investor Relations".

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Exchange Act requires our directors and executive officers to file reports of holdings and transactions in common stock and related securities with the SEC. Based on our records and other information, we believe that in 2007 all of our directors and executive officers met all applicable Section 16(a) filing requirements except that, due to an administrative oversight, a Form 4 reflecting the exercise of options made by Gordon McGilton on January 13, 2007 and a Form 4 reflecting a grant of restricted shares by the Company to Raymond Pollard on May 1, 2007, were not timely filed. In addition, Form 4s reflecting a grant of shares to MGen. Jack A. Davis, Frank Kavanaugh, and LTG. Roger G. Thompson, Jr. in January 2007 were not timely filed.

Audit Committee

        The audit committee of our board of directors ("Audit Committee") is a separately designated standing committee of our board of directors established in accordance with Section 3(a)(58)(A) of the Securities Exchange. The Audit Committee is comprised of Messrs. Day (Chairman) and Paxton, LTG. Thompson and MGen. Davis. The Audit Committee operates under a written charter adopted by our board of directors, a current copy of which is available on our website at www.forceprotection.net, under "Investor Relations, Board Committees". Our board of directors has determined that each of Generals Davis and Thompson and Messrs. Day and Paxton meets the independence requirements set forth in Rule 10A-3(b)(1) under the Exchange Act and the applicable rules of Nasdaq, that all of the Audit Committee members are "financially literate" and that Mr. Day qualifies as an "audit committee financial expert" as defined by Item 407(d)(5) of Regulation S-K. Pursuant to the regulations of the SEC, a person who is determined to be an "audit committee financial expert" will not be deemed an expert for any purpose, including, without limitation, for purposes of Section 11 of the Securities Act, as a result of being designated or identified as an "audit committee financial expert" pursuant to Item 407(d)(5) of Regulation S-K. Furthermore, the designation or identification of a person as an "audit committee financial expert" pursuant to Item 407(d)(5) of Regulation S-K does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee or our board of directors in the absence of such designation or identification. Moreover, the designation or identification of a person as an "audit committee financial expert" pursuant to Item 407(d)(5) of Regulation S-K does not affect the duties, obligations or liability of any other member of the Audit Committee or our board of directors.

        Information relating to our executive officers and directors is set forth in Part I of this Annual Report on Form 10-K, Item 1, Management.

137

ITEM 11.    EXECUTIVE COMPENSATION

Director Compensation

        The following table shows the compensation of the non-employee members of our board of directors for 2007.

Director Compensation

Name(1)	Fees Earned or Paid in Cash			Stock Awards(5)		All other Compensation(6)		Total
Davis	$	66,000	(3)	$	30,999	$	1,340	$	98,339
Day	$	30,000	(4)		—		—	$	30,000
Kavanaugh(2)	$	36,000	(3)	$	30,999		300	$	67,299
Thompson	$	66,000	(3)	$	30,999	$	1,340	$	98,339

(1)

See "Executive Compensation" and "Summary Compensation Table" for information regarding compensation (including amounts received for service as a director) for Messrs. McGilton and Moody.



(2)

Mr. Kavanaugh resigned as Chairman and as a member of our board of directors on June 21, 2007.



(3)

Six thousand dollars ($6,000) of the annual retainer for the fourth quarter of 2006 was paid in the first quarter of 2007.



(4)

Mr. Day was appointed to our board of directors in September 2007 and received a pro-rata portion of the $60,000 annual retainer.



(5)

$30,999 in stock compensation was paid in the first quarter of 2007 for services rendered in 2006. The stock grants were valued at the amount recognized for financial statement reporting purposes for the fair value of the stock granted in accordance with FASB Statement No. 123(R).



(6)

Represents the amount paid pursuant to our Gain Sharing Program during 2007.

        In 2007, all members of our board of directors, including those who were employed by us, received an annual cash retainer of $60,000. Directors who only served a portion of 2007 were paid a pro rata share of the $60,000 retainer. Retainers were paid quarterly in advance within the first fifteen (15) days after the beginning of each quarter. Directors are reimbursed for out-of-pocket expenses incurred in performing their duties as directors. We cover directors under our overall directors and officers liability insurance policies.

        During a portion of 2007, the members of our board of directors also participated in our Gain Sharing Program, which provides that ten percent (10%) of our quarterly net income be distributed equally to all of our employees and directors. We do not offer a pension plan or other compensation to our non-employee directors.

        In the third fiscal quarter of 2007, the compensation committee of our board of directors ("Compensation Committee") eliminated the eligibility of independent directors to participate in the Gain Sharing Program, and in February 2008, the Compensation Committee eliminated the eligibility of any other director to participate in the Gain Sharing Program.

        In February 2008, the Compensation Committee engaged an external independent compensation consultant, Hewitt Associates LLC, to assist in a review and revision to our director compensation program. The independent compensation consultant provided benchmark director compensation data as

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compared to other companies of similar revenue size, market capitalization, and industry. Our board of directors, based on the recommendation of the Compensation Committee, approved a new director compensation program for 2008 comprised of (1) annual retainers for each member with separate retainers for each committee chairman and (2) meeting fees for board of directors and committee meetings. Likewise, our board of directors, upon the recommendation of the Compensation Committee, approved the adoption of the Force Protection, Inc. 2008 Stock Plan ("2008 Stock Plan") subject to shareholder approval.

Compensation Committee

        The Company has a Compensation Committee comprised of MGen. Davis (Chairman), LTG. Thompson and Mr. Paxton. The current members of the Compensation Committee are "independent directors" within the meaning of the Nasdaq rules, are "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code and are "non-employee directors" within the meaning of Rule 16b-3 of the Exchange Act.

Compensation Committee and Board of Director Interlocks and Insider Participation

        None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or Compensation Committee. None of the current members of our Compensation Committee is now or has ever been an officer or employee of Force Protection or any subsidiary of Force Protection. See "Related Party Transactions" below for a discussion of the Company's transactions with related parties.

Compensation Committee Report

        The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis section of this Annual Report on Form 10-K as required by Item 402(b) of Regulation S-K with management. Based on its review and discussions with management, the Compensation Committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Compensation Committee

MGen. Jack A. Davis (Chairman)
LTG. Roger G. Thompson, Jr.
John W. Paxton, Sr.

The preceding Compensation Committee Report is provided only for the purpose of this Annual Report on Form 10-K. Pursuant to the regulations of the SEC, this Report is not "soliciting material," is not deemed filed with the SEC and is not to be incorporated, in whole or in part, in any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Compensation Discussion and Analysis

Overview of Program

        The compensation and benefits provided to our named executive officers for 2007 are set forth in detail in the Summary Compensation Table and other tables, and the accompanying footnotes and narrative material. This Compensation Discussion and Analysis explains the purposes of our executive compensation and benefits program and explains the material elements of the compensation awarded to each of our named executive officers. The discussion focuses primarily on the compensation awarded for the year ended December 31, 2007, but also addresses actions taken by the Compensation Committee during its review of the executive compensation program in early 2008. Our executive

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compensation and benefits program is designed and administered under the direction and control of the Compensation Committee. See "Compensation Committee" above.

2007 Compensation Program Objectives

        The Compensation Committee's objective is to maintain an executive compensation program that will attract, retain, motivate and reward highly qualified and talented executives that will enable us to perform better than our competitors.

        During 2007, our executive compensation decisions were based on providing fair and marketplace competitive base compensation. During 2007, the Compensation Committee approved our chief executive officer's base salary as the sole means of compensation. Further, the Company established designated classes of employees based on roles within the organization and determined each employee in the class to be at the same compensation level (including all executive officers). In 2007, we adopted a Gain Sharing Program that provides additional compensation that is paid quarterly in arrears to eligible employees for quarters in which we earn net income. Under the Gain Share Program we distributed ten percent (10%) of the net income equally to all eligible employees regardless of compensation level.

        No other bonuses or other long-term incentive compensation were paid or awarded to our named executive officers. We eliminated annual performance and merit reviews to focus all employee efforts on optimizing the organizational system as a whole. Our compensation philosophy was demonstrated by eliminating all incentive compensation, merit compensation and annual reviews, in lieu of delivering equal compensation for all employees by level, as a method to motivate employees to contribute to the success of the overall organizational system.

Components of Compensation

        During the year ended December 31, 2007, our executive compensation program consisted of the following components:

•

base salary;



•

standard health and welfare benefits;



•

401(k) retirement plan benefits (without a company match);



•

limited perquisites; and



•

pro rata sharing in the Gain Sharing Program.

Base Salary.

        We believe that an appropriate and competitive base salary (median to market) is a necessary element to attracting and retaining qualified executive officers. In determining base salary for the year ended December 31, 2007, the Compensation Committee sought to fairly compensate each executive and to provide each executive with a reasonable level of economic security. Base salary was not automatically adjusted annually and there was no annual cost-of-living adjustment made to salaries either for executive officers or any other employee.

Health and Welfare Benefits.

        For the year ended December 31, 2007, we provided medical, dental and vision coverage, life insurance, and disability (long- and short-term) insurance to executive officers under the same programs offered to all salaried employees. All participating employees pay a percentage of the cost of these programs.

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401(k) Plan.

        For the year ended December 31, 2007, our executive officers participated in our 401(k) / Profit Sharing Plan ("401(k) Plan") on the same terms as provided to all of our salaried employees. The 401(k) Plan permits participants to make pre-tax salary contributions up to the maximum amount permitted under the Internal Revenue Code. We did not contribute any matched amount against the pre-tax salary contributions made by participants.

Limited Perquisites.

        For the year ended December 31, 2007, we provided limited perquisites to executive officers, without tax gross-ups. Two such perquisites are (1) provision of home security services for the named executive officers and (2) ability to participate in the Leadership Charitable Giving Program. The Leadership Charitable Giving Program provides for the ability of certain executive officers to support local community charitable organizations. See "Summary Compensation Table" for itemized disclosure of certain perquisites provided to the named executive officers.

Gain Sharing Program.

        For the fiscal year ended December 31, 2007, our Gain Sharing Program provided for ten percent (10%) of our quarterly net income to be distributed equally to all of our eligible employees and directors. See "Director Compensation" and "Summary Compensation Table" for amounts paid to our named executive officers and directors under the Gain Sharing Program for the fiscal year ended December 31, 2007. We did not calculate or pay gain sharing for the fourth quarter of 2007 because our total net income for the year ended December 31, 2007 was less than the previously reported net income for the nine-month period ended September 30, 2007.

        In the third fiscal quarter of 2007, the Compensation Committee eliminated the eligibility of independent directors to participate in the Gain Sharing Program, and in February 2008, the Compensation Committee eliminated the eligibility of all other directors to participate in the Gain Sharing Program. Additionally, in September 2008, the Compensation Committee decided that no executive officer who is eligible to participate in Short Term Incentive Plan will be eligible to participate in our Gain Sharing Program in 2008.

2007 Change in Control Arrangements

        To retain the senior leadership team and enable the management team to negotiate effectively for shareholders without concern for their own future in the event of any actual or threatened change in control of the Company, we adopted change in control severance protections for our chief executive officer and other executive officers, including named executive officers ("Covered Officers"). Covered Officers receive no payments or benefits under these arrangements unless their employment ends following a change in control. See "Potential Payments upon Termination or Change in Control" for a further discussion of these arrangements.

2007 and Prior Period Employment Agreements

Chief Executive Officer.

        On January 27, 2005, we entered into a standard employment offer letter agreement (an offer letter in the form as provided to all employees) with Gordon McGilton as Chief Executive Officer, effective January 1, 2005, providing for $15,000 a month in base salary with a bonus of $180,000 after twelve months paid either in cash or in common stock, the right to receive $15,000 per month in stock or cash equivalent and the right to participate in a Company qualified stock option plan.

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        On January 13, 2006, our board of directors approved new compensation for Mr. McGilton, effective January 1, 2006, providing for cash compensation equal to $35,000 per month, relocation expenses of $30,000 upon separation from the Company for any reason, an equity grant of 300,000 shares of common stock, plus an option to purchase 1,000,000 shares of our unregistered common stock. On October 25, 2006, our board of directors approved new compensation for Mr. McGilton, effective January 1, 2007, providing for cash compensation equal to $40,000 per month and an additional option to purchase 500,000 shares of our unregistered common stock.

Chief Operating Officer.

        On April 11, 2006, we entered into a non-standard employment agreement with Raymond Pollard ("Pollard Employment Agreement") as Chief Operating Officer providing for an annual salary of $240,000, an equity grant equal to $40,000 on the first and second anniversary dates of employment, a one-time relocation payment of $30,000, the right to participate in our employee benefits and eligibility to participate in our Gain Sharing Program and stock incentive program. The Pollard Employment Agreement also provided for a salary guarantee equal to twenty-four months of salary such that if Mr. Pollard was terminated without cause during the first twenty-four months of employment, he would receive a one-time lump-sump severance payment equal to any remaining salary compensation. See "Separation Agreements" below for a description of the payments made to Mr. Pollard upon his termination of employment with the Company.

Chief Financial Officer.

        On January 18, 2007, we entered into an employment offer letter agreement with Michael S. Durski as Chief Financial Officer, providing for an annual salary of $180,000, paid-time off and paid holidays, participation in the 401(k) Plan, the right to participate in our employee benefits, and a one-time relocation benefit allowance of $35,000. See "Separation Agreements" below, for a description of the payments made to Mr. Durski upon his termination of employment with the Company.

General Counsel.

        On November 15, 2004, we entered into an employment agreement with R. Scott Ervin as General Counsel, providing for an annual salary of $118,000, the right to participate in our employee benefits, relocation expenses of $15,000, a performance bonus at the discretion of our board of directors, eligibility to participate in our stock incentive program and an equity grant of 500,000 common shares and four Series C Preferred shares. For a period of time, up and until the time of his departure, Mr. Ervin also served as our Acting Chief Financial Officer. See "Separation Agreements" below, for a description of the payments made to Mr. Ervin upon his termination of employment with the Company.

Co-General Counsel.

        On May 24, 2007, we entered into an employment offer letter with Denise Speaks as Co-General Counsel, providing for an annual salary of $250,000, the right to participate in our employee benefits, and relocation expenses of $35,000. See "Separation Agreements" below, for a description of the payments made to Ms. Speaks upon her termination of employment with the Company.

Actions Taken in 2008

        In early 2008, the Compensation Committee became concerned that our compensation program was not competitive with the marketplace and engaged an external, independent compensation consultant, Hewitt Associates LLC ("Hewitt") to assist in a thorough review of the program. As part of

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this review, the Compensation Committee determined that the executive compensation program was no longer aligned with the Compensation Committee's stated compensation philosophy, which is outlined below. See "Use of Compensation Consultants" below. Further, the Compensation Committee reviewed its processes and procedures for considering executive compensation. The Compensation Committee determined to re-state and modify certain core compensation program principles to realign them with our business operating and compensation philosophies:

•

Total compensation is to be competitive with the marketplace. To ensure that our executive compensation program is more competitive, we, with the assistance of management and Hewitt, measured certain key elements of executive compensation as against other companies of similar revenue size, market capitalization, and industry. For certain positions, Hewitt did not focus specifically on defense companies because we believe that the market for our executive talent is broader than the defense industry, but reviewed a peer group of defense contractors and general industry peers. For 2008, compensation for our executives is compared to the market 50^th percentile to assess competitiveness.



•

Stock ownership is to be emphasized. One conclusion drawn from our review of the executive compensation program is that stock ownership by our executives is critical in order to align the interests of our executives with those of our shareholders. The Compensation Committee, with the assistance of Hewitt, has developed a long-term program designed to support stock ownership. Our board of directors, upon the recommendation of the Compensation Committee, approved the adoption of the Force Protection, Inc. 2008 Stock Plan ("2008 Stock Plan") subject to shareholder approval.



•

Adoption of a Short Term Incentive Plan. In February 2008, the Compensation Committee approved, for eligible executives, performance metrics and target levels for the 2008 Short Term Incentive Plan. See "Short Term Incentive Plan" below.

Use of Compensation Consultants.

        Hewitt reports directly to the Compensation Committee chairman, but may work with management as necessary in fulfilling its responsibilities to the Compensation Committee. The Compensation Committee may meet in executive session with the consultant and is free to speak directly with them. In 2008. Hewitt assisted the Compensation Committee and management with the following tasks:

•

Development of the compensation peer group;



•

Benchmarking of executive pay levels;



•

Benchmarking of outside director pay levels;



•

Review of severance and change in control arrangements;



•

Review of the proposed 2008 Stock Plan, including the modeling of the proposed share pool;



•

Review of the Compensation Discussion & Analysis section of this Annual Report on Form 10-K; and



•

Development of the total shareholder return performance graph.

Composition Peer Group.

        Two peer groups were used in assessing market pay levels, a defense industry group ("Defense Industry") that represents companies in a similar line of business, and a general industry group ("General Industry") to provide a broader measure of competitors for talent at Force Protection.

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        The Defense Industry group was comprised of 20 companies in the Standard and Poor's Aerospace and Defense industry with revenues and market capitalization between $500 million and $3 billion. In addition, LMI Aerospace, Inc. and Ducommun, Inc. were included in the group even though they did not meet the above criteria because they are relevant peer companies. Median revenue and market capitalization for this group was $846 million and $1.4 billion, respectively.

        The General Industry group was comprised of 37 companies from Hewitt's total compensation measurement with revenue between $500 million and $1.7 billion. The median revenue for the General Industry group was $1.1 billion.

        In general, the pay levels for the two peer groups are similar.

        The following table contains the companies in the two peer groups.

Defense Industry Peer Group	General Industry Peer Group
AAR Corp.	Alpharma Inc.
Alion Science And Technology	Ameron International Corporation
Ceradyne Inc.	Belden Inc.
Cubic Inc.	Brady Corporation
Curtiss-Wright Corp.	Cabot Oil & Gas Corporation
DRS Technologies Inc.	Callaway Golf Company
Ducommun Inc.	Cimarex Energy Co.
Dyncorp International Inc.	Coca-Cola Bottling Co. Consolidated
EDO Corp.	Curtiss-Wright Corporation
Esterline Technologies Corp.	Donaldson Company, Inc.
Gencorp Inc.	Edwards Lifesciences LLC
Heico Corp.	Federal Signal
Hexcel Corp.	Fossil, Inc.
LMI Aerospace Inc.	Fraser Papers Inc.
Moog Inc.	Graco Inc.
Orbital Sciences Corp.	H.B. Fuller Company
Teledyne Technologies Inc.	Innophos, Inc.
TransDigm Group Inc.	Kaman Corporation
Triumph Group Inc.	Kennametal Inc.
United Industrial Corp.	Kinetic Concepts Inc.
	Milacron Inc.
	Mine Safety Appliances Co.
	Neenah Paper, Inc.
	Newfield Exploration Company
	OMNOVA Solutions Inc.
	Pioneer Natural Resources Company
	Playtex Products, Inc.
	Polaris Industries Inc.
	Rayonier Inc.
	Revlon Inc.
	Sensient Technologies Inc.
	TriMass Corporation
	Valeant Pharmaceuticals International
	Valmont Industries, Inc.
	Walter Industries, Inc.
	Waters Corporation
	Woodward Governor Company

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Executive Pay Benchmarking.

        At the Compensation Committee's request, Hewitt evaluated the Company's compensation programs and made recommendations to better align the Company's compensation programs with the organization's compensation philosophy and business strategies. After conducting its review of our compensation program, Hewitt concluded that our executive compensation program was not competitive in several different areas:

•

Base salary levels are significantly below market median levels;



•

Total cash compensation levels are also significantly below market due to the lack of an annual incentive plan; and



•

The lack of an annual long-term incentive plan results in total compensation being significantly below market, at least 65% below each position's market medians.

Based on these findings, Hewitt recommended that our Compensation Committee consider realigning our executive compensation program as follows:

•

Adjust base salary levels to the median of the peer groups;



•

Introduce an annual short-term incentive plan that provides a link between pay and key performance metrics and performance levels selected by management and approved by the committee. Target opportunities under the plan should approximate the median target opportunity of the peer groups; and



•

Introduce an annual long-term incentive plan to provide a link between the executive's wealth accumulation and the long-term performance of the Company. Awards under the plan should approximate the median of the peer group in connection with the revised base salaries and the short-term incentive plan; the long-term incentive plan should result in a target total compensation at the median of the peer group.

Based on Hewitt's recommendations, the Compensation Committee took several steps following the end of 2007 to make our executive compensation program more competitive and more aligned with shareholders' interests.

        Other than the services described above, Hewitt does not provide any services to the Company or the Compensation Committee and all work requested to be performed by Hewitt must be approved by the Compensation Committee.

Base Salary.

        As discussed above, base salaries for our executive officers were adjusted to more closely reflect market median levels. Upon the execution of his employment agreement, Mr. Moody's salary was increased to $560,000.

Short Term Incentive Plan.

        In February 2008, the Compensation Committee approved, for eligible executives, performance metrics and target performance levels for the 2008 Short Term Incentive Plan, which is not a

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shareholder approved plan. For 2008, 7 executives are eligible to participate in the 2008 Short Term Incentive Plan. The following table describes the plan.

Measure(1)	Weighting
(1) Inventory Turns		1/6
(2) Gross Profit (as a %)		1/6
(3) G&A (as a % of Revenue)		1/6
(4) Cash at Year End		1/6

(1)

The Company included two additional metrics that we deem proprietary; each will have a 1/6 weighting.

        Each executive's payout from the plan is dependent upon the level of performance on the above measures and range as follows:

As a Percent of Salary
Executive	Threshold(1)		Target(2)
CEO		0		75	%
EVP Finance		0		50	%
Chief Strategy Officer, General Counsel and Secretary		0		50	%
EVP Development		0		50	%
EVP Operations		0		50	%
EVP Customer Operations		0		50	%

(1)

Increase of 2008 performance as compared to 2007 Performance.



(2)

Target is a percentage of base salary.

2008 Stock Plan.

        At its February 20, 2008 meeting, upon the recommendation of the Compensation Committee, our board of directors approved the adoption of the Force Protection, Inc. 2008 Stock Plan ("2008 Stock Plan"), subject to approval of our shareholders at the 2008 Annual Meeting.

Severance Agreements (change of control arrangements).

        Our "change in control" arrangements are intended to serve the objectives of fairness and support for difficult organizational decisions. These arrangements are established with the advice of Hewitt, based on competitive and market trends. The Compensation Committee determined that these arrangements provide a benefit to us and our shareholders.

        As part of the compensation program review undertaken in early 2008, the Compensation Committee determined that the above change in control arrangements were not competitive with the market and did not meet the stated goals. In conjunction with Hewitt and recommendations of senior management, the Compensation Committee has approved severance agreements (change of control arrangements) for certain executive officers.

        In March and April 2008, we entered into severance agreements (change of control agreements) with each of our named executive officers and certain other executives ("Severance Agreements"). Although Mr. Moody is not party to a Severance Agreement, his employment agreement has similar provisions. See "Employment Agreements" below for the provisions regarding severance for our chief executive officer, effective in 2008, upon a change in control. These agreements improve on the existing severance protections for our executive officers and provide an additional inducement to secure the executives' continued service and, in the event of any threat or occurrence of, or negotiation or other

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action that could lead to, or create the possibility of, a change in control, ensure the executives' continued and undivided dedication to their duties when faced with the possibility of change in control. Amounts paid under the Severance Agreements are in lieu of all other severance or similar payments or benefits. See "Potential Payments Upon Termination or Change in Control" below.

Employment Agreements.

        On March 19, 2008, the Company entered into an employment agreement with Michael Moody ("Moody Employment Agreement") in order to be competitive in recruiting and retaining top executive officers, such as Mr. Moody. The Moody Employment Agreement, effective March 1, 2008, provides for an annual base salary of not less than $560,000, an annual cash bonus with a target bonus of no more than 75% of the annual base salary based on the attainment of certain performance goals, and the right to participate in all employee benefit plans, including the 2008 Stock Plan, if approved by our shareholders, and three weeks of paid vacation. Under the Moody Employment Agreement, Mr. Moody may be terminated with or without "cause" (as defined in the Moody Employment Agreement) and Mr. Moody may terminate his employment with or without "good reason" (as defined in the Moody Employment Agreement).

        Under the Moody Employment Agreement, if Mr. Moody's employment is terminated for a Nonqualifying Termination (as defined in the Moody Employment Agreement) event, Mr. Moody is entitled to receive:

•

a lump-sum cash payment equal to his base salary accrued through the date of termination;



•

any unpaid bonus accrued through the date of termination, any accrued vacation;



•

a one-time relocation benefit of $30,000; and



•

any other payments or benefits to which he would have been entitled to under the terms of any other Company compensation arrangement.

        If Mr. Moody's employment is terminated other than by reason of a Nonqualifying Termination event, Mr. Moody is entitled to receive:

•

a lump-sum cash payment equal to his base salary accrued through the date of termination;



•

any unpaid bonus accrued through the date of termination, any accrued vacation,



•

a one-time relocation benefit of $30,000;



•

any other payments or benefits to which he would have been entitled to under the terms of any other Company compensation arrangement;



•

a pro-rata portion of his annual bonus;



•

lump-sum cash payment equal to his annual base salary plus the greatest of his target bonus for the year in which termination occurred and the average of his bonuses earned over the preceding two years;



•

acceleration of vesting of any equity awards for a twelve-month period after his termination; and



•

the ability to elect payment of his COBRA premiums for a period of twelve months.

        If Mr. Moody's employment is terminated by reason of a Qualifying Termination (as defined in the Moody Employment Agreement) in connection with a change in control, Mr. Moody is entitled to receive:

•

a lump-sum cash payment equal to his base salary accrued through the date of termination;



•

any unpaid bonus accrued through the date of termination, any accrued vacation,

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•

a one-time relocation benefit of $30,000;



•

any other payments or benefits to which he would have been entitled to under the terms of any other Company compensation arrangement;



•

a pro-rata portion of his annual bonus;



•

lump-sum cash payment equal to two times his annual base salary plus the greatest of his target bonus for the year in which termination occurred, the target bonus for the fiscal year in which the change in control occurs and the average of his bonuses earned over the preceding two years;



•

acceleration of vesting of any outstanding equity awards; and



•

the ability to elect payment of his COBRA premiums for a period of eighteen months.

        In addition, if the value of certain payments that are contingent upon a change in control, referred to as parachute payments, exceed a safe harbor amount and Mr. Moody becomes subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the executive is entitled to receive an additional payment to cover the additional tax and any interest and penalties incurred.

        In consideration for the benefits received under the Moody Employment Agreement, Mr. Moody agreed that during his employment and for 12 months after the date of his termination he will not compete with us and not solicit any of our clients or employees. Mr. Moody also agreed not to disclose any of our confidential information, except as required by law or with our prior written consent, and not to disparage us. Mr. Moody also agreed to release, waive, and discharge any claims against us at the time of termination.

Separation Agreements.

        On January 31, 2008, we entered into a Separation Agreement ("McGilton Separation Agreement") with Gordon McGilton, our then Chief Executive Officer, in connection with Mr. McGilton's retirement as Chief Executive Officer and as a director of the Company effective as of January 31, 2008. The McGilton Separation Agreement provided for a lump sum payment to Mr. McGilton of $60,000 on January 31, 2008, reduced by any applicable tax withholdings, and the right to elect continuation of employee benefit coverage under COBRA. In consideration for these severance benefits, Mr. McGilton agreed to a 12-month non-compete and agreed not to solicit any of our clients or employees for 12 months after his departure from the Company. Mr. McGilton also agreed not to disclose any of our confidential information and agreed to release, waive, and discharge any claims against us.

        On March 10, 2008, we entered into a Separation Agreement ("Durski Separation Agreement") with Michael Durski, our then Chief Financial Officer, in connection with his departure from the Company effective February 29, 2008. The Durksi Separation Agreement provided for a severance payment equal to Mr. Durski's current annual base salary for a period of one year, accrued and unpaid vacation pay in the amount of $10,000, and the right to elect continuation of employee benefit coverage under COBRA. In consideration for these severance benefits, Mr. Durksi agreed to a 12-month non-compete and agreed not to solicit any of our clients or employees for 12 months after his departure from the Company. Mr. Durksi also agreed not to disclose any of our confidential information, except as required by law or with our prior written consent. In addition, Mr. Durksi agreed to release, waive, and discharge any claims against us.

        On March 18, 2008, the Company entered into a Separation Agreement ("Pollard Separation Agreement") with Raymond Pollard, our then Chief Operating Officer, in connection with his departure from of the Company effective March 3, 2008. The Pollard Separation Agreement provided for a severance payment equal to Mr. Pollard's current annual base salary for a period of one year, a

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payment in the amount of $40,000 representing the remaining salary guarantee as provided in the Pollard Employment Agreement, an equity grant of common stock equal to $40,000 as provided in the Pollard Employment Agreement, accrued and unpaid vacation pay in the amount of $7,846, and the right to elect continuation of coverage of employee benefit coverage under COBRA. In consideration for these severance benefits, Mr. Pollard agreed to a 12-month non-compete and agreed not to solicit any of our clients or employees for 12 months after his departure from the Company. Mr. Pollard also agreed not to disclose any of our confidential information, except as required by law or with our prior written consent. In addition, Mr. Pollard agreed to release, waive, and discharge any claims against us.

        On April 4, 2008, Ms. Speaks executed the general release provided for as an attachment to the Severance Agreement she entered into with us in exchange for the payment of $400,000 in accordance with the terms of the Severance Agreement she entered into with us.

        In March and April 2008, we entered into the Severance Agreements with each of the Company's named executive officers and certain other executive officers. Under the Severance Agreements, the relevant executive officers agree to not voluntarily leave the Company without "good reason" (as defined in the Severance Agreements) for ninety days following a change in control which is defined as (a) any person becoming a beneficial owner of our securities representing 35% or more of the voting power of the Company, subject to certain provisions and exceptions; (b) individuals holding seats on our board of directors as of February 29, 2008, ceasing to constitute at least a majority of our board of directors, given certain exceptions; (c) our consummation of a merger or other similar transaction, subject to certain further provisions and rules; (d) our shareholders approving a plan of complete liquidation or distribution; or (e) the consummation of a sale of the assets of the Company and our subsidiaries to an entity that is not an affiliate of the Company.

        However, if a named executive officer's employment is terminated by reason of a Nonqualifying Termination (as defined in the Severance Agreements), then the executive is entitled to a lump-sum cash amount equal to (i) the executive's base salary accrued through the date of termination; (ii) any accrued vacation; (iii) any unpaid bonus accrued through the date of termination; and (iv) any unreimbursed expenses through the date of termination as well as any other payments or benefits to which the executive would have been entitled under the terms of any other Company compensation arrangement.

        If a named executive officer's employment is terminated other than by reason of a Nonqualifying Termination event (as defined in the Severance Agreements), the executive is entitled to receive a lump-sum cash amount equal to (i) the executive's base salary accrued through the date of termination; (ii) any accrued vacation; (iii) any unpaid bonus accrued through the date of termination; (iv) any unreimbursed expenses through the date of termination; (v) a lump-sum cash payment equal to the sum of the executive's base salary and the greatest of any target bonus for the fiscal year and average of the actual bonuses earned in the preceding two years; (vi) a lump-sum cash amount equal to a pro-rata portion of the executive's annual bonus for the year of termination; (vii) the ability to elect the payment of any COBRA premiums for a period of twelve months; (viii) the acceleration of vesting or lapse of forfeiture for an additional twelve months for any outstanding equity awards; and (ix) any other payments or benefits to which the executive would have been entitled to under the terms of any other Company compensation arrangement.

        If the named executive officer's employment is terminated other than by reason of a Nonqualifying Termination (as defined in the Severance Agreements) in anticipation of or during the two-year period commencing on the change in control, the executive is entitled to receive lump-sum cash amount equal to (i) the executive's base salary accrued through the date of termination; (ii) any accrued vacation; (iii) any unpaid bonus accrued through the date of termination; and (iv) any unreimbursed expenses through the date of termination; (v) a lump-sum cash amount equal to a pro-rata portion of the executive's annual bonus for the year of termination; the acceleration of vesting or lapse of forfeiture

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of all outstanding equity awards; (vi) any other payments or benefits to which the executive would have been entitled to under the terms of any other Company compensation arrangement; and (vii) a lump-sum cash amount equal to 1.5 times the sum of the executive's highest rate of annual base salary during the year prior to the date of termination and the greatest of (x) the executive's target bonus for the year of termination, (y) the executive's target bonus for the year in which the change in control occurs and (z) the average of the actual bonus earned during the two proceeding fiscal years prior to the year in which the change in control occurs. Under such circumstances, we are also obligated to pay a portion of the executive's COBRA premium equal to the amount that we would have paid for the executive's health benefits if the executive was our employee for up to eighteen months; this obligation will terminate if the executive becomes employed with another employer and becomes eligible to receive substantially similar or improved health benefits from such employer. In addition, if the value of certain payments that are contingent upon a change in control, referred to as parachute payments, exceed a safe harbor amount and the executive becomes subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the executive is entitled to receive an additional payment to cover the additional tax and any interest and penalties incurred.

        Under the Severance Agreements and in consideration for future severance benefits, the named executive officers agreed to a 12-month non-compete and agreed not to solicit any of our clients or employees for 12 months after departure from the Company. The named executive officers also agreed not to disclose any of our confidential information, except as required by law or with our prior written consent, and not to disparage the Company. In addition, to be entitled to severance payments and benefits, the executive must execute a general release of claims in favor of the Company and our affiliates.

Role of Chief Executive Officer in Compensation Decisions

        The Compensation Committee makes all final compensation decisions for the named executive officers and approves recommendations regarding equity awards, if any, for all elected officers of the Company. Decisions regarding the non-equity compensation of other executive officers are made by our chief executive officer.

        Our chief executive officer annually reviews the performance of each named executive officer (other than the chief executive officer whose performance is reviewed by the Compensation Committee). The conclusions reached and recommendations based on these reviews, including with respect to salary adjustments and annual award amounts, are presented to the Compensation Committee. The Compensation Committee may exercise its discretion in modifying any recommended adjustments or awards to executive officers.

Additional Policies

Tax and Accounting Considerations.

        When it reviews compensation matters, the Compensation Committee considers the anticipated tax treatment of various payments and benefits to us and, when relevant, to its executives. Where practical, the Committee seeks to design compensation programs so that all compensation paid to the executive officers will qualify for deduction from our income taxes. However, the Compensation Committee reserves the right to authorize the payment of non-deductible compensation if it deems that it is appropriate to do so under the circumstances.

        The Compensation Committee also considers the accounting treatment of its compensation programs but, aside from overall cost, accounting treatment is generally not a factor in determining compensation.

150

Hedging Policy.

        It is the Company's policy that all employees, including the named executive officers, cannot purchase or sell options on common stock, engage in short sales with respect to common stock or trade in puts, calls, straddles, equity swaps, or other derivative securities that are directly linked to common stock.

Pension Benefits.

        The Company does not maintain any tax-qualified defined benefit pension plans or supplemental executive retirement plans.

Nonqualified Deferred Compensation Life Insurance Agreements.

        The Company does not maintain any nonqualified deferred compensation plans or arrangements.

Deductibility of Executive Compensation.

        As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain individuals unless certain guidelines are followed. We believe that compensation paid under the management incentive plans is generally fully deductible for federal income tax purposes. However, in certain situations, the Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers. For fiscal 2007, except for Gordon McGilton, no named executive officer received executive compensation under Section 162(m) of the Internal Revenue Code in excess of $1,000,000.

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Summary Compensation Table

        The following table sets forth information concerning total compensation earned or paid to our chief executive officer, president, chief financial officer and our other most highly compensated executive officers who served in such capacities as of December 31, 2007 for services rendered to us during the year ended December 31, 2007. The table also sets forth total compensation paid to Scott Ervin, our former Acting Chief Financial Officer, who resigned in January 2007.

Name and Principal Position		Year		Salary ($)		Bonus ($)(1)		Stock Awards($)(2)		Option Awards($)(3)		Non-Equity Incentive Plan Compensation ($)(4)		Changes in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4)		All Other Compensation ($)(5)		TOTAL ($)
Gordon McGilton(6),			2007	$	480,000	$	2,415		—		—		—		—	$	98,039	$	580,454
	Chief Executive Officer		2006	$	421,576		—	$	216,000	$	723,991		—		—	$	57,263	$	1,418,830
Michael Moody(7),			2007	$	79,615	$	1,075		—		—		—		—	$	157,415	$	238,105
	President		2006		—		—		—		—		—		—		—		—
Michael Durski(8),			2007	$	159,231	$	2,415		—		—		—		—	$	44,824	$	206,470
	Chief Financial Officer		2006		—		—		—		—		—		—		—		—
Raymond Pollard,			2007	$	240,000	$	2,415	$	25,000		—		—		—	$	10,376	$	277,791
	Chief Operating Officer		2006	$	151,677		—	$	55,000		—		—		—	$	87,264	$	293,941
Denise Speaks(9),			2007	$	129,808	$	2,115		—		—		—		—	$	30,000	$	161,923
	Co-General Counsel		2006		—		—		—		—		—		—		—		—
Scott Ervin(10),			2007	$	43,615	$	5,000		—		—		—		—	$	36,999	$	85,614
	Former Acting Chief Financial Officer		2006	$	176,215		—		—		—		—		—	$	57,263	$	233,478

(1)

For the year ended December 31, 2007, we made awards to all of our employees under our Gain Sharing Program, pursuant to which ten percent (10%) of our quarterly net income is distributed equally to all of our eligible employees and directors. We did not calculate or pay gain sharing for the fourth quarter of 2007 because our total net income for the year ended December 31, 2007 was less than the previously reported net income for the nine-month period ended September 30, 2007. Other than through this program, during 2007 we did not offer an incentive compensation opportunity to "named executive officers" or any other employee. As of February 2008, none of our directors are eligible to participate in our Gain Sharing Program.

(2)

Amounts in this column reflect the expense recognized by the Company for accounting purposes calculated in accordance with FASB Statement 123(R) for grants of shares of our stock in 2006 and 2007. On February 13, 2006, Mr. McGilton received a grant of 300,000 shares of our common stock at a price of $0.72 per share valued pursuant to a resolution of our board of directors dated January 13, 2006. On June 1, 2007, Mr. Pollard received a grant of 20,513 shares of our common stock at a price of $1.95 per share valued pursuant to the Pollard Employment Agreement dated April 11, 2006.

(3)

For the years ended December 31, 2006 and 2007, we did not have an approved equity incentive plan. On January 13, 2006, Mr. McGilton was granted an option to purchase 1,000,000 shares of our common stock at an exercise price of $0.72 per share with a vesting date of January 1, 2007. On October 25, 2006, Mr. McGilton was granted an option to purchase 500,000 shares of our common stock at an exercise price of $7.48 per share with immediate vesting and expiration five years after the grant date or 120 days from the date Mr. McGilton departs the Company. The options were valued at the amount recognized for financial statement reporting purposes for the fair value of the stock options granted in accordance with FASB Statement No. 123(R).

152

(4)

For the years ended December 31, 2006 and 2007, we did not have an approved nonequity incentive plan or a deferred compensation plan.

(5)

Amounts shown in this column are detailed in the chart below:

			Taxable Fringe Benefits (Medical, Dental, Vision & Life)
											Director Compensation
	Year				Leadership Charitable Giving		Home Security Surveillance		Company Relocation Benefits		Fees earned or paid in cash		Stock Awards ($)
McGilton*		2007	$	5,664	$	10,000	$	376		—	$	51,000	$	30,999
		2006		—		—		—		—	$	18,000	$	39,263
Moody*		2007		—		—		—	$	30,000	$	72,000	$	55,415
		2006		—		—		—		—		—		—
Durski		2007	$	4,824	$	5,000		—	$	35,000		—		—
		2006		—		—		—		—		—		—
Pollard*		2007		—	$	10,000	$	376		—		—		—
		2006		—		—		—	$	30,000	$	18,000	$	39,264
Speaks		2007		—		—		—	$	30,000		—		—
		2006		—		—		—		—		—		—
Ervin*		2007		—		—		—		—	$	6,000	$	30,999
		2006		—		—		—		—	$	18,000	$	39,263

(*)

Executive members of our board of directors received director cash compensation and participated in our Gain Sharing Program for the year ended December 31, 2007. As of February 2008, no executive members of our board of directors are eligible to receive any cash or non-cash compensation for serving as a director, and none of our directors are eligible to participate in our Gain Sharing Program. During 2006, Mr. McGilton received $18,000 in director cash compensation and was granted 15,387 shares of our common stock valued at $39,263; Mr. Pollard received $18,000 in director cash compensation and was granted 11,560 shares of our common stock valued at $39,264 for the period prior to his resignation from our board of directors on August 4, 2006; Mr. Ervin received $18,000 in director cash compensation and was granted 15,387 shares of our common stock valued at $39,263.

(6)

Mr. McGilton retired as our Chief Executive Officer and retired from our board of directors, each effective on January 31, 2008.

(7)

Mr. Moody was appointed as our President on September 18, 2007 and was appointed Chairman of our board of directors on January 8, 2008. On February 29, 2008, he was appointed as our Chief Executive Officer.

(8)

Mr. Durski joined the Company effective January 19, 2007. Mr. Durski departed the Company on February 29, 2008.

(9)

Ms. Speaks joined the Company on June 18, 2007. Ms. Speaks departed the Company on April 4, 2008.

(10)

Mr. Ervin resigned from the Company effective as of January 31, 2007.

Grants of Plan-Based Awards

        The Company did not make any equity-based award grants during the year ended December 31, 2007.

153

Grants of Plan-Based Awards Fiscal Year 2007

        The table below sets forth each grant of stock or option awards to the Company's named executive officers for the year ended December 31, 2007.

									All Other Stock Awards: No. of Shares of Stock or Units (#)		All Other Option Awards: No. of Securities Underlying Options (#)
			Estimated Possible Payouts Under Non-Equity Incentive Plan Awards												Grant Date Fair Value of Stock and Option Awards
													Exercise or Base Price of Option Awards ($)
	Grant Date
Name			Threshold		Target		Maximum
Gordon McGilton Chief Executive Officer		—		—		—		—		—		—		—		—
Michael Moody President		—		—		—		—		—		—		—		—
Michael Durski Chief Financial Officer		—		—		—		—		—		—		—		—
Raymond Pollard Chief Operating Officer		06/01/07		—		—		—		—		20,513		—	$	40,000
Denise Speaks Co-General Counsel		—		—		—		—		—		—		—		—
Scott Ervin Former Acting Chief Financial Officer		—		—		—		—		—		—		—		—

        Mr. Pollard's award was granted pursuant to the Pollard Employment Agreement, under which Mr. Pollard was to receive a grant of $40,000 worth of our restricted common stock on each of the first and second anniversaries of his employment. 20,513 shares of our common stock were issued to Mr. Pollard on June 1, 2007 for his services rendered through the first anniversary of his employment.

Outstanding Equity Awards at 2007 Year-End

        The following table shows the unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of the end of the Company's last completed fiscal year.

			Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options (# Exercisable)		Number of Securities Underlying Unexercised Options (# Unexercisable)		Equity Incentive Plan Awards Number of Securities Underlying Unearned Options (#)		Option Exercise Price		Option Expiration Date		Number of Shares or Units of Stock Held That Have Not Vested		Market Value of Nonvested Shares or Units of Stock Held That Have Not Vested		Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested		Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, or Other Rights That Have Not Vested
McGilton(1)		500,000		—		—	$	7.48		05/31/2008		—		—		—		—
Moody		—		—		—		—		—		—		—		—		—
Durski		—		—		—		—		—		—		—		—		—
Pollard		—		—		—		—		—		—		—		—		—
Speaks		—		—		—		—		—		—		—		—		—
Ervin		—		—		—		—		—		—		—		—		—

(1)

The aggregate in-the-money value of Mr. McGilton's stock options as of December 31, 2007 was $1,560,958. These stock options were granted by the Company on October 25, 2006 and vested quarterly in 2007 with full vesting by December 31, 2007. Mr. McGilton's stock options were unexercised as of December 31, 2007 and expired 120 days after his date of retirement, which was January 31, 2008.

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Option Exercises and Stock Vested

        The following table gives information for stock options exercised by our named executive officers and stock awards held by our named executive officers that vested during the year ended December 31, 2007.

	Option Awards				Stock Awards
Name	Number of Shares Acquired or Vested		Value Realized on Exercise		Number of Shares Acquired on Vesting		Value Realized on Vesting
McGilton(1)		1,000,000	$	21,730,000		—		—
Moody		—		—		—		—
Durski		—		—		—		—
Pollard(2)		—		—		20,513	$	40,000
Speaks		—		—		—		—
Ervin		—		—		—		—

(1)

Mr. McGilton exercised these options on January 17, 2007. In exchange for $720,000 paid to the Company, Mr. McGilton subsequently sold a number of these shares on January 24, 25, and 26 resulting in a value of $21,730,000 to Mr. McGilton.

(2)

Awarded pursuant to the Pollard Employment Agreement, under which Mr. Pollard was to receive a grant of $40,000 worth of our restricted common stock on each of the first and second anniversaries of his employment. 20,513 shares of our common stock were issued on June 1, 2007 for his services rendered through the first anniversary of his employment. The common stock is unregistered and is subject to Rule 144 before transfer or disposal.

Pension Benefits

        The Company did not provide for any payments or other benefits to its named executive officers in connection with retirement for the year ended December 31, 2007.

Nonqualified Deferred Compensation

        The Company did not have any plan providing for the deferral of compensation for its named executive officers for the year ended December 31, 2007.

Potential Payments Upon Termination or Change in Control

        As of December 31, 2007, all of our executive officers were employed at-will. Except as described below, executive officers have no contractual entitlement to any severance or other termination benefits upon a termination of employment.

        On July 7, 2006, our board of directors approved a resolution providing for change in control severance benefits for Mr. McGilton, named executive officers and other key employees. A "change in control" for this purposes means a 51% stock acquisition by a person not controlled by the Company, or a merger or consolidation of the Company such that after giving effect to the transaction, our shareholders immediately prior to such transaction own less than 51% of the aggregate voting power of the Company, or we sell or transfer our assets, as an entirety or substantially as an entirety, and our shareholders immediately prior to such transaction own less than 33% of the aggregate voting power of the acquiring entity immediately after the transaction.

155

        Pursuant to such change in control severance benefits, if Mr. McGilton's employment with the Company terminated for any reason following a change in control, he would be entitled to the immediate vesting of specified stock options granted in January 2006 and a lump-sum cash severance payment equal to six months' base salary. If his employment terminated or he resigned, he would have received a lump-sum cash severance payment equal to $240,000 and 1,000,000 shares of our unregistered common stock subject to outstanding stock options would have vested in full. In lieu of the above, Mr. McGilton received a lump sum payment of $60,000 on January 31, 2008, reduced by applicable withholdings, and the right to elect continuation of employee benefit coverage under COBRA pursuant to the McGilton Separation Agreement. See "Separation Agreements" above for a description of the McGilton Separation Agreement.

        If the employment of a named executive officer (other than the Chief Executive Officer) terminated for any reason (other than for cause) during the one-year period commencing on a "change in control," the executive was entitled to receive a lump-sum cash severance payment in the amount of $40,000. These provisions have been superseded by the terms of the new Severance Agreements. See "Severance Agreements (change of control arrangements)" above.

        The following chart shows the potential severance payments to our executive officers upon termination of employment or a change in control as of December 31, 2007.

Name	Cash Severance		Other Benefit		Total Value of Change in Control Related Benefits
Gordon McGilton Chief Executive Officer	$	240,000	$	205,606	$	445,606
Michael Moody President	$	40,000		—	$	40,000
Michael Durski Chief Financial Officer	$	40,000		—	$	40,000
Raymond Pollard Chief Operating Officer	$	40,000		—	$	40,000
Denise Speaks Co-General Counsel	$	40,000		—	$	40,000
Scott Ervin Former Acting Chief Financial Officer	$	40,000		—	$	40,000

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation Plans Approved By Security Holders		—		—		—
Equity Compensation Plans Not Approved By Security Holders		500,000	$	7.48		—
Total		500,000	$	7.48		—

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        On October 25, 2006, Mr. McGilton was granted an option to purchase 500,000 shares of our common stock at the issue price of $7.48 per share with immediate vesting and expiration five years after the grant date or 120 days from the date that Mr. McGilton leaves the Company. Mr. McGilton retired as our Chief Executive Officer and as a director of the Company effective on January 31, 2008 and accordingly, the options are now expired.

Principal Shareholders and Security Ownership of Management

Principal Shareholders

        As of September 9, 2008, the only persons known by us to own beneficially, or to be deemed to own beneficially, 5% or more of our common stock were:

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percent of Class
Franklin Resources, Inc.(1) Franklin Advisors, Inc. Franklin Templeton Portfolio Advisors, Inc. One Franklin Parkway San Mateo, CA 94403-1906		8,061,237		10.9	%
FMR, LLC(2) 82 Devonshire Street Boston, MA 02109		6,022,305		8.824	%
Wellington Management Company, LLP(3) 75 State Street Boston, MA 02109		5,724,500		8.39	%
Heartland Advisors, Inc.(4) 789 North Water Street Milwaukee, WI 53202		4,200,000		6.2	%

(1)

Franklin Advisors, Inc. filed a Schedule 13G with the SEC on February 7, 2007 reflecting beneficial ownership as of December 31, 2007 of 8,061,237 shares of our common stock. Franklin Advisors, Inc. has the sole power to vote or direct the vote, and sole power to dispose or direct the disposition of, 6,063,844 shares and Franklin Templeton Portfolio Advisors, Inc. has the sole power to vote or to direct the vote, and sole power to dispose or to direct the disposition of 1,997,393 shares.

(2)

In the aggregate, FMR, LLC has the sole voting power over 409,100 shares, and sole power to direct disposition of 6,022,305 shares based on its beneficial ownership report on Schedule 13G/A, filed on April 10, 2008.

(3)

Wellington Management Company, LLP, an investment advisor, filed a Schedule 13G with the SEC on February 14, 2008, reflecting beneficial ownership as of December 31, 2007, of 5,724,500 shares of our common stock, with shared voting power over 3,011,600 shares and shared dispositive power over 5,724,500 shares.

(4)

Heartland Advisors, Inc., an investment advisor, filed a Schedule 13G with the SEC on February 8, 2008, reflecting beneficial ownership as of December 31, 2007, of 4,200,000 shares of our common stock, with shared voting power over 4,200,000 shares and shared dispositive power over 4,200,000 shares.

157

Executive Officers and Directors

        The table below shows the number of shares of common stock beneficially owned as of December 31, 2007 by each member of our board of directors, each nominee for our board of directors and each named executive officer, as well as the number of shares owned by our current directors and executive officers as a group. None of the directors or named executive officers own one percent (1%) or more of the Company's common stock.

Name of Beneficial Owner	Amount and Nature Beneficial Ownership(1)		Percent of Class
Jack A. Davis		15,387		*
John S. Day		—		*
Michael Durski		—		*
Scott Ervin		15,387		*
Gordon McGilton		15,387		*
Michael Moody		7,654		*
Raymond Pollard		22,073		*
Denise Speaks		—		*
Roger G. Thompson		3,827		*
Directors and Officers as a Group (10 persons)		71,715		*

*

less than 1%



(1)

Based on December 31, 2007 Stock Transfer Report.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Related Party Transactions

        Our board of directors recognizes that transactions with related persons can present actual or potential conflicts of interest and wants to ensure that Company transactions are based solely on the best interests of the Company and our shareholders. Accordingly, our board of directors has delegated responsibility to the Audit Committee to review transactions between the Company and related persons. The Audit Committee has adopted a written policy providing procedures for review, approval and ratification of related person transactions.

        The Audit Committee has adopted procedures regarding the review, approval and ratification of related party transactions. A related party transaction is a transaction between the Company and (a) a director, officer or 5% shareholder; (b) an immediate family member of a director, officer or 5% shareholder; or (c) other entity in which any of these persons have a material interest. All reportable related party transactions must be reviewed, approved or ratified by the Audit Committee. In determining whether to approve or ratify such transactions, the Audit Committee will take into account, among other factors and information it deems appropriate: (1) the related person's relationship to Force Protection and interest in the transaction; (2) the material facts of the transaction; (3) the benefits to Force Protection of the transaction; (4) an assessment of whether the transaction is (to the extent applicable) in the ordinary course of business, at arm's length, at prices and terms customarily available to unrelated third-party vendors or customers generally, and whether the related person had any direct or indirect personal interest in, or received any personal benefit from such transaction; and (5) if applicable, the availability of other sources of comparable products and services. The Audit Committee chairperson is authorized to approve related party transactions when it is impractical or undesirable to wait until the next committee meeting for approval. Such transactions must be reported to the Audit Committee at the next meeting.

158

        Our board of directors reviews all disclosed relationships and transactions for compliance with the independence standards and makes a determination of the independence of each director. For those directors identified as independent, the Company and our board of directors are aware of no relationships or transactions with the Company or management other than of a type deemed immaterial in accordance with the guidelines described above.

        On August 26, 2008, the Audit Committee was informed by our interim chief financial officer that in connection with the exercise of stock options in January 2007 and Gordon McGilton's subsequent sale of common stock received through such exercise, the proper amount of Mr. McGilton's share of Medicare taxes relating to such exercise was not collected from Mr. McGilton. As a result, Mr. McGilton owed us $315,085 for payment of such tax withholding, which may be considered a violation of applicable U.S. law prohibiting loans by public companies to their directors and executive officers. Upon learning of this administrative oversight, the Audit Committee instructed management to contact Mr. McGilton to seek repayment of the payment of taxes. On September 11, 2008, Mr. McGilton paid us $315,085 to satisfy all outstanding obligations with respect to withholding of his taxes relating to such stock option exercise. We believe that the underwithholding of the taxes was the result of the mistaken belief of Company's former chief financial officer that the proper amount of taxes upon Mr. McGilton's stock option exercise were withheld. Subsequently, we have instituted additional controls on the withholding of taxes and monitoring of IRS Chapter Section 162(m).

        Previously, we disclosed that Mr. McGilton was a principal of APT Leadership, a consulting firm the Company hired to provide various business consulting services, training seminars and certain business software. For the years ended December 31, 2007 and 2006, APT Leadership billed us a total of $545,299 and $606,396, respectively, for such services, training and software. Mr. McGilton disclosed to our board of directors each year that he did not receive any dividends, distributions or other compensation from APT Leadership at any time while an employee of the Company. Further, Mr. McGilton disclosed that as of December 31, 2007 he transferred his interest in APT Leadership to the other owner for $1 consideration.

        In addition, we have entered into an agreement with APT Leadership pursuant to which APT Leadership has granted us a non-exclusive right and license to use the diagrams, methods, concepts and business operating system functionality contained in APT Leadership's "APT Tool" software and we purchased certain software to be used in the analysis of process capability. Under the terms of such agreement we paid a one-time license fee of $60,000 and agreed to pay an annual license fee thereafter of $50,000 per Company operating site.

Director Independence

        In determining independence, our board of directors determines whether directors have a material relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of directors. When assessing materiality, our board of directors considers all relevant facts and circumstances including, without limitation, transactions between the Company and the director, family members of directors, or organizations with which the director is affiliated. Our board of directors further considers the frequency and dollar amounts associated with any of these transactions and whether the transactions were in the ordinary course of business and were consummated on terms and conditions similar to those with unrelated parties.

        On an annual basis, each member of our board of directors is required to complete a questionnaire designed in part to provide information to assist our board of directors in determining whether the director is independent under the rules and regulations of The Nasdaq Stock Market, LLC. ("Nasdaq"), the rules and regulations of the SEC and other applicable laws. In addition, each director or potential director has an affirmative duty to disclose to our board of directors relationships between and among that director (or an immediate family member), the Company, and/or the management of the Company.

159

        As of September 3, 2008, our board of directors has affirmatively determined that all of our current directors, other than Mr. Michael Moody, President & Chief Executive Officer of the Company, were independent in that each such person has no material relationship with the Company, our management or our independent registered public accounting firm, and otherwise met the independence standards under the rules and regulations of Nasdaq, the rules and regulations of the SEC and other applicable laws. Our board of directors determined that Michael Moody is not independent due to his status as an executive officer of Force Protection.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

Pre-approval Policies and Procedures

        Consistent with the Audit Committee's responsibility for engaging the Company's independent registered public accounting firm, all audit and permitted non-audit services performed by our independent registered public accounting firm require pre-approval by the Audit Committee. The full Audit Committee approves projected services and fee estimates for these services and establishes budgets for major categories of services at its first in-person meeting of each fiscal year. The Audit Committee Chairman has been designated by the Audit Committee to approve any services arising during the year that were not pre-approved by the Audit Committee and associated fees for preapproved services that exceed the set budget by more than 10%. Services approved by the Audit Committee Chairman are communicated to the full Audit Committee at its next regular quarterly meeting and the Audit Committee reviews actual and forecasted services and fees for the year at each such meeting. During 2007, all services performed by the independent registered public accounting firm were pre-approved. During 2007, Elliott Davis served as the Company's independent registered public accounting firm, until their resignation in March 2008. Grant Thornton was approved by the Audit Committee as the Company's independent public accounting firm in April 2008.

Audit, Audit-Related, Tax and All Other Fees

        During, or with respect to, 2006 and 2007, Jaspers + Hall, Elliott Davis and Grant Thornton (which were incurred in 2008), respectively, billed the Company fees for professional services in the following categories and amounts:

Independent Public Accounting Fees
Type	2007 (Grant Thornton)		2007 (Elliott Davis)		2006 (Jaspers + Hall)
Audit Fees	$	3,054,318	$	389,275	$	55,000
Audit-Related Fees		—	$	112,087		—
Tax Fees		—	$	26,775		—
All Other Fees		—	$	9,500		—
Total	$	3,054,318	$	537,637	$	55,000

        Audit fees were for those professional services rendered in connection with the audit of the Company's consolidated financial statements on Form 10-K, the review of the Company's quarterly condensed consolidated financial statements on Form 10-Q, which are customary under the standards of the Public Company Accounting Oversight Board (United States) and in connection with statutory audits in foreign jurisdictions. Audit-related fees were primarily for professional services rendered in connection with the filing of SEC periodic reports, due diligence assistance, and consultation on financial accounting and reporting standards. Tax fees were primarily for professional services rendered in connection with the preparation of tax returns, assistance with tax audits and technical assistance. All other fees were primarily for professional services rendered in connection with services related to accounting for our 401(k) plan.

160

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

1.    Consolidated Financial Statements

        The Consolidated Financial Statements are filed as part of Part II Item 8 of this Annual Report on Form 10-K.

2.     Consolidated Financial Statement Schedules

        All schedules are omitted because they are not required or because the required information is included in the Consolidated Financial Statements or notes thereto.

3.     Exhibits

        The following is an index of the exhibits included in this Annual Report on Form 10-K or incorporated herein by reference.

161

EXHIBIT INDEX

NUMBER		DESCRIPTION
	2.1	Agreement and Plan of Merger.†
	3.1	Articles of Incorporation.†
	3.2	First Amended and Restated By-Laws of Force Protection, Inc., filed as Exhibit 3.1 on the Company's Current Report on Form 8-K filed February 26, 2008, is hereby incorporated by reference.
	3.3	Certificate of Amendment to Articles of Incorporation.†
	4.1	Certificate of Designation for Series D Convertible Preferred Stock, dated January 19, 2005, filed as Exhibit 4.1 on the Company's Current Report on Form 8-K filed January 27, 2005, is hereby incorporated by reference.
	4.2	Amended and Restated Certificate of Designation for Series B Convertible Preferred Stock, filed as Exhibit 4.1 of the Company's Current Report on Form 8-K filed February 15, 2005, is hereby incorporated by reference.
	4.3	Amended and Restated Certificate of Designation for Series C Convertible Preferred Stock, filed as Exhibit 4.2 of the Company's Current Report on Form 8-K filed February 15, 2005, is hereby incorporated by reference.
	10.1	Lease Agreement between Dorchester County, South Carolina and Lati Industries, Inc., dated December 7, 1998.† (This lease was assumed by the Company under the Assignment and Assumption Agreement, dated March 22, 2007 referred to in Exhibit 10.35 to this Form 10-K.)
	10.2	Industrial Lease between Force Protection, Inc. and Aerospace/Defense, Inc., dated September 2, 2003, filed as Exhibit 10.12 to the Company's Quarterly Report on Form10-QSB filed August 13, 2004, is hereby incorporated by reference.
	10.3	Royalty Agreement between Force Protection, Inc., and J.J. van Eck, dated April 1, 2004, filed as Exhibit 10.13 to the Company's Quarterly Report on Form 10-QSB filed August 13, 2004, is hereby incorporated by reference.
	10.4	Contract between Force Protection, Inc. and the U.S. Marines, dated April 21, 2004, filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-QSB filed August 13, 2004, is hereby incorporated by reference.
	10.5	Letter regarding Industrial Lease Agreement between Force Protection, Inc. and Aerospace/Defense, Inc., dated July 13, 2004, filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-QSB filed August 13, 2004, is hereby incorporated by reference.
	10.6	Employment Letter between Force Protection, Inc. and R. Scott Ervin, dated November 15, 2004.†*
	10.7	Building No. 1 Office Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc. dated June 1, 2005, filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.8	Order for Supplies or Services and Delivery Order between Force Protection, Inc. and U.S. Department of Defense, dated June 23, 2005, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 27, 2005, is hereby incorporated by reference.
	10.9	Employment Arrangement between Force Protection, Inc. and Gordon McGilton, dated January 13, 2006, as amended.†*

NUMBER		DESCRIPTION
	10.10	Building No. 1 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc. dated January 15, 2006, filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.11	Employment Agreement between Raymond Pollard and Force Protection, Inc., dated April 5, 2006.†
	10.12	First Amendment to Building No. 1 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated May 1, 2006, filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.13	Production License Agreement between Force Protection Industries, Inc. and BAE Systems Land & Armaments, LP, dated June 13, 2006, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed August 14, 2006, is hereby incorporated by reference.
	10.14	Logistic Support Agreement between Force Protection Industries, Inc. and BAE Systems Land & Armaments, LP, dated June 13, 2006, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed August 14, 2006, is hereby incorporated by reference.
	10.15	Second Amendment to Building No. 1 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 1, 2006, filed as Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.16	Letter Agreement among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 18, 2006 regarding Building No. 2 Industrial Lease and Building No. 3 Industrial Lease, filed as Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.17	Common Stock Purchase Agreement, dated July 24, 2006, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 25, 2006, is hereby incorporated by reference.
	10.18	Modification No. 01 to Subcontract No. SCT0044135 between Force Protection Industries, Inc. and BAE Land Systems and Armaments L.P., dated August 8, 2006.†
	10.19	Contract between Force Protection Industries, Inc. and the British Ministry of Defence, dated August 11, 2006, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 17, 2006, is hereby incorporated by reference.
	10.20	Memorandum of Agreement and Cooperation between Mechem, a division of Denel (PTY) Ltd. and Force Protection, Inc., dated September 28, 2006, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 28, 2006, is hereby incorporated by reference.
	10.21	Third Amendment to Building No. 1 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated October 1, 2006, filed as Exhibit 10.13 to the Company's Current Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.22	Memorandum of Understanding between Force Protection, Inc. and General Dynamics Land Systems, Inc., dated November 9, 2006, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 17, 2006, is hereby incorporated by reference.

NUMBER		DESCRIPTION
	10.23	Form of Securities Purchase Agreement, dated December 20, 2006, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed December 21, 2006, is hereby incorporated by reference.
	10.24	Joint Venture Agreement between General Dynamics Land Systems, Inc. and Force Protection, Inc., dated December 15, 2006, as amended, filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.
	10.25	Certificate of the Company's Corporate Secretary, dated January 10, 2007, filed as Exhibit 10.2 to the Company's Registration Statement on Form S-8 filed January 12, 2007, is hereby incorporated by reference.
	10.26	Letter Contract issued to Force Protection, Inc. by the United States Marine Corps Systems Command, dated January 11, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed January 18, 2007, is hereby incorporated by reference.
	10.27	Employment Agreement between Force Protection, Inc. and Michael Durski, dated January 18, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, is hereby incorporated by reference.**
	10.28	Letter Contract issued to the Company by the United States Marine Corps Systems Command, dated January 25, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 5, 2007, is hereby incorporated by reference.
	10.29	Ground Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated February 1, 2007, filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.30	Second Amendment to Building No. 2 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated February 1, 2007, filed as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.31	Letter Contract issued to Force Protection, Inc. by the United States Marine Corps Systems Command, dated February 14, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 20, 2007, is hereby incorporated by reference.
	10.32	Letter Contract issued to Force Protection, Inc. by the United States Marine Corps Systems Command, dated March 9, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 15, 2007, is hereby incorporated by reference.
	10.33	Purchase and Sale Agreement between Force Protection, Inc. and NEWTEC Services Group, Inc., dated March 9, 2007, filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 15, 2007, is hereby incorporated by reference.
	10.34	Asset Purchase Agreement between Force Protection Technologies, Inc. and Lati USA, Inc., dated March 22, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 28, 2007, is hereby incorporated by reference.
	10.35	Assignment and Assumption Agreement between Force Protection Technologies, Inc. and Lati USA, Inc., dated March 22, 2007, filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 28, 2007, is hereby incorporated by reference.
	10.36	Post Closing Memorandum between Force Protection Technologies, Inc. and Lati USA, Inc., dated March 22, 2007, filed as Exhibit 10.3 to the Company's Current Report on Form 8-K filed March 28, 2007, is herby incorporated by reference.

NUMBER		DESCRIPTION
	10.37	Technology and License Agreement among Force Protection, Inc., General Dynamics Land Systems Inc. and Force Dynamics LLC, dated April 3, 2007, filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.38	Modification of Contract Agreement with the United States Marine Corps, dated April 17, 2007, filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.
	10.39	Delivery Order under Contract No. M67854-07-D-5031 with the United States Marine Corps Systems Command, dated April 23, 2007, filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.
	10.40	Employment Letter between Force Protection Industries, Inc. and Denise Speaks, dated May 24, 2007.†*
	10.41	Delivery Order under Contract No. M67854-07-D-5031 with the United States Marine Corps Systems Command, dated June 19, 2007, filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.
	10.42	First Amendment to Building No. 1 Office Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 1, 2007, filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.43	First Amendment to Ground Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 1, 2007, filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.44	Second Amendment to Building No. 3 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 1, 2007, filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.45	Fourth Amended and Restated Building No. 1 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 1, 2007, filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.46	Third Amendment to Building No. 2 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated July 1, 2007, filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.47	License Agreement between Force Protection Industries, Inc. and the CSIR, dated July 6, 2007, filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.48	Loan Agreement between Force Protection, Inc. and Wachovia Bank, National Association, dated July 20, 2007, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.
	10.49	Security Agreement between Force Protection, Inc. and Wachovia Bank, National Association, dated July 20, 2007, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.

NUMBER		DESCRIPTION
	10.50	Promissory Note between Force Protection, Inc. and Wachovia Bank, National Association, dated July 20, 2007, filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed August 9, 2007, is hereby incorporated by reference.
	10.51	Delivery Order No. 5 under Contract M67854-07-D-5031 with the United States Marine Corps Systems Command, dated August 10, 2007, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.52	Subcontract Agreement among Force Protection Industries, Inc., General Dynamics, Inc. and General Dynamics Land Systems, Inc., dated September 10, 2007.†
	10.53	Modification Number One to Promissory Note between Force Protection, Inc. and Wachovia Bank, National Association, dated September 30, 2007, filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.54	Delivery Order No. 6 under Contract M67854-07-D- 5031 with the United States Marine Corps Systems Command, dated October 18, 2007, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed November 13, 2007, is hereby incorporated by reference.
	10.55	Memorandum of Agreement between the CSIR and Force Protection Industries, Inc., dated October 29, 2007, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 2, 2007, is hereby incorporated by reference.
	10.56	Fourth Amendment to Building No. 2 Industrial Lease among Force Protection, Inc., Force Protection Industries, Inc., and Aerospace/Defense, Inc., dated November 1, 2007.†
	10.57	Delivery Order No. 7 under Contract No. M67854-07-D-5031 with the United States Marine Corps Systems Command, dated December 18, 2007.†**
	10.58	Modification Number Two to Promissory Note between Force Protection, Inc. and Wachovia Bank, National Association, dated January 9, 2008.†
	10.59	First Amendment to Loan Agreement between Force Protection, Inc. and Wachovia Bank, National Association, dated January 9, 2008.†
	10.60	Modification Number Three to Promissory Note between Force Protection, Inc. and Wachovia Bank, National Association, dated January 9, 2008.†
	10.61	Extension Amendment to Leases between Force Protection, Inc. and Aerospace/Defense, Inc., dated January 10, 2008.†
	10.62	Separation Agreement between Force Protection, Inc. and Gordon McGilton, dated January 31, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 5, 2008, is hereby incorporated by reference.
	10.63	Second Amendment to Loan Agreement between Force Protection, Inc. and Wachovia Bank, National Association, dated February 15, 2008.†
	10.64	Modification, dated April 15, 2008, to the Second Amendment to Loan Agreement, dated February 15, 2008.†
	10.65	Amendment of Solicitation/Modification of Contract under Contract No. M67854-06-C-5162 with United States Marine Corps Systems Command, dated February 22, 2008.†**
	10.66	Teaming Agreement between Force Protection, Inc. and DRS Sustainment Systems, Inc., dated February 25, 2008.†

NUMBER		DESCRIPTION
	10.67	Separation Agreement between Force Protection, Inc. and Michael Durski, dated March 10, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 12, 2008, is hereby incorporated by reference.
	10.68	Separation Agreement between Force Protection Inc. and Raymond Pollard, dated March 11, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 21, 2008, is hereby incorporated by reference.
	10.69	Employment Agreement between Force Protection, Inc. and Michael Moody, dated March 19, 2008, filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 24, 2008, is hereby incorporated herein by reference.**
	10.70	Agreement between Force Protection, Inc. and Lenna Ruth Macdonald, dated March 24, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 24, 2008, is hereby incorporated by reference.
	10.71	Agreement between Force Protection, Inc. and Damon Walsh, dated April 4, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 8, 2008, is hereby incorporated by reference.
	10.72	Agreement between Force Protection, Inc. and Mark Edwards, dated April 4, 2008, filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 8, 2008, is hereby incorporated by reference.
	10.73	Agreement between Force Protection, Inc. and Daniel Busher, dated April 4, 2008, filed as Exhibit 10.3 to the Company's Current Report on Form 8-K filed April 8, 2008, is hereby incorporated by reference.
	10.74	Agreement between Force Protection, Inc. and Shelia Boyd, dated April 4, 2008, filed as Exhibit 10.4 to the Company's Current Report on Form 8-K filed April 8, 2008, is hereby incorporated by reference.
	10.75	Agreement between Force Protection, Inc. and Denise Speaks, dated April 4, 2008, filed as Exhibit 10.5 to the Company's Current Report on Form 8-K filed April 8, 2008, is hereby incorporated by reference.
	10.76	Amended and Restated Loan Agreement between Force Protection, Inc., Force Protection Technologies, Inc., Force Protection Industries,  Inc., and Wachovia Bank, National Association, dated May 6, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 9, 2008, is hereby incorporated by reference.
	10.77	Promissory Note between Force Protection, Inc. and Wachovia Bank, National Association, dated May 6, 2008, filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed May 9, 2008, is hereby incorporated by reference.
	10.78	Amendment of Solicitation/Modification of Contract under Contract No. M67854-06-C-5162 between Force Protection Industries, Inc. and the United States Marine Corps Systems Command, dated May 19, 2008.†**
	10.79	Amendment of Solicitation/Modification of Contract under Contract No. M67854-D7-D5031-0003 between Force Protection Industries, Inc. and the United States Marine Corps Systems Command, dated May 30, 2008.†**
	10.80	Agreement between Force Protection, Inc. and Charles Mathis, dated June 25, 2008, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 27, 2008, is hereby incorporated by reference.
	10.81	Second Extension Amendment to Leases between Force Protection, Inc. and Aerospace/Defense, Inc., dated June 25, 2008.†

NUMBER		DESCRIPTION
	14.1	Code of Conduct and Ethics of Force Protection, Inc.†
	21.1	Subsidiaries of the Registrant†
	23.1	Consent of Grant Thornton LLP.†
	23.2	Consent of Jaspers + Hall, PC.†
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†
	32.1	Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†

(Exhibits marked with a (†) are filed electronically herewith.)

(Exhibits marked with an asterisk (*) are a management contract or compensatory plan required to be filed as an Exhibit to this Annual Report on Form 10-K.)

(Exhibits marked with two asterisks (**) have portions of the exhibit omitted pursuant to a confidential treatment request. This information has been filed or will be filed separately with the Securities and Exchange Commission.)

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FORCE PROTECTION INC. (Registrant)
Date: September 15, 2008	By:	/s/ MICHAEL MOODY
		Name:	Michael Moody
		Title:	President and Chief Executive Officer (principal executive officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the 15th of September, 2008, on behalf of the registrant and in the capacities indicated.

Signature	Capacity
/s/ MICHAEL MOODY Michael Moody	Chief Executive Officer, President and Chairman of the Board of Directors
/s/ FRANCIS E. SCHEUERELL, JR. Francis E. Scheuerell, Jr.	Interim Chief Financial Officer (Principal Financial Officer)
/s/ MAJOR GENERAL JACK A. DAVIS Major General Jack A. Davis	Director
/s/ JOHN S. DAY John S. Day	Director
/s/ LIEUTENANT GENERAL ROGER G. THOMPSON, JR. Lieutenant General Roger G. Thompson, Jr.	Director
/s/ JOHN W. PAXTON, SR. John W. Paxton, Sr.	Director

EX-2.1

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Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

        AGREEMENT AND PLAN OF MERGER dated as of December 31, 2004 ("Agreement"), between Force Protection, Inc., a Colorado corporation ("Force Protection Colorado"), and Force Protection, Inc., a Nevada corporation ("Force Protection Nevada").

RECITALS

Whereas, the Board of Directors of Force Protection Colorado has approved a change of legal domicile to the State of Nevada as being in the best interests of the corporation and its shareholders; and

Whereas, the change of legal domicile through the merger ("Merger") with Force Protection Nevada will take place under the terms and conditions set forth in this Agreement.

Now Therefore, in consideration of the respective representations, warranties, covenants and agreements contained in this Agreement, Force Protection Colorado and Force Protection Nevada hereby agree as follows:

ARTICLE I—THE MERGER

1.01    THE MERGER.    Upon the terms and subject to the conditions of this Agreement, and in accordance with the relevant provisions of the Colorado Business Corporation Act ("Colorado Statute") and the Nevada Business Corporation Act ("Nevada Statute"), respectively, Force Protection Colorado will be merged with and into Force Protection Nevada as soon as practicable following the satisfaction or waiver, if permissible, of the conditions set forth in Article IV of this Agreement. Following the Merger, Force Protection Nevada will continue as the surviving corporation and will continue its existence under the laws of the State of Nevada, and the separate corporate existence of Force Protection Colorado will cease.

1.02    EFFECTIVE DATE.    Subject to approval of the Merger by the shareholders of the two entities, the Merger will be consummated by filing with the Secretaries of State of the States of Colorado and Nevada, respectively, Articles of Merger, and any other appropriate documents ("Articles of Merger") in accordance with the Colorado Statute and the Nevada Statute, respectively. The Articles of Merger shall specify that the Merger will become effective on JANUARY 1, 2005 (the time the Merger becomes effective being the "Effective Date").

1.03    EFFECTS OF THE MERGER.    The Merger will have the effects specified in the Colorado Statute and the Nevada Statute, respectively.

1.04    DIRECTORS AND OFFICERS OF FORCE PROTECTION NEVADA.    After the Effective Date, the initial directors and officers of Force Protection Nevada, as the surviving corporation, will be the following persons:

Gale Aguilar	Director Class I, President
R. Scott Ervin	Director Class II, Secretary
Frank Kavanaugh	Director Class III
Tom Thebes	Treasurer

Such persons will serve until their successors will have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with Force Protection Nevada's Certificate of Incorporation and by laws.

ARTICLE II—EXCHANGE OF SHARES

2.01    SHARE EXCHANGE.    On the Effective Date by virtue of the Merger, each share of common stock and/or Preferred stock of Force Protection Colorado held by the shareholders of Force Protection Colorado will be deemed exchanged for corresponding shares of the common stock and/or Preferred

stock as the case may be of Force Protection Nevada. Promptly after the Effective Date, Force Protection Nevada may issue to each shareholder of Force Protection Colorado a certificate representing the common stock and/or preferred stock to be issued to each shareholder and in such event each shareholder of Force Protection Colorado will be required to exchange and surrender the certificate representing all of such shareholder's shares in Force Protection Colorado. At the close of business on the day of the Effective date, the stock ledger of Force Protection Colorado will be closed.

ARTICLE III—COVENANTS

3.01    FURTHER ACTION.    The parties will, subject to the fulfillment at or before the Effective Date of each of the conditions of performance set forth in Section IV herein, perform such further acts and execute such documents as may be reasonably required to effect the Merger.

3.02    MEETING OF BREAKTHROUGH SHAREHOLDERS.    Force Protection Colorado will submit the Merger to its shareholders for their consideration and consent in accordance with the Colorado Statute and other provisions of applicable law. Force Protection Colorado will notify Force Protection Nevada that the consent of the shareholders has been obtained.

3.03    BEST EFFORTS TO CLOSE.    The parties hereto agree to use their best efforts to close the transactions contemplated hereby as soon as practicable after the execution of this Agreement.

ARTICLE IV—CONDITIONS TO CONSUMMATION OF THE MERGER

4.01    CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.    The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Date, of the following conditions:

(a)

This Agreement will have been approved by the affirmative vote of the shareholders of Force Protection Colorado by the requisite vote in accordance with applicable law;



(b)

No statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent), will have been enacted, entered, promulgated or enforced by any court or governmental authority which is in effect and has the effect of prohibiting the consummation of the Merger; provided, however, that each of the parties will have used its best efforts to prevent the entry of any injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered.

ARTICLE V—MISCELLANEOUS

5.01    ASSIGNMENT, BINDING EFFECT; BENEFIT; ENTIRE AGREEMENT.    Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon and will inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective heirs, successors, executors, administrators and assign any rights, remedies, obligations or liabilities under or by reason of this Agreement. This Agreement and any documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings (oral and written) among the parties with respect thereto. No addition to or modification of any provision of this Agreement will be binding upon any party hereto unless made in writing and signed by all parties hereto.

5.02    SEVERABILITY.    Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such invalidity or

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unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction. If any provision, clause, section or part of this Agreement is so broad as to be unenforceable, the provision, clause, section or part will be interpreted to be only so broad as is enforceable, and all other provisions, clauses, sections or parts of this Agreement which can be effective without such unenforceable provision, clause, section or part will, nevertheless, remain in full force and effect.

5.03    GOVERNING LAW.    This Agreement will be governed by and construed in accordance with the laws of the State of Nevada without regard to its rules of conflict of laws.

5.04    DESCRIPTIVE HEADINGS.    The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

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

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized representative, all as of the day and year first above written.

Force Protection, Inc. (Colorado)
By:
	/s/ GALE AGUILAR
Title:	President
Force Protection, Inc. (Nevada)
By:
	/s/ GALE AGUILAR
Title:	President

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EX-3.1

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Exhibit 3.1

ARTICLES OF INCORPORATION

FORCE PROTECTION, INC.
(The "Corporation")

The undersigned incorporator does hereby file these Articles of Incorporation of a Private (Domestic) Corporation pursuant to Title Seven of the Nevada Revised Statutes as follows:

FIRST:    The name of the corporation is FORCE PROTECTION, INC.

SECOND:    The name of the initial registered agent and registered office is: Sage International, Inc., 1135 Terminal Way, Suite 209, Reno, Nevada, 89502.

THIRD:    The Corporation shall have and may exercise all of the rights, powers and privileges now or hereafter conferred upon corporations organized under the laws of Nevada. In addition, the corporation may do everything necessary, suitable or proper for the accomplishment of any of its corporate purposes. The corporation may conduct part or all of its business in any part of Nevada, the United States or the world and may hold, purchase, mortgage, lease and convey real and personal property in any of such places.

FOURTH:    The aggregate number of shares that the corporation shall have authority to issue is three hundred and ten million (310,000,000) shares of which a portion shall be common stock and a portion shall be preferred stock, all as described below.

A.    Common Stock.    The aggregate number of common shares which the Corporation shall have the authority to issue is three hundred million (300,000,000) shares, each with a stated Par Value of $0.001 per share, which shares shall be designated "Common Stock." Subject to all the rights of the Preferred Stock as expressly provided herein, by law or by the Board of Directors pursuant to this Article, the Common Stock of the corporation shall possess all such rights and privileges as are afforded to capital stock by applicable law in the absence of any express grant of rights or privileges in these Articles of Incorporation, including, but not limited to, the following rights and privileges:

(a)

dividends may be declared and paid or set apart for payment on the Common Stock out of any assets or funds of the corporation legally available for the payment of dividends;



(b)

the holders of Common Stock shall have unlimited voting rights, including the right to vote for the election of directors and on all other matters requiring stockholder action. Cumulative voting shall not be permitted in the election of directors or otherwise.



(c)

on the voluntary or involuntary liquidation, dissolution or winding up of the corporation, and after paying or adequately providing for the payment of all of its obligations and amounts payable in liquidation, dissolution or winding up, and subject to the rights of the holders of Preferred Stock, if any, the net assets of the corporation shall be distributed pro rata to the holders of the Common Stock.

B.    Preferred Stock.    The aggregate number of preferred shares which the Corporation shall have the authority to issue is ten million (10,000,000) shares, each with a stated Par Value of $0.001 per share, which shares shall be designated "Preferred Stock." Shares of Preferred Stock may be issued from time to time in one or more series as determined by the Board of Directors. The Board of Directors is hereby authorized, by resolution or resolutions, to provide from time to time, out of the un-issued shares of Preferred Stock not then allocated to any series of Preferred Stock, for a series of the Preferred Stock. Each such series shall have distinctive serial designations. Before any shares of any such series of Preferred Stock are issued, the Board of Directors shall fix and determine, and is hereby expressly empowered to fix and determine, by resolution or resolutions, the voting powers, full or limited, or no voting powers, and the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof as provided by Nevada law. Before issuing any shares of a class or series, the corporation shall deliver to the secretary of state for filing articles of amendment to these articles of incorporation that set forth information required by

Nevada law, including but not limited to, the designations, preferences, limitations, and relative rights of the class or series of shares.

C.    Voting.    Unless otherwise ordered by a court of competent jurisdiction, at all meetings of shareholders one-third of the shares of a voting group entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum of that voting group.

FIFTH:    The initial board of directors shall consist of three (3) members whose name and address are as follows:

Frank Kavanaugh

R. Scott Ervin

Gale Aguilar

All of whose address is 9801 Highway 78, Building #2, Ladson, South Carolina 29456

The number of directors of the corporation shall be fixed from time to time by the Board of Directors, within a range of no less than one or no more than five. A Director shall be a natural person who is eighteen years of age or older. A director need not be a resident of Nevada or a shareholder of the corporation.

SIXTH:    The incorporator of the corporation is R. Scott Ervin, 9801 Highway 78, Building #2, Ladson, South Carolina 29456.

SEVENTH:    The Corporation shall establish and maintain one or more offices as may be appropriate from time to time and as required under the laws of the state of Nevada.

EIGHTH:    The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and the same are in furtherance of and not in limitation or exclusion of the powers conferred by law.

        (a)   Conflicting Interest Transactions.    As used in this paragraph, "conflicting interest transaction" means any of the following: (i) a loan or other assistance by the corporation to a director of the corporation or to an entity in which a director of the corporation is a director or officer or has a financial interest; (ii) a guaranty by the corporation of an obligation of a director of the corporation or of an obligation of an entity in which a director of the corporation is a director or officer or has a financial interest; or (iii) a contract or transaction between the corporation and a director of the corporation or between the corporation and an entity in which a director of the corporation is a director or officer or has a financial interest. No conflicting interest transaction shall be void or voidable, be enjoined, be set aside, or give rise to an award of damages or other sanctions in a proceeding by a shareholder or by or in the right of the corporation, solely because the conflicting interest transaction involves a director of the corporation or an entity in which a director of the corporation is a director or officer or has a financial interest, or solely because the director is present at or participates in the meeting of the corporation's board of directors or of the committee of the board of directors which authorized, approves or ratifies a conflicting interest transaction, or solely because the director's vote is counted for such purpose if: (A) the material facts as to the director's relationship or interest and as to the conflicting interest transaction are disclosed or are known to the board of directors or the committee, and the board of directors or committee in good faith authorizes, approves or ratifies the conflicting interest transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors are less than a quorum; or (B) the material facts as to the director's relationship or interest and as to the conflicting interest transaction are disclosed or are known to the shareholders entitled to vote thereon, and the conflicting interest transaction is specifically authorized, approved or ratified in good faith by a vote of the shareholders; or (C) a conflicting interest transaction is fair as to the corporation as of the time it is authorized,

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approved or ratified by the board of directors, a committee thereof, or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes, approves or ratifies the conflicting interest transaction.

        (b)   Loans and Guaranties for the Benefit of Directors.    Neither the board of directors nor any committee thereof shall authorize a loan by the corporation to a director of the corporation or to an entity in which a director of the corporation is a director or officer or has a financial interest, or a guaranty by the corporation of an obligation of a director of the corporation or of an obligation of an entity in which a director of the corporation is a director or officer or has a financial interest, until at least ten days after written notice of the proposed authorization of the loan or guaranty has been given to the shareholders who would be entitled to vote thereon if the issue of the loan or guaranty were submitted to a vote of the shareholders. The requirements of this paragraph (b) are in addition to, and not in substitution for, the provisions of paragraph (a) of Article EIGHTH.

        (c)   Indemnification.    The corporation shall indemnify, to the maximum extent permitted by law, any person who is or was a director, officer, agent, fiduciary or employee of the corporation against any claim, liability or expenses arising against or incurred by such person made party to a proceeding because he is or was a director, officer, agent, fiduciary or employee of the corporation or because he was a director, officer, agent, fiduciary or employee of the corporation or because he is or was serving another entity as a director, officer, partner, trustee, employee, fiduciary or agent at the corporation's request. The corporation shall further have the authority to the maximum extent permitted by law to purchase and maintain insurance providing such indemnification.

        (d)   Limitation on Director's Liability.    No director of this corporation shall have any personal liability for monetary damages to the corporation or its shareholders for breach of his fiduciary duty as a director, except that this provision shall not eliminate or limit the personal liability of a director to the corporation or its shareholders for monetary damages for: (i) any breach of the director's duty of loyalty to the corporation or its shareholders; or (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; Nothing contained herein will be construed to deprive any director of his right to all defenses ordinarily available to a director nor will anything herein be construed to deprive any director of any right he may have for contribution from any other director or other person.

The undersigned incorporator does hereby certify the foregoing as a true and accurate statement of the Articles of Incorporation of the Corporation.

Dated:	December 9, 2004
By:
	/s/ R. SCOTT ERVIN
	R. Scott Ervin, Incorporator

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Exhibit 3.1

EX-3.3

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Exhibit 3.3

CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
FORCE PROTECTION, INC.

        The undersigned hereby certifies as follows:

        ONE: That he is the duly appointed and authorized corporate Secretary of Force Protection, Inc., a Nevada Corporation (the "Corporation"), being the surviving entity of a Merger between the Corporation and a Colorado corporation of the same name ("FPI Colorado"). Under the terms of the Merger, all existing corporate action, identity and authority of FPI Colorado was and is transferred and merged into the Corporation.

        TWO: That, by Resolution of the Board of Directors of the Corporation which was ratified and approved by a majority of the stockholders properly voting at a duly called General Stockholder's meeting at which a quorum was present, the Corporation resolved to amend its Articles of Incorporation (such action being the action of the Corporation by virtue of the Merger), as follows:

        IT IS RESOLVED, that the Articles of Incorporation are hereby amended to read as follows:

NINTH: That the Board of Directors be authorized, without further approval of the shareholders, to take all steps necessary to effect, or in its discretion not to effect, a reverse split of the Common Stock of the Corporation on the basis of a ratio within the range of two to twelve PRE-SPLIT shares for every one POST-SPLIT share of Common Stock, with the ratio to be selected and implemented by the Corporation's Board of Directors in its sole discretion (the "Reverse Split"), and further that the Board of Director be authorized to take all others actions necessary and appropriate to effect such Reverse Split if so required.

        THREE: This Amendment was approved by the required vote of stockholders in accordance with applicable corporate law at the Annual General meeting of the Stockholders properly held on December 30, 2004 at which a quorum was present. The Amendment was properly put to the stockholders pursuant to a Proxy Statement duly filed and sent to each stock holder of record as of October 15, 2004 (the "Record Date") and the number of shares voting in favor of the amendment exceeded the number required to approve such Amendment, that number being greater than fifty percent (50%) of the shares voting.

        FOUR: This Amendment shall be deemed effective as of the date of filing with the Secretary of State of the State of Nevada, or January 3, 2005, whichever is later.

        I the undersigned, hereby declare under penalty of perjury, in accordance with the laws of the state of Nevada, that I am the Secretary of the Corporation, that I executed this Certificate of Amendment to the Articles of Incorporation, that I have personal knowledge of the information contained therein, and that the information contained therein is true and correct.

By:	/s/ R. SCOTT ERVIN
Title	Secretary

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Exhibit 3.3

EX-10.1

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Exhibit 10.1

LEASE AGREEMENT

by and between

DORCHESTER COUNTY, SOUTH CAROLINA

and

LATI INDUSTRIES, INC.

Dated as of December 7, 1998

Certain rights of LATI Industries, Inc. under this Lease Agreement have been or may be assigned and pledged, and, if so assigned and pledged, are or may be subject to, a financing or other security interests. Information concerning such financing or other security interest may be obtained from LATI Industries, Inc. at the address provided in Section 12.03 herein.

TABLE OF CONTENTS

Section		Page
	Parties to Lease	1
	ARTICLE I
	DEFINITIONS
1.01.	Definitions	2
1.02.	References to Lease	4
	ARTICLE II
	REPRESENTATIONS AND COVENANTS
2.01.	Representations and Covenants by County	5
2.02.	Representations and Warranties by Tenant	5
	ARTICLE III
	DEMISING CLAUSE
3.01.	Demise of Project	7
	ARTICLE IV
	ACQUISITION OF PROJECT; MODIFICATION, IMPROVEMENT AND ADDITIONS TO PROJECT; AMENDMENTS TO EXHIBITS
4.01.	Acquisition by Construction and Purchase of Project	8
4.01.	Revision of Plans and Specifications	8
4.03.	Completion Date	8
4.04.	Completion of Project if Financing Arrangement Proceeds are Insufficient	8
4.05.	Amendments to Exhibits	8
	ARTICLE V
	LEASE TERM AND RENT PROVISIONS
5.01.	Term	9
5.02.	Basic Rent	9
5.03.	Administration Expenses	9
5.04.	Net Lease	9
	ARTICLE VI
	MAINTENANCE AND MODIFICATION OF PROJECT; REMOVAL OF LEASED EQUIPMENT; PAYMENTS IN LIEU OF TAXES; TAXES, UTILITIES AND OTHER CHARGES; INSURANCE
6.01.	Maintenance and Modification of Project	10
6.02.	Removal or Replacement of Leased Equipment and Leased Improvements	10
6.03.	Payments in Lieu of Taxes	10
6.04.	Taxes, Utilities and Other Governmental Charges	11
6.05.	Insurance	11

Section		Page
	ARTICLE VII
	CASUALTY AND CONDEMNATION
7.01.	Damage and Destruction	13
7.02.	Condemnation	13
7.03.	Payments in Lieu of Taxes in the Event of Damage and Destruction or Condemnation	13
	ARTICLE VIII
	PARTICULAR COVENANTS AND AGREEMENTS
8.01.	Covenant of Quiet Possession	14
8.02.	No Warranty of Condition or Suitability of Project	14
8.03.	No Conveyance or Impairment of Title by the County	14
8.04.	Primary Use	14
8.05.	Right to Inspect	14
8.06.	Release of Leased Improvements; Easements	14
8.07.	Limitation of County's Liability	15
8.08.	Liens by Tenant	15
8.09.	Maintenance of Corporate Existence	15
8.10.	Applications and Licenses	16
8.11.	Qualification in State	16
8.12.	No Liability of County's Personnel	16
8.13.	Indemnification	16
	ARTICLE IX
	SUBLET OR ASSIGNMENT OR OTHER TRANSFER OF PROJECT; SURVIVAL OF TENANT'S OBLIGATION
9.01.	Sublet or Assignment or Other Transfer	17
9.02.	Access	17
	ARTICLE X
	PURCHASE AND OPTION TO PURCHASE PROJECT; PURCHASE PRICE
10.01.	Mandatory Purchase of Project by Tenant	18
10.02.	Options to Purchase the Project; Exercise of Option Hereunder	18
10.03.	Purchase Price	18
10.04.	Status of Title	18
10.05.	Conveyance; Charges Incident Thereto	19
	ARTICLE XI
	EVENTS OF DEFAULT AND REMEDIES
11.01.	Events of Default	20
11.02.	Remedies on Event of Default	20
11.03.	Tenant's Obligation to Survive Repossession and Termination	20

Section		Page
	ARTICLE XII
	MISCELLANEOUS
12.01.	Rights and Remedies Cumulative	21
12.02.	Successors and Assigns	21
12.03.	Notices; Demands; Requests	21
12.04.	Applicable Law; Entire Understanding	21
12.05.	Severability	22
12.06.	Headings and Table of Contents; References	22
12.07.	Multiple Counterparts	22
12.08.	Amendments	22
12.09.	Waiver	22
12.10.	Memorandum of Lease Agreement	22
LEASEHOLD MORTGAGE RIDER		Rider-1
EXHIBIT A—Description of Leased Land		A-1
EXHIBIT B—Leased Improvements		B-1
EXHIBIT C—Form of Deed		C-1
EXHIBIT D—Form of Bill of Sale		D-1
EXHIBIT E—Form of Nondisclosure Statement		E-1

LEASE AGREEMENT

        THIS LEASE AGREEMENT made and entered into as of December 7, 1998 by and between Dorchester County, South Carolina (the "County"), a body politic and corporate and a political subdivision of the State of South Carolina, and LATI Industries, Inc., a corporation duly organized and existing under the laws of the State of South Carolina (the "Tenant").

W I T N E S S E T H:

        WHEREAS, Title 4, Chapter 12, Code of Laws of South Carolina 1976, as amended (the "Act"), in conjunction with other parts and provisions of Title 4 of the Code of Laws of South Carolina including, without limitation, Chapters 9 and 29, authorizes and empowers the several counties of the State of South Carolina to acquire, or cause to be acquired, enlarge, improve and expand one or more projects (as such term is defined in the Act), to allow financing agreements with any industry to construct and thereafter operate, maintain and improve a project, and to enter into lease agreements which require the industry to make payments to the county, municipality, school district and other political units in which the project is located in lieu of taxes as an inducement for the acquiring, enlarging, improving or expanding such project by construction and purchase; and

        WHEREAS, as inducement for the Tenant to acquire land within the County and construct a facility thereon to manufacture thermoplastic compounds, the County has agreed to enter into this Lease Agreement with provisions for payments in lieu of taxes for the purpose of acquiring, by construction and purchase, certain land, buildings and other improvements constituting a project (as defined in the Act) necessary, suitable or useful by the Tenant in the construction of the facility for the manufacturing of thermoplastic compounds, (the "Project" as more particularly defined herein), all to be located within the limits of the Industrial Park (hereinafter defined), and as a result thereof to lease the Project to the Tenant in accordance with the terms and conditions hereinafter set forth; and

        WHEREAS, the Project will be located in a multi-county industrial park (the "Industrial Park") established by the County and Orangeburg County in accordance with Title 4, Chapter 1, Section 170 of the Code of laws of South Carolina (the "Park").

        NOW, THEREFORE, in consideration of the respective representations and agreements hereinafter contained, the County and the Tenant agree as follows provided that in the performance of the agreements of the County herein contained, it shall not incur any obligation for the payment of money, but, the foregoing notwithstanding, any obligation it may thereby incur shall not create a pecuniary liability or a charge upon its general credit or taxing powers but shall be a limited obligation of the County payable solely out of the moneys derived by it from this Lease, and certain insurance proceeds and condemnation awards as provided herein and in the Act.

ARTICLE I

DEFINITIONS

        SECTION 1.01. Definitions. In addition to the words and terms elsewhere defined in this Lease, the following words and terms as used herein and in the preambles hereto shall have the following meanings unless the context or use indicates another or different meaning or intent. Furthermore, terms not defined herein which are defined in the Act shall have the meaning ascribed to them in the Act.

        "Act" shall mean Title 4, Chapter 12, Code of Laws of South Carolina 1976, as amended, and all future acts amendatory thereof.

        "Additional Rent" shall have the meaning ascribed to it in Section 6.04 of this Lease.

        "Administrative Expenses" shall mean the reasonable and necessary expense incurred by the County with respect to the Project and this Lease, including the fees and expenses of counsel to the County; provided, however, that no such expenses shall be considered an Administration Expense until the County has furnished to the Tenant a statement in writing indicating the amount of such expense and the reason it has been or will be incurred.

        "Authorized County Representative" shall mean the person or persons at the time designated to act on behalf of the County by written certificate furnished to the Tenant containing the specimen signature of such person and signed on behalf of the County by the County Administrator.

        "Authorized Tenant Representative" shall mean any person or persons at the time designated to act on behalf of the Tenant by a written certificate furnished to the County containing the specimen signature of each such person and signed on behalf of the Tenant by its President or Chief Information and Financial Officer.

        "Basic Rent" shall have the meaning ascribed to it in Section 5.02 of this Lease.

        "Code" shall mean the Code of Laws of South Carolina 1976, as amended.

        "Completion Date" shall mean the date on which the acquisition, construction and installation of the Project or any one of its Increments is completed in its entirety as certified in accordance with Section 4.03 of this Lease.

        "Cost" or "Cost of the Project" shall mean the cost of acquiring, by construction and purchase, the Project and shall be deemed to include, whether incurred prior to or after the date of this Lease: (a) the cost of acquisition of the Leased Improvements including, but not limited to, (i) obligations of the Tenant or the County incurred for labor, materials and other expenses to contractors, builders and materialmen in connection with the acquisition, construction and installation of the Project; (ii) the cost of contract bonds and of insurance of all kinds that may be required or necessary during the course of construction of the Project, which are not paid by the contractor or contractors or otherwise provided for; (iii) the expenses of the Tenant or the County for test borings, surveys, test and pilot operations, estimates, plans and specifications and preliminary investigations therefor, and for supervising construction, as well as for the performance of all other duties required by or reasonably necessary in connection with the acquisition, construction and installation of the Project; (b) the cost of acquisition of the Leased Equipment; (c) legal, accounting, financial and printing expenses, fees and all other expenses incurred in connection with the execution and delivery of this Lease; (d) all other costs which the Tenant shall be required to pay under the terms of any contract or contracts for the acquisition, construction and installation of the Project; and (e) any suns required to reimburse the Tenant or the County for advances made by either of them for any of the above items, or for any other work done and costs incurred by the Tenant or the County which are for the acquisition of property of a character

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subject to the allowance or depreciation provided for under Section 167 of the Internal Revenue Code of 1986, as amended, and included in the Project.

        "County" shall mean Dorchester County, South Carolina, a body politic and corporate and a political subdivision of the State of South Carolina, and its successors and assigns.

        "County Council" shall mean the governing body of the County and its successors.

        "Default" shall mean an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default as defined in Section 11.01 hereof.

        "FILOT Payments" shall mean the payments in lieu of taxes which the Tenant is obligated to pay to the County as set forth in Section 6.03 hereof.

        "Increments" shall mean those increments of the Project which are completed and fit for their intended use as prescribed by Section 12-37-670 of the Code.

        "Independent Counsel" shall mean an attorney duly admitted to practice law before the highest court of any state.

        "Industrial Park" shall mean the multi-county industrial park established between the County and Orangeburg County, South Carolina.

        "Land" shall mean the real property to be acquired by Tenant and located in the Industrial Park.

        "Lease" or "Agreement" shall mean this agreement as originally executed and from time to time supplemented or amended as permitted herein.

        "Leased Equipment" shall mean all equipment acquired by the Tenant and conveyed to the County pursuant to this Lease, and all equipment acquired by Tenant in the name of the County, all of which shall be operated by the Tenant on the Land and leased by the County to the Tenant pursuant to this Lease.

        "Leased Improvements" shall mean the buildings and improvements to the Land, including fixtures comprising real property, to be constructed or undertaken as part of the Project and conveyed to the County and described in Exhibit B hereto, as it may be supplemented or amended.

        "Permitted Encumbrances" shall mean as of any particular time, (i) liens for ad valorem taxes and special assessments not then delinquent; (ii) this Lease, any sublease, and any financing or other security instrument including any leasehold mortgage; (iii) utility, access and other easements and rights of way, flood rights, leases, subleases, restrictions and exceptions that an Authorized Tenant Representative certifies will not interfere with or impair the operations being conducted at the Project (or, if no operations are being conducted therein, the operations for which the Project was designed or last modified); (iv) such minor defects, irregularities, encumbrances, easements, rights of way, and clouds on title as normally exist with respect to properties similar in character to the Project and as do not, according to the written certification of an Authorized Tenant Representative delivered to the County, materially impair the property affected thereby for the purpose for which it was acquired or is held by the County; (v) mechanic's and materialman's liens in effect on the date hereof or otherwise; (vi) any mortgage, lease or security interest with respect to machinery and equipment not constituting part of the Project to be used or installed at the Project; and (vii) any security interest held by a third party lender in the Leased Improvements or in the Leased Equipment or other personal property that comprises the Project.

        "Person" shall mean and include any individual, association, unincorporated organization, corporation, partnership, joint venture, or government or agency or political subdivision thereof.

        "Plans and Specifications" shall mean the plans and specifications prepared for the portion of the Project comprising the Leased Improvements, on file at the Tenant's office, as the same may be

3

implemented and detailed from time to time and as the same may be revised from time to time prior to the completion of the acquisition, construction and installation of the Project in accordance with Section 4.03 hereof.

        "Project" shall mean, to the extent placed in service in the initial five-year period described in Section 4-12-30(C) of the Act, or within the seven-year period described in Section 4-12-30(C) and as authorized by the extension executed by the County and the Company, or constituting replacement property therefor within the meaning of Section 4-12-30(F) of the Act, (i) the Leased Improvements, (ii) the Leased Equipment; (iii) all other machinery, equipment, other fixtures or personal property which is installed in or on the Land in substitution or replacement of the Leased Improvements or the Leased Equipment; and (iv) any personal property acquired hereafter which becomes so attached, integrated or affixed to any item described in the foregoing clauses that it cannot be removed without damaging such items or impairing the operating utility of such items as originally designated.

        "Reserved Rights" shall mean the rights of the County hereunder to receive notices, to inspect the Project and any books and records relating to the Project, to receive payment of Administration Expenses for costs incurred by the County, to receive payments in lieu of taxes pursuant to Section 6.03 hereof, and to receive payments under Section 6.04 hereof.

        "School District" shall mean the applicable school district in which the Project is located.

        "State" shall mean the State of South Carolina.

        "Tenant" shall mean LATI Industries, Inc. and any surviving, resulting or transferee corporation in any merger, consolidation or transfer of assets permitted under Section 8.09 hereof.

        "Term" shall mean the duration of the leasehold estate as set forth in Section 5.01 hereof.

        All terms used herein which are not otherwise defined shall have the meaning ascribed to them in the Act.

        SECTION 1.02. References to Lease. The words "hereof," "herein," "hereunder" and other words of similar import this Lease as a whole.

[End of Article I]

4

ARTICLE II

REPRESENTATIONS AND COVENANTS

        SECTION 2.01. Representations and Covenants by County. The County makes the following representations and covenants as the basis for the undertakings on its part herein contained:

        (a)   The County is a body politic and corporate and a political subdivision of the State of South Carolina and is authorized and empowered by the provisions of the Act to enter into the transactions contemplated by this Lease and to carry out its obligations hereunder. The Project constitutes and will constitute a "project" within the meaning of the Act. By proper action by the County Council, the County has been duly authorized to execute and deliver this Lease and any and all agreements collateral thereto.

        (b)   The County is acquiring the Project, either in its own name or pursuant to a conveyance from the Tenant, and proposes to lease the Project to the Tenant in accordance with the terms hereof and to sell the Project to the Tenant at the expiration or sooner termination of the Term of the Lease, if the Tenant, at its sole option, shall elect to purchase the same for the total consideration of One Dollar ($1.00), all for the purpose of promoting the industrial development, developing the trade, and utilizing and employing the manpower, agricultural products and natural resources of South Carolina and benefiting the general public welfare of the County by providing services, employment, recreation, or other public benefits not otherwise provided locally.

        (c)   The County is not in default under any of the provisions of the laws of the State whereby any such default would adversely affect the transactions contemplated by this Lease.

        (d)   The authorization, execution and delivery of this Lease, and the compliance by the County with the provisions hereof, will not conflict with, violate, or constitute a breach of, or a default under any existing law, ordinance, court or administrative regulation, decree, order or any provision of the Constitution or laws of the State relating to the establishment of the County or its affairs, or any agreement, mortgage, lease or other instrument to which the County is subject or by which it is bound.

        (e)   No actions, suits, proceedings, inquiries or investigations are pending or threatened against or affecting the County in any court or before any governmental authority or arbitration board or tribunal, any of which materially and adversely affect the transactions contemplated by this Lease or which adversely affect the validity or enforceability of this Lease or any agreement or instrument to which the County is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby. The Lease is a valid and legally enforceable agreement of the County.

        (f)    The County hereby covenants that it will, upon the expiration or earlier termination of this Lease, and at the sole option of the Tenant, reconvey the Project to the Tenant in the same quality of title as received, in fee simple absolute, by a limited warranty deed in substantially the form set forth in Exhibit C hereto and by a bill of sale in substantially the form set forth in Exhibit D hereto, for the purchase price set forth in Section 10.03 hereof.

        SECTION 2.02. Representations and Warranties by Tenant. The Tenant makes the following representations and warranties as the basis for the undertakings on its part herein contained:

        (a)   The Tenant is a corporation duly incorporated and having legal corporate existence and good standing under the laws of the State of South Carolina and has power to enter into this Lease and by proper corporate action has been duly authorized to execute and deliver this Lease and any and all agreements collateral thereto. The Lease is a valid and legally enforceable agreement of the Tenant.

5

        (b)   Neither the execution and delivery of this Lease, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Lease, will result in a material breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Tenant is now a party or by which it is bound, or will constitute a default under any of the foregoing, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Tenant which materially restricts the Tenant's ability to make any payments hereunder, other than as may be created or permitted by this Lease.

        (c)   No event has occurred and no condition exists with respect to the Tenant which would constitute an "Event of Default" as defined herein which with the lapse of time or with the giving of notice or both would become an "Event of Default" under this Lease.

        (d)   The Project constitutes and will constitute a "project" within the meaning of the Act and the Tenant intends to operate the Project for the purpose of manufacturing thermoplastic compounds and for such other purposes permitted under the Act as the Tenant may deem appropriate.

        (e)   The acquisition, by construction and purchase, of the Project by the County, whether in its own name or pursuant to a conveyance from the Tenant, in order to authorize FILOT Payments under the Act and the leasing of the Project to the Tenant have been instrumental in inducing the Tenant to locate and construct the Project in the Industrial Park.

        (f)    No actions, suits, proceedings, inquiries or investigations are pending or threatened against or affecting the Tenant in any court or before any governmental authority or arbitration board or tribunal, any of which involve the possibility of materially and adversely affecting the transactions contemplated by this Lease or which, in any way would adversely affect the validity or enforceability of any financing arrangement, this Lease or any agreement or instrument to which the Tenant is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby.

        (g)   The Tenant intends on the date hereof to make capital expenditures with respect to the Project equal to or in excess of $19,000,000 within seven years of the close of the property tax year in which this Agreement is executed.

[End of Article II]

6

ARTICLE III

DEMISING CLAUSE

Project. The County demises and leases to the Tenant, and the Tenant leases from the County, the Project for the Term and at the rental set forth in Sections 5.01, 5.02 and 5.03 hereof in accordance with the provisions of this Lease.

[End of Article III]

7

ARTICLE IV

ACQUISITION OF PROJECT;
MODIFICATION, IMPROVEMENT AND ADDITIONS TO PROJECT;
AMENDMENTS TO EXHIBITS

        SECTION 4.01. Acquisition by Construction and Purchase of Project. The Tenant hereby agrees to acquire in the name of the County by construction and purchase, or convey to the County after acquisition by Tenant, the Project, to the extent comprising the Leased Improvements, in accordance with the Plans and Specifications, and all other things deemed necessary by the Tenant in connection with the Project. The Tenant agrees to maintain such records in connection with the acquisition by construction and purchase of the Project as to permit ready identification thereof. The Tenant further agrees (a) to use its best efforts to cause such acquisition as promptly as practicable and (b) to expend upon the acquisition of the Project not less than $19,000,000 prior to seven years following the end of the property tax year in which this Agreement is executed. The Tenant agrees to convey to the County, from time to time and in any event prior to the end of each calendar year, by bill of sale or other instrument of conveyance reasonably satisfactory to the County, all property comprising the Project which is placed in service during the year by the Tenant. Title to the Project shall thereafter be and remain in the name of the County throughout the Term of this Lease.

        SECTION 4.02. Revision of Plans and Specifications. The Tenant may revise the Plans and Specifications at any time and from time to time prior to the Completion Date, so long as the Project remains within the minimum investment figures set forth in Section 4.01.

        SECTION 4.03. Completion Date. The Completion Date shall be evidenced to the County by a certificate of an Authorized Tenant Representative certifying the Completion Date and stating that the acquisition of the Project has been completed in accordance with the Plans and Specifications and that payment of the Cost of the Project or provision therefor has been made except for any items of Cost of the Project not then due and payable or the liability for payment of which is being contested or disputed by the Tenant. Notwithstanding the foregoing, the Certificate of Completion may state that it is given without prejudice to any rights against third parties which exist at the date of such certificate or which may subsequently come into being.

        SECTION 4.04. Completion of the Project if Financing Arrangement Proceeds are Insufficient. Whether or not the proceeds of any financing arrangement authorized by this Agreement are sufficient to pay the Cost of the Project in full, the Tenant will complete or cause to be completed the Project at least to the level of the minimum investment cited in Section 4.01, above, and pay or cause to be paid all of that portion of the Cost of the Project in excess of the moneys available therefor under the financing arrangement. The County does not make any warranty, either express or implied, or accept any obligation regarding the Cost of the Project. If the Tenant shall pay any portion of the Cost of the Project pursuant to the provisions of this Section 4.04, it shall not be entitled to any reimbursement therefor, nor shall it be entitled to any diminution in or postponement of the payments required in Article V of this Lease to be paid by the Tenant.

        SECTION 4.05. Amendments to Exhibits. The Tenant may supplement Exhibit B from time to time with the written consent of the County, which consent will not be unreasonably withheld.

[End of Article IV]

8

ARTICLE V

LEASE TERM AND RENT PROVISIONS

        SECTION 5.01. Term. Subject to the terms and provisions herein contained, this Lease shall be and remain in full force and effect for a term commencing on the date hereof and ending at midnight twenty (20) years from the date of the final investment with respect to the Project under Section 4-12-30(C) of the Act, unless sooner terminated as herein permitted.

        SECTION 5.02. Basic Rent. In consideration of the public benefits accruing to the citizens of the County as a result of the location of the Project in the Industrial Park, the Tenant will pay to the County without notice or demand One Dollar ($1.00) per year (herein called "Basic Rent") on or before the date FILOT Payments are due. In addition, the Tenant agrees to pay Administration Expenses when and as they shall become due, but in no event later than forty-five (45) days after receiving written notice from the County.

        SECTION 5.03. Administration Expenses. The Tenant will pay on demand Administration Expenses, as Additional Rent and all other amounts, liabilities and obligations which the Tenant herein assumes or agrees to pay. Specifically, but without limitation, the Tenant will pay all insurance payments, assessments, and judgments on or associated with the Project. In the event of any failure on the part of the Tenant to pay any such amounts, liabilities or obligations, the County shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of the Basic Rent.

        SECTION 5.04. Net Lease. This Lease is a net lease. The obligation to pay Basic Rent, Additional Rent and all other sums payable hereunder to or for the account of the County, and to perform all other covenants, conditions and agreements hereunder (except as otherwise provided herein) shall be absolute and unconditional without notice or demand and without set-off, counterclaim, abatement, suspension, deduction, diminution or defense for any reason whatsoever.

[End of Article V]

9

ARTICLE VI

MAINTENANCE AND MODIFICATION OF PROJECT;
REMOVAL OF LEASED EQUIPMENT; PAYMENTS IN LIEU
OF TAXES; TAXES, UTILITIES AND OTHER CHARGES;
INSURANCE

        SECTION 6.01. Maintenance and Modification of Project. The Tenant at its own expense during the Term will keep and maintain the Project in good repair and in good operating condition. Subject to the provisions of Section 7.01 of this Lease, the Tenant will promptly make, or cause to be made, all repairs, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen, necessary to keep the Project in good and lawful order and in good operating condition, wear and tear from reasonable use excepted, whether or not such repairs are due to any laws, rules, regulations or ordinances hereafter enacted which involve a change of policy on the part of the government body enacting the same.

        The County shall not be required to rebuild or to make any repairs, replacements or renewals of any nature or description to the Project or to make any expenditure whatsoever in connection with this Lease or to maintain the Project in any way. The Tenant expressly waives the right contained in any law now or hereafter in effect to make any repairs at the expense of the County, as lessor hereunder.

        SECTION 6.02. Removal or Replacement of Leased Equipment and Leased Improvements. The parties hereto understand that the Tenant, or its agents, shall acquire and operate the Leased Equipment on the Land. The County shall not be under any obligation to renew, repair or replace any inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary Leased Equipment or any portion of the Leased Improvements. If no Default under this Lease shall have happened and be continuing, in any instance where the Tenant in its discretion determines that any items of Leased Equipment or any portion of the Leased Improvements have become inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary for operations on the Land, the Tenant may remove such items of Leased Equipment or any portion of the Leased Improvements from the Land (and on behalf of the County) sell, trade-in, exchange or otherwise dispose of them (as a whole or in part) without consent of the County. If the Tenant disposes of Leased Equipment or any portion of the Leased Improvements subject to the FILOT Payments described in Section 6.03, the FILOT Payments must be reduced by the amount of the FILOT Payment applicable to that Leased Equipment or any portion of the Leased Improvements. Leased Equipment or any portion of the Leased Improvements is considered disposed of only when disposed of in accordance with this Section. Any property which is placed in service as replacement for property which is subject to the FILOT Payment shall become part of the FILOT Payment subject to and in accordance with the terms of Section 4-12-30(F) of the Act.

        SECTION 6.03. Payments in Lieu of Taxes. It is recognized that under the Act, for a project involving an initial investment of at least $5,000,000, the lease agreement must contain a provision requiring the industry to make payments to the County in lieu of taxes as provided in the Act. In accordance with the provisions of the Act, during the Term the Tenant shall make twenty (20) annual FILOT Payments calculated as set forth in the next succeeding paragraph of this Lease for each Increment of the Project that is placed in service during the initial five (5) year investment period, as extended, if applicable, and for that portion of the Project consisting of replacement property, subject to the terms and provisions of Section 4-12-30(F) of the Act.

        Such annual payments under the previous paragraph shall be due and payable and subject to such penalties on the date and in the manner as prescribed for County and other ad valorem taxes. The amount of such annual payments shall be determined by using an assessment ratio of 6%; a fixed millage rate of 240.0; and, a fair market value estimate as determined by the South Carolina Department of Revenue using original cost less allowable depreciation for the personal property as provided in Section 12-27-930 of the Code but without extraordinary obsolescence, unless State law

10

should subsequently be revised to allow extraordinary obsolescence, in which event such extraordinary obsolescence shall be permitted under this Lease.

        In the event that the Act and/or the FILOT Payments are declared invalid or unenforceable, in whole or in part, for any reason, the Tenant and the County express their intentions that such payments be reformed so as to afford the Tenant the maximum benefit then permitted by law. If the Project is deemed to be subject to ad valorem taxation, the Tenant shall be entitled (1) to the five-year exemption from ad valorem taxes provided by Article X, Section 3 of the Constitution of the State, and any other exemption allowed by law from time to time; (2) to all allowable depreciation; and (3) to receive credit, if any there be, by reason of the fact that the School District received larger allocations of funds under the Education Finance Act of 1977 (Sections 59-20-10 to 59-20-80 of the Code) than it would have received if the Project had been taxed at the normal industrial property assessment ratio (presently 10.5% of fair market value), provided such credit shall be adjusted to take into account any amounts which the School District is required to pay under the Education Finance Act as a result of the Project becoming subject to ad valorem taxation.

        In the event that the Cost of the Project has not exceeded $5,000,000 within five years from the end of the property tax year in which this Agreement is executed, the Project shall revert retroactively to the tax treatment required pursuant to Section 4-12-20 of the Code and the unpaid taxes due thereby, less amounts previously paid as FILOT Payments hereunder, shall be subject to interest as provided in Section 12-54-20 of the Code.

        With respect to improvements to the Leased Equipment and Leased Improvements made by the Tenant during the Term but after the initial five (5) year investment period and which do not qualify as replacement property under Section 4-12-30(F) of the Act, Tenant shall make the statutory payments in lieu of ad valorem taxes required by Section 4-12-20 of the Code, with appropriate reductions similar to the tax exemption, if any, which would be afforded to the Tenant if it were the owner of such leasehold improvements.

        SECTION 6.04. Taxes, Utilities and Other Governmental Charges. The County and the Tenant acknowledge that: (a) pursuant to the Act, no part of the Project will be subject to ad valorem taxation in South Carolina but will be subject to fees in lieu of taxes as provided in Section 6.03; and (b) under present law the income and profits (if any) of the County from the Project are not subject to either federal or South Carolina taxation and under present law there is no tax imposed upon leasehold estates in South Carolina. However, in addition to the payments in lieu of taxes referred to in Section 6.03 hereof and any other taxes and governmental charges that may lawfully be assessed, levied or imposed against it, the Tenant will pay as the same respectively become due: (i) all taxes and governmental charges of any kind whatsoever that may be lawfully assessed, levied or imposed against the County with respect to the Project or any machinery, equipment or other property installed or brought by the Tenant therein or thereon; (ii) all utility and other charges incurred in the operation, maintenance, use and occupancy of the Project; and (iii) all assessments and charges lawfully made by any governmental body for public improvements to the Project (herein collectively referred to as "Additional Rent"). If the Tenant shall contest any such tax, assessment, lien or charge, such action by the Tenant shall not be considered as a breach by it of any of its covenants under this Lease while the action to contest such tax, assessment, lien or charge remains pending.

        SECTION 6.05. Insurance. The Tenant shall maintain public liability insurance with specific reference to the Project and shall otherwise keep the Project continuously insured against such risks as are customarily insured against by businesses of like size and type, paying as the same become due and payable all premiums with respect thereto. In lieu of separate insurance policies, such insurance may be in the form of a blanket insurance policy or policies. Insurance policies may be written with deductible amounts and exceptions and exclusions comparable to those of businesses of like size and type, and

11

shall name the County as an additional insured. The insurance requirements hereunder may be satisfied by the Tenant's providing self-insurance.

        All proceeds of insurance against property damage to the Project shall be made Payable as the Tenant shall specify, and such proceeds shall be collected and applied as provided in Section 7.01 hereof, and all claims under any insurance policy referred to in this Lease may be settled by the Tenant.

[End of Article VI]

12

ARTICLE VII

CASUALTY AND CONDEMNATION

        SECTION 7.01. Damage and Destruction. If all or any part of the Project shall be destroyed or damaged, the Tenant shall either repair the Project or not, as the Tenant may elect in its sole discretion. If the cost of rebuilding, replacing, restoring or repairing thereof after any particular incident shall exceed $500,000, the Tenant shall promptly notify the County as to the nature and extent of such damage or loss. If the Tenant shall determine to repair the Project, the Tenant shall forthwith proceed with such rebuilding, repairing or restoring and shall notify the County upon the completion thereof. In the event any insurance proceeds are not sufficient to pay in full the costs of such rebuilding, repair or restoration, the County shall not have any responsibility to complete the work thereof or pay that portion of the costs thereof in excess of the amount of said proceeds. The Tenant shall not, by reason of the payment of any excess costs, be entitled to any reimbursement from the County or any abatement or diminution of the amounts payable under Section 6.03 hereof.

        SECTION 7.02. Condemnation. In the event that title to or the temporary use of the Project, or any part thereof, shall be taken in condemnation or by the exercise of the power of eminent domain, there shall be no abatement or reduction in the payments required under Section 5.02 hereof to be made by the Tenant. Immediately after the occurrence of any such taking of the Project, the Tenant shall notify the County as to the nature and extent of such taking and, as soon as practicable thereafter, notify the County whether it desires to restore the Project. If the Tenant shall determine to restore the Project, the Tenant shall forthwith proceed with such restoration, and shall notify the County upon the completion thereof. Any proceeds of any such taking shall be paid as Tenant shall specify.

        SECTION 7.03. Payments in Lieu of Taxes in the Event of Damage and Destruction or Condemnation. In the event that the Project is damaged or destroyed or the subject of condemnation proceedings, which damage, destruction and/or condemnation would substantially impair the operating ability of the Project, the parties hereto agree that the FILOT Payment required pursuant to Section 6.03 hereof shall be abated in the same manner and in the same proportion as would ad valorem taxes if the Project were owned by the Tenant, subject always to the terms and provisions of Section 6.03.

[End of Article VII]

13

ARTICLE VIII

PARTICULAR COVENANTS AND AGREEMENTS

        SECTION 8.01. Covenant of Quiet Possession. The County does not make any representation or covenant that the Tenant shall have quiet and peaceable possession of the Project; provided, however, the County agrees that except with respect to its rights hereunder and in furtherance of its duties and authorities as a political subdivision it will not take or cause another party to take any action to interfere with the Tenant's peaceful and quiet enjoyment of the Project. In the event peaceful and quiet enjoyment of the Project shall be denied to the Tenant or contested by anyone, the County shall, upon request of the Tenant, join where necessary in any proceeding to protect and defend the quiet enjoyment of the Tenant, provided that the Tenant shall pay the entire cost of any such proceeding and shall reimburse and indemnify and hold harmless the County from any cost or liability whatsoever resulting therefrom. The provisions of this Section shall be subject and subordinate to the obligations of the Tenant set forth in Article V hereof.

        SECTION 8.02. No Warranty of Condition or Suitability of Project. The County makes no warranty, either express or implied, as to the design, capabilities or condition of the Project or that it will be suitable for the Tenant's purposes or needs.

        SECTION 8.03. No Conveyance or Impairment of Title by the County. The County covenants and agrees that, during the Term, it will not convey, or suffer or permit the conveyance of, or impair or permit the impairment of (other than Permitted Encumbrances), by any voluntary act or omission on its part, its title to the Project to any person, firm or corporation whatsoever irrespective of whether any such conveyance or attempted conveyance shall recite that it is expressly subject to the terms of this Lease, provided, however, that nothing herein shall restrict the conveyance or transfer of the Project in accordance with any terms or requirements of this Lease.

        SECTION 8.04. Primary Use. The Tenant is granted and shall have the right during the Term to occupy and use the Project for any lawful purpose authorized pursuant to the Act. Insofar as it is practicable under existing conditions from time to time during the Term of this Lease, the Project shall be used primarily as a facility for manufacturing thermoplastic compounds.

        SECTION 8.05. Right to Inspect. The Tenant agrees that the County shall have the right at all reasonable times to enter upon and examine and inspect the Project. The County shall also be permitted, at all reasonable times, to examine the Plans and Specifications and the other books and records of the Tenant with respect to the Project. The aforesaid rights of examination and inspection shall be exercised only upon such reasonable and necessary terms and conditions as the Tenant shall prescribe, which conditions shall be deemed to include, but not be limited to, those necessary to protect the Tenant's trade secrets and proprietary rights. Prior to the exercise of any right to inspect the Project or the Plans and Specifications and books and records of the Project, the County shall sign a nondisclosure statement substantially in the form shown in Exhibit E attached hereto. In no way shall this requirement of a nondisclosure statement be deemed to apply to or restrict the rights of the United States Government and the State or its political subdivisions in the exercise of their respective sovereign duties and powers.

        SECTION 8.06. Release of Leased Improvements; Easements. The County, with consent of any leasehold mortgagee, agrees that so long as the Tenant is not in default hereof it will convey fee title, grant easements, rights of way, licenses, execute party wall agreements or terminate any of the foregoing or enter into such other similar agreements for the purposes of providing utility services, roadway or roadway access whether for the Leased Improvements or other land, expansion of the

14

Tenant's facilities, reasonable business purposes of the Tenant or for such other similar purposes as may be deemed necessary or desirable by the Tenant upon receipt of the following:

        (a)   a legal description of the real property proposed to be conveyed or affected by such grant, license or agreement (which legal description shall be accompanied by a current plat of survey delineating that portion of the Leased Land affected by the proposed conveyance, grant, license or agreements);

        (b)   the instrument in the form necessary for such purpose;

        (c)   a certificate from an Authorized Tenant Representative stating that the Tenant is not in default under the Lease;

        (d)   a certificate from an Authorized Tenant Representative stating that (i) the conveyance, grant, license or agreement will not impair the character or significance of the Leased Improvements for the purpose for which it was last designated or modified and is not detrimental co the proper conduct of the business of the Tenant at the Project, (ii) no part of the Leased Improvements, necessary to its use as a facility to manufacture synthetic carpet fibers, is included in any conveyance, and (iii) such conveyance, grant, license or agreement will not destroy the means of ingress thereto or egress therefrom; and

        (e)   an opinion of Independent Counsel that the proposed conveyance, grant or agreement is not in violation of the terms hereof.

        Upon receipt of the foregoing, the County shall promptly execute and deliver such conveyance, grant or agreement.

        No release effected under the provisions of this Section of the Lease shall entitle the Tenant to any abatement or diminution of the rents payable under Sections 5.02, 5.03, 6.03 and 6.04 hereof.

        SECTION 8.07. Limitation of County's Liability. Anything herein to the contrary notwithstanding: (a) any obligation the County may incur hereunder, including for the payment of money, except for the County's obligations under Sections 8.03 and 9.01, shall not be deemed to constitute a debt or general obligation of the County but shall be payable solely and exclusively from the moneys derived by the County from the leasing or sale of the Project or the FILOT Payments; and (b) the County may require as a condition to the participation by it with the Tenant in any contests or in obtaining any license or permits or other legal approvals a deposit by the Tenant of such amount as determined by the County to be reasonable to assure the reimbursement to the County of the costs incurred by it in such participation, with any amount of such deposit in excess of such costs to be returned to the Tenant.

        SECTION 8.08. Liens by Tenant. The Tenant may create or permit to be created or to remain, and will not be required to discharge, except as required in the normal business course of events, any lien, encumbrance or charge upon the Tenant's leasehold interest in the Project or any part thereof without the prior consent of the County. To facilitate actions by the Tenant, the County agrees to abide by all terms and conditions of the Leasehold Mortgage Rider which is attached hereto and expressly incorporated herein.

        SECTION 8.09. Maintenance of Corporate Existence. The Tenant agrees that as long as this Lease is in effect it will maintain its separate corporate existence, will not dissolve or otherwise dispose of all or substantially all of its assets or any material portion of the Project and will not consolidate with or merge into any other corporation without the prior written consent of the County; provided, however, that the Tenant may permit one or more other corporations to consolidate or merge into it without the consent of the County, so long as the Tenant is the surviving corporation and so long as no default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.

15

        SECTION 8.10. Applications and Licenses. In the event it may be necessary, for the proper performance of this Lease, on the part of the County or the Tenant, that any application or applications for any permit or license to do or to perform certain things be made to any governmental or other agency by the Tenant or the County, the Tenant and the County each agree to execute upon the request of the other such application or applications, including among other things the authorization necessary for the County to perform its obligations under Article X of this Lease.

        SECTION 8.11. Qualification in State. The Tenant warrants that it is duly qualified to do business in the State of South Carolina and covenants that it will continue to be so qualified so long as it operates the Project.

        SECTION 8.12. No Liability of County's Personnel. All covenants, stipulations, promises, agreements and obligations of the County contained herein shall be deemed to be covenants, stipulations, promises, agreements and obligations of the County and not of any member of the County Council or any officer, agent, servant or employee of the County in his individual capacity, and no recourse shall be had for the payment of any moneys hereunder or the performance of any of the covenants and agreements of the County herein contained or for any claims based thereon against any member of the governing body of the County or any officer, agent, servants or employee of the County.

        SECTION 8.13. Indemnification. The Tenant releases the County, including the members of the governing body of the County, and the employees, officers and agents of the County from, agrees that the County shall not be liable for, and agrees to hold the County harmless against, any loss or damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the Project or the use thereof, including all liability arising (i) from the use, storage, discharge, release, or handling of any hazardous or toxic materials, wastes, or substances (as such terms are defined by any applicable federal, state or local law) at the Project, or any other material the use, generation, storage, transportation, discharge, release, or handling of which is regulated by any federal, state or local statute, law, rule, regulation, ordinance or order at any time; or, (ii) as a result of any release of any nature onto the ground or into the water or air from or upon the Project at any time; provided, however, that the obligation under the indemnity in this Section shall be effective only to the extent of any actual loss that may be sustained by the County in excess of the net proceeds, if any, received by the County from any insurance or other reimbursement with respect to the loss sustained. Notwithstanding the preceding sentence, the indemnity provided by this Section shall not extend to liability occasioned by acts of the County which are unrelated to the utilization of the Project and any liability that may be attributable in whole or in part co the negligence or intentional acts of the County. The Tenant further agrees to indemnify and save harmless the County against and from any and all costs, liabilities, expenses, claims, and reasonable attorneys fees incurred directly in connection with the County's reasonable actions reasonably required in connection with the fulfillment of its obligations contained within this Lease, as well as those arising from any breach or default on the part of the Tenant in the performance of any covenant or agreement on the part of the Tenant to be performed pursuant to the terms of this Lease and from and against all cost, liability and expenses incurred in or in connection with any such claim or action or proceeding brought thereon, and in case any action or proceeding is brought against the County by reason of any such claim, the Tenant upon notice from the County covenants to resist or defend such action or proceedings at the Tenant's expense.

[End of Article VIII]

16

ARTICLE IX

SUBLET OR ASSIGNMENT OR OTHER TRANSFER OF PROJECT;
SURVIVAL OF TENANT'S OBLIGATION

        SECTION 9.01. Sublet or Assignment or Other Transfer. (a) To the maximum extent allowable under the Act, the Tenant may assign (including, without limitation, absolute, collateral, and other legal and equitable assignments of whatever form, type or name) all or a part of its rights and/or obligations under this Lease to one or more other entities so long as the County gives its written consent and so long as such assign of the Tenant is qualified under the Act to assume such rights and/or obligations and so long as such assign assumes all responsibilities and obligations of the Tenant, without adversely affecting the benefits to the Tenant or its assignees pursuant to any such agreement or the Act; provided, however, that in the case of an assignment of its leasehold interest hereunder to a financing institution, so long as the Tenant remains fully liable under this Lease, the consent of the County shall not be required.

        (b)   Notwithstanding the provisions of subparagraph (a), the Tenant may, in connection with financing transactions, mortgage or sublease all or a part of its rights and/or obligations under this Lease and the Project to one or more entities so long as the Tenant gives prior written notice of such mortgage or sublease to the County. The County shall, if Tenant requests, acknowledge receipt and sufficiency of any such notice.

        (c)   The Tenant or any assignee or sublessee within thirty (30) days thereof shall furnish or cause to be furnished to the County a true and correct copy of any sublease, assignment or other transfer effected pursuant to subparagraph (a) or (b).

        SECTION 9.02. Access. In lieu of and/or in addition to any subleasing by Tenant pursuant to Section 9.01, Tenant may, without any approval by the County, grant such rights of access to the Project.

[End of Article IX]

17

ARTICLE X

PURCHASE AND OPTION TO PURCHASE PROPERTY;
PURCHASE PRICE

        SECTION 10.01. Mandatory Purchase of Project by Tenant. If, during the Term (a) as a consequence of a defect in title the Tenant and the County shall be denied the use and occupancy of the Project; (b) a final decree or judgment shall be entered by a court of competent jurisdiction that the Act is invalid, unenforceable or unconstitutional or that the negotiated payments in lieu of taxes described in Section 6.03 hereof are invalid, unenforceable or unconstitutional or a change occurs in the Constitution or other laws and regulations of the State of South Carolina or the United States of America which would render the payments in lieu of taxes described herein or any other provision hereof invalid, unenforceable or unconstitutional; or (c) as a result of any changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof, this Lease shall have become void or unenforceable or impossible to perform in accordance with the intent and purposes of the parties as expressed in this Lease, then in any such event, whether any financing instrument is outstanding and unpaid, or not, the Tenant shall purchase the Project. Any such purchase provided for herein shall be made not later, than forty-five (45) days after such use or occupancy is denied or such change, decree, final judgment or order as the case may be or at such later date as may be agreeable to the County. Upon such purchase, this Lease shall terminate.

        SECTION 10.02. Options to Purchase the Project; Exercise of Option Hereunder. The Tenant (or the sublessee or any leasehold mortgagee, if applicable) shall have, and is hereby granted, the unconditional option to purchase all or a portion of the Project prior to the expiration of the full Term hereof at any time and from time to time and for any reason or no reason (such option to be exercisable whether or not an "Event of Default" has occurred and is continuing).

        To exercise such option, the Tenant or any sublessee or leasehold mortgagee, if applicable, shall give written notice to the County of its exercise and shall specify the anticipated date of closing and which portions of the Project shall be purchased. Upon the purchase pursuant to such option, this Lease shall terminate with respect to the portion of the Project so purchased.

        SECTION 10.03. Purchase Price. The purchase price for any purchase of all or any portion of the Project pursuant to Sections 10.01 or 10.02 hereof shall be an amount equal to (a) any Basic Rent and Additional Rent due hereunder with respect to such portion, including, without limitation, any unpaid fees and expenses of the County; (b) any accrued but unpaid FILOT Payments and other payments required pursuant the provisions of Section 6.03 hereof; and, (c) $1.00.

        SECTION 10.04. Status of Title. In the event of any purchase of the Project or any portion thereof pursuant to any provision of this Lease, the County shall convey good and marketable title by a bill of sale in substantially the form set forth in Exhibit D and by a limited warranty deed in substantially the form set forth in Exhibit C to the Tenant or any sublessee, leasehold mortgagee or assignee of Tenant, but the County shall not otherwise be obligated to give or assign any better title than existed on the first day of the Term. The Tenant, or any sublessee or leasehold mortgagee, shall accept such title, subject, however, to (i) Permitted Encumbrances; (ii) any liens, encumbrances, charges, exceptions and restrictions not created or caused by the County; and, (iii) any applicable laws, regulations, and ordinances. Although the County shall be obligated to convey title to the Project as aforesaid on the date of purchase upon receipt of the purchase price therefor, the County shall nevertheless have such additional time as is reasonably required by the County to deliver or cause to be delivered to the Tenant, or any sublessee or assignee, all instruments and documents required by the Tenant, or any sublessee or assignee, and necessary to remove from record or otherwise discharge any liens, encumbrances, charges or restrictions in order that the County may convey title as aforesaid.

18

        SECTION 10.05. Conveyance; Charges Incident Thereto. Upon the date fixed for the purchase of the Project or any portion thereof by the Tenant, or any sublessee, leasehold mortgage or assignee, the Tenant, or any sublessee, leasehold mortgagee or assignee, shall tender the purchase price therefor and the additional payments required by Section 10.03 of this Lease to the County or its order, and the County shall deliver a deed for the Project or such portion thereof to the Tenant (or sublessee, if applicable). The Tenant shall pay all expenses of the County and all other charges incident to any conveyance, including any recording fees and any applicable federal, state and local taxes and the like.

[End of Article X]

19

ARTICLE XI

EVENTS OF DEFAULT AND REMEDIES

        SECTION 11.01. Events of Default. Any one or more of the following events (herein called "Events of Default") shall constitute an Event of Default:

        (a)   if the Tenant shall assign this Lease, or sublet the whole or any part of the Project, otherwise than as expressly permitted pursuant to Sections 8.08 or 9.01 hereof;

        (b)   if default shall be made by the Tenant in the due performance of or compliance with any of the terms hereof, including payment, and such default shall (i) continue for thirty (30) days after the County shall have given the Tenant written notice of such default or an Authorized Tenant Representative shall otherwise have actual knowledge thereof, or (ii) in the case of any such default which can be cured but which cannot with due diligence be cured within such thirty (30)-day period, if the Tenant shall fail to proceed promptly to cure the same and thereafter prosecute the curing of such default with due diligence, it being intended in connection with the default not susceptible of being cured with due diligence within thirty (30) days that the time of the Tenant within which to cure the same shall be extended for such period as may be necessary to complete the curing of the same with all due diligence;

        (c)   if any material representation or warranty made by the Tenant herein or any statement or certificate furnished or delivered by the Tenant in connection with the execution and delivery of this Lease, proves untrue in any material respect as of the date of the issuance or making thereof;

        (d)   if the Tenant shall abandon the Project;

        (e)   if the Tenant shall dissolve or fail to maintain its separate corporate existence without prior assignment of this Lease pursuant to Section 9.01 hereof; or

        (f)    Tenant bankruptcy.

        SECTION 11.02. Remedies on Event of Default. Upon the occurrence of any Event of Default, the County at its option: (i) may terminate this Lease by thirty (30) days' notice in writing specifying the termination date; (ii) may reenter and take possession of the Project, make any necessary repairs and perform any work that may be necessary by reason of the Tenant's default, with or without terminating this Lease, and relet the Project; (iii) may have access to and inspect, examine and make copies of, the books, records and accounts of the Tenant pertaining to the Project; or, (iv) may take whatever action at law or in equity as may appear necessary or desirable to collect the rent then due and thereafter to become due or to enforce observance or performance of any covenant, condition or agreement of the Tenant under this Lease. Notwithstanding the foregoing, the Tenant shall retain the right to exercise any purchase option referred to in Section 10.02 hereof. If the Tenant fails to pay the FILOT Payments due under Section 6.03, the County shall have the same collection and enforcement rights and remedies as it would have for the collection of ad valorem taxes.

        SECTION 11.03. Tenant's Obligations to Survive Repossession and Termination. Except as hereinafter provided, no termination of the Term of the Lease or repossession of the Project pursuant to Section 11.02 hereof shall relieve the Tenant of its liability and obligations to make the payments required by Sections 6.03 and 6.04 hereof, all of which shall survive any such termination or repossession.

[End of Article XI]

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ARTICLE XII

MISCELLANEOUS

        SECTION 12.01. Rights and Remedies Cumulative. Each right, power and remedy of the County or of the Tenant provided for in this Lease shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Lease or now or hereafter existing at law or in equity, in any jurisdiction where such rights, powers and remedies are sought to be enforced, and the exercise by the County or by the Tenant of any one or more of the rights, powers or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the County or by the Tenant of any or all such other rights, powers or remedies.

        SECTION 12.02. Successors and Assigns. The terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

        SECTION 12.03. Notices; Demands; Requests. All notices, demands and requests to be given or made hereunder to or by the County or the Tenant shall be in writing, and shall be deemed to be properly given or made if sent within the United States by United States first class mail, postage prepaid addressed as follows or at such other places as may be designated in writing by such party, or outside the United States by Federal Express or other international carrier:

        (a)   As to the County:

Dorchester County
Office of the County Administrator
Post Office Box 416
St. George, South Carolina 29477
Attention: County Administrator

With copy to:

John G. Frampton
Chellis & Frampton, PA
Post Office Box 430
Summerville, South Carolina 29484

        (b)   As to the Tenant:

LATI Industries, Inc.
Mt. Pleasant Business Center
Suite 8
1470 Ben Sawyer Boulevard
Mt. Pleasant, South Carolina 29464
Attention: Gregory B. Newby

With copy to:

McNair Law Firm, P.A.
Post Office Box 11390
Columbia, South Carolina 29211
Attention: Erik P. Doerring

        SECTION 12.04. Applicable Law; Entire Understanding. This Lease shall be governed exclusively by the provisions hereof and by the applicable laws of the State of South Carolina. This Lease expresses the entire understanding and all agreements of the parties hereto with each other and neither party hereto has made or shall be bound by any agreement or any representation to the other party which is

21

not expressly set forth in this Lease or in certificates delivered in connection with the execution and delivery hereof.

        SECTION 12.05. Severability. In the event that any clause or provisions of this Lease shall be held to be invalid by any court of competent jurisdiction, the invalidity of such clause or provision shall not affect any of the remaining provisions hereof.

        SECTION 12.06. Headings and Table of Contents; References. The headings of the Lease and any Table of Contents or Index annexed hereto are for convenience of reference only and shall not define or limit the provisions hereof or affect the meaning or interpretation hereof. All references in this Lease to particular Articles or Sections or subdivisions of this Lease are references co the designated Articles or Sections or subdivision of this Lease.

        SECTION 12.07. Multiple Counterparts. This Lease may be executed in multiple counterparts, each of which shall be an original but all of which shall constitute but one and the same instrument.

        SECTION 12.08. Amendments. This Lease may be amended only by a writing signed by both parties.

        SECTION 12.09. Waiver. Either party may waive compliance by the other party with any term or condition of this Lease only in a writing signed by the waiving party.

        SECTION 12.10. Memorandum of Lease Agreement. The County and the Tenant agree to execute a short form memorandum of this Lease upon execution and delivery hereof for recording with the Clerk of Court of Dorchester County, South Carolina.

[End of Article XII]

22

        IN WITNESS WHEREOF, Dorchester County, South Carolina, has executed this Lease by causing its name to be hereunto subscribed by the Chairman of its County Council for the County and attested by the Clerk to the County Council, and LATI Industries, Inc. has executed this Lease by causing its corporate name to be hereunto subscribed by its President, all being done as of the day and year first written above.

DORCHESTER COUNTY, SOUTH CAROLINA
By:	/s/ RICHARD ROSEBROCK Richard Rosebrock, Chairman, County Council of Dorchester County, South Carolina

(SEAL)
ATTEST:
By:	/s/ MYRTLE KILLION Myrtle Killion, Clerk to County Council of Dorchester County, South Carolina
WITNESSES:
/s/ ILLEGIBLE
/s/ LYNN FINICUN
LATI INDUSTRIES, INC.
By:	/s/ GREGORY NEWBY
Its:	President
WITNESSES:
/s/ ILLEGIBLE
/s/ RUTH STEWART

23

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Exhibit 10.1

EX-10.6

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Exhibit 10.6

FORCE PROTECTION, INC.
9801 Highway 78, Bldg #3
Ladson, SC 29456 Tel (843) 740-7015
Fax (843) 740-1973
www.forceprotection.net

November 15, 2004

To:

R. Scott Ervin
4606 Horseshoe Bend
Austin Texas 78731

Re:

Employment Letter

Dear Scott:

        I am pleased to confirm your employment as part of the Force Protection management team on the following terms:

Title:		General Counsel (Vice President Legal). Scope of duties attached.
Compensation:
	Salary:	$118,000 per year, paid bi-weekly (based on an alternating work schedule of three weeks on and one week off, i.e., 75% of full time.)
	Benefits:	Health insurance and other benefits according to the Company's standard benefits package in effect from time-to-time.
	Other:	Relocation Expense of $15,000 500,000 common shares + 4 Series "C" Performance Bonus at the discretion of the Board of Directors Eligible for Company Stock Incentive program
Start Date:		Aug. 9, 2004

Employment Terms:

        Your position will be with Force Protection, Inc. (jointly with its subsidiary Technical Solutions Group, Inc. referred to as the "Company") and you will have a primary office at the Company's facility in Ladson, South Carolina, it being understood and agreed that you will have also have the discretion to perform your duties from your office in Austin Texas.

        In consideration of your employment, you agree to the following:

•

You agree to be bound by and comply with the provisions of the Company Employee Handbook (as amended from time to time) and our Code of Ethics & Conduct.



•

You agree at all times to protect the Company's best interests and to perform your duties in a diligent and professional manner. You owe a duty of loyalty to the Company and agree not to work for any third parties without the Company's express approval.



•

You agree to treat all Company information and trade secrets as confidential, and agree not to use for your own purposes or disclose such information to outside third parties.



•

You agree that work you perform for the Company shall be "work for hire" and that the Company shall own all the results of your work, including all intellectual property rights arising out of or from such work.

•

You agree to execute such additional documents as the Company may require from time to time in connection with any of the foregoing matters or as part of the Company's standard policies & procedures, including our "Non-Disclosure Agreement." You acknowledge that such agreements shall be deemed to be a part of your employment agreement, and that the conditions of such agreements may bind you beyond the period of your employment.



•

You understand and agree that this employment agreement is "at will," and can be terminated by you or the Company at any time and for any reason without payment of severance compensation or other termination damages.



•

You agree that this agreement may be transferred by the Company in connection with any merger, acquisition, reorganization or restructuring and that it is subject to the jurisdiction and laws of the State of South Carolina.

        We are extremely pleased to confirm this offer and look forward to your contribution to our Company. If the foregoing is acceptable to you, I would ask that you kindly sign below and return a copy of this letter to me.

Regards,

Sincerely yours,

/s/ GALE AGUILAR Force Protection, Inc.	Accepted and Agreed:
	By:	/s/ R. SCOTT ERVIN
	Name: R. Scott Ervin

Scope of Duties
General Counsel

        The General Counsel shall report to the Board of Directors and the CEO.

        The scope of duties for your position shall include managing the Company's legal affairs (and those of its affiliates and subsidiaries), including:

•

Acting as the Company's primary legal counsel, with responsibility generally to oversee all legal matters to ensure their proper handling and resolution, and in connection therewith to develop and manage the Company's legal department.



•

Providing information to the Company's officers and employees in response to general inquiries regarding the Company's legal matters. For the avoidance of doubt, such duty in these regards is to act on behalf of the Company and not on behalf of any director, officer or employee personally. The General Counsel shall not render advice to any director, officer or employee in connection with any personal matter or in connection with any matter contrary to the Company's interests.



•

Providing advice and assistance in connection with the Company's routine legal matters such as reviewing and/or drafting contracts and other legal documents and providing legal support to business negotiations and transactions.



•

Providing corporate "housekeeping" services to the Company and its subsidiaries as the Corporate Secretary, maintaining Minutes of Meetings, Resolutions and other corporate "books," and filing such corporate documents as may be necessary to maintain the Company in good standing and in compliance with applicable corporate regulations.



•

Overseeing and managing legal claims and proceedings involving the Company, carrying out such investigation as may be necessary to assess their validity and the Company's potential liability, and making recommendations regarding the prosecution, defense, settlement or other disposition of them. If appropriate, the General Counsel may represent the Company directly in such matters.



•

Coordinating the activities of the Company's outside legal counsel, including litigation counsel, securities counsel and local South Carolina counsel. In this capacity the General Counsel shall undertake to ensure the efficient use of outside counsel, directing their work efforts, monitoring their performance and reviewing their billings.



•

Undertaking to develop and implement policies to ensure compliance by the Company and its directors, officers and employees with all applicable laws and regulations, including for example, SEC rules relating to stock purchases and sales and federal and state employment regulations.



•

Providing advice and assistance to the CEO as follows:

Counsel & Assist the CEO

        Protection of Shareholder Interests

        Protection of Company Assets

        Protection of Management ("Compliance")


•

Providing advice and assistance to the CFO as follows:

Counsel & Assist the CFO

        Contracting Support

        Liability Management

        Labor Relations

        Code of Conduct & Ethics


•

Providing such other legal services as the Company may request from time to time.

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Exhibit 10.6

Scope of Duties General Counsel

EX-10.9

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Exhibit 10.9

Compensation Arrangement for Gordon McGilton
as approved by the Board of Directors
of Force Protection, Inc.

Excerpts from Force Protection, Inc. Board Minutes, dated January 13, 2006:

RESOLVED, that effective as from January 1, 2006 the compensation of Mr. McGilton as Chief Executive Officer of the Company shall include:

•

Cash compensation of $35,000 per month, plus



•

Relocation expenses of $30,000 upon separation from the Company for any reasons, plus



•

A one time grant of 300,000 shares of the Company's unregistered common stock, such grant to be effective on January 1, 2006, plus



•

Options to purchase 1,000,000 shares of the Company's "S8" stock at a per share price equal to the closing market price on the first business day of January 2006, such options to vest as follows: 100% to vest in full one year from the date hereof provided that Mr. McGilton is employed by the Company at that time, and provided further that 50% of such options shall vest in the event of any change of control of more than 33.3% of the ownership of the Company and 50% of such options to vest in the event of termination of the CEO's position with the Company (unless such termination is the result of resignation or for good cause shown) prior to such vesting date.



•

All options must be exercised within 120 days from the date of leaving the Company's employment.



•

The foregoing grants are subject to the Company right to make such adjustment or changes at any time as may be necessary to comply with applicable law or to preserve and protect the best interests of the Company under the existing terms of any prior equity transaction (for example to avoid triggering any applicable "ratchet" clause or to avoid triggering an event of default or breach or representation).

Excerpts from Force Protection, Inc. Board Minutes, dated October 25, 2006:

RESOLVED, as per the recommendation of the Compensation Committee, and based upon the information reviewed, that the 2007 Compensation for Gordon McGilton as CEO will increase effective January 1, 2007, by $5,000 per month;

FURTHER RESOLVED additionally the Company will issue an option grant of 500,000 shares of common stock with a 5 year exercise period, registered under an S8, at a strike price as of market close on October 31, 2006. The options will vest 25% per quarter, on the final day of each calendar quarter in 2007 while Mr. McGilton remains employed in the capacity of CEO and/or Executive Chairman.

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Exhibit 10.9

EX-10.11

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Exhibit 10.11

Force Protection, Inc.
Force Protection Industries, Inc.
9801 Highway 78, Bldg #3
Ladson, SC 29456 Tel (843) 740-7015
Fax (843) 740-1973
www.forceprotection.net

Date: April 5, 2006

To:

Mr. Raymond Pollard
86 Labbe Lane
Leonard MI 48367

Re:

Employment Letter

Dear Ray:

        I am pleased to confirm our offer of employment with Force Protection Inc., (the "Company") on the following terms:

Title:		Chief Operating Officer
Compensation:
	Salary:	$240,000 per year in cash to be paid bi-weekly (according to the Company's regular practices).
	Stock Grant:	As an employee, on the first (1st) and second (2nd) anniversary of employment with the Company—an annual grant of shares of the Company's unregistered common stock equal to $40,000 (calculated using the closing share price as of the date of acceptance of this offer).
	Relocation:	A one time relocation payment of $30,000 payable upon start of employment.
	Benefits:	Health insurance and other benefits according to the Company's standard benefits package in effect from time-to-time. You will also be eligible for Gain Sharing and/or Company Stock Option programs if and when they are approved.
	Severance:	Your employment is "at will" and the Company may end your employment at any time without prior notice. We agree to "guarantee" twenty-four (24) months of Salary to you commencing from your start date. If your employment is terminated by the Company without cause during the 24 month period immediately following your Start Date, you will receive a one-time lump-sum severance amount equal to the remaining Salary compensation you would have been paid during the balance of such 24 month period. As an example, if your employment is terminated without cause 15 months from your start date, you would receive a lump-sum payment of 9 months under the aforementioned "guarantee"—for a total compensation period of 24 months.
Start Date:		As soon as available

Employment Terms:

        Your principal place of work will be at the Company's facility in Ladson, South Carolina.

        In consideration of the Company extending this offer to you, you agree to the following:

•

You agree to be bound by and comply with the Company's practices and procedures and our Code of Ethics & Conduct.



•

You agree at all times to protect the Company's best interests and to perform your duties in a diligent and professional manner. You owe a duty of loyalty to the Company and agree not to work for any third parties without the Company's express approval.



•

You agree to treat all Company information and trade secrets as confidential, and agree not to use for your own purposes or disclose such information to outside third parties.



•

You agree that work you perform for the Company shall be "work for hire" and that the Company shall own all the results of your work, including all intellectual property rights arising out of or from such work.



•

You agree to execute such additional documents as the Company may require from time to time in connection with any of the foregoing matters or as part of the Company's standard policies & procedures, including our "Non-Disclosure Agreement." You acknowledge that such agreements shall be deemed to be a part of your employment agreement, and that the conditions of such agreements may bind you beyond the period of your employment.



•

You agree that this agreement may be transferred by the Company in connection with any merger, acquisition, reorganization or restructuring and that it is subject to the jurisdiction and laws of the State of South Carolina.

        We are extremely pleased to confirm this offer and look forward to your contribution to our Company. This agreement is intended to supersede and replace all other agreements between us and may not be modified or amended except in writing signed by both of us.

        If the terms hereof are acceptable to you, I would ask that you kindly sign below and return a copy of this letter to me.

Regards,

Sincerely yours,

By:	/s/ GORDON MCGILTON
	Gordon McGilton 4/7/06	Accepted and Agreed:
		By:	/s/ RAYMOND POLLARD
		Name: Ray Pollard 4/11/06

2

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Exhibit 10.11

EX-10.18

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Exhibit 10.18

SALES AUTHORIZATION RELEASE		MASTER PROJECT #
		PROJECT #
		WORK ORDER #
CONTRACT:	STC004135	SALES AUTHORIZATION RELEASE #	06—23
MODIFICATION:	1	CONTRACT/MOD TYPE:	FFP
CONTRACT/MOD DATE:	August 8, 2006	PROGRAM MGMT POC:	Mike Martyn
F.O.B. POINT	Origin (FPI Facility)	CONTRACT POC:	Terry LaBorde
DESCRIPTION:	ILAV Vehicles & FSR Support

SCOPE OF WORK:

1.

171 Vehicles        Delivery: (2) Sept 2996; (10) Oct. 2006; (20) Nov. 2006; (30) Dec. 2006; (32) Jan 2006; (32) Feb 2006; (32) Mar 2006; (13) Apr 2006

2.

CLS Support in accordance with Statement of Work Section C 5

3.

Per Section 8.18 BAE responsible for supplying all materials in accordance with FPI Mater Planning Schedule. BAE and FPI must finalize delivery of materials from BAE to FPI within 20 days after contract execution. BAE responsible for repair/replacement any all expediting, freight charges, and direct cost associated with a rejection/delay/shortage of BAE furnished materials. FPI must notify BAE within 48 hour of discovering any damage, rejection or shortage of ABE furnished material.

4.

FPI BOS Quality System is applicable (See Section 5.2)

5.

FPI proprietary information must be marked with proprietary legend before submittal to BAE

6.

Payment terms net 20 days

SPECIAL TERMS & CONDITIONS, IF APPLICABLE:

NOTE: Contract and contract modifications are available on S/Library/Contracts

BAE SYSTEMS LAND & ARMAMENTS, L.P., GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 1—SUBCONTRACT FORM
03 AUGUST 2006

To:	Force Protection Industries, Inc.	From:	BAE Systems Land & Armaments L.P.
	9801 Highway 78		Ground Systems Division
	Building 1		P.O. Box 15512
	Ladson, SC 29456		York, PA 17405-1512
	Attention: Otis Byrd		Attention: Terrence L. LaBorde
	Title: Director of Contracts		Title: Senior Subcontract Specialist

THIS MODIFICATION NO: 01 TO SUBCONTRACT SCT004135, entered into by and between BAE Systems Land & Armaments L.P., a Delaware registered limited partnership, acting through its Ground Systems Division, address shown above (hereinafter referred to as "GSD"), and Force Protection Industries, Inc., a corporation organized and existing under the laws of the State of Nevada (hereinafter referred to as "Subcontractor" or "Contractor") is issued in accordance with the Changes clause to incorporate negotiated Terms and Conditions throughout Sections 1 through 10.

WHEREAS, GSD and Subcontractor wish to modify the Subcontract.

NOW THEREFORE, in consideration of the foregoing and the undertakings hereinafter set forth, GSD and the Subcontractor do hereby agree to the following:

1.     Subcontract Form

1.1   General Subcontract Information

This Subcontract is issued under:

	GSD Prime Contract Number:	W56HZV-06-D-VB01
	DPAS Rating:	DOA4
	Program:	Iraqi Light Armored Vehicle (ILAV)
	Subcontract Issue Date:	14 June 2006
Original Subcontract Value & Funding:		$51,266,969
Modification Decrease In Value & Funding:		1,042,302
Subcontract Total Price This Modification 01:		$50,224,667

Unless otherwise agreed to by the parties, GSD shall award Subcontractor fifty percent (50%) of all vehicles ordered under the prime contract as well as all spares and Contractor Logistic Support (CLS) services for the term of the prime contract.

Prime Contract Number: W56HZV-06-D-VB01

1.2   Execution of Required Activity

The Subcontractor shall provide all necessary resources to include but not be limited to labor, material, equipment, facilities, and management to accomplish the effort prescribed herein and shall otherwise fully comply with the terms and conditions of this Subcontract.

The Subcontractor has also represented that it does not require additional GSD or Government Furnished Facilities for completion of the effort prescribed hereunder unless otherwise agreed to by

1

both parties and addressed herein to provide for the allowable use of the stated facilities by the Subcontractor.

1.3   Inclusive Sections

Documents comprising this Subcontract are as follows:

Document	Title of Document	Issue Date	Modification Number
Section 1	Subcontract Form	3 August 2006	01
Section 2	Supplies or Services and Prices/Costs	3 August 2006	01
Section 3	Description/Specifications/Work Statement	3 August 2006	01
Section 4	Packaging and Marking	3 August 2006	01
Section 5	Inspection and Acceptance	3 August 2006	01
Section 6	Deliveries or Performance	3 August 2006	01
Section 7	Subcontract Administrative Data	3 August 2006	01
Section 8	Special Subcontract Requirements	3 August 2006	01
Section 9	Subcontract Clauses	3 August 2006	01
Section 10	List of Attachments	3 August 2006	01
Section 11	Representations and Certifications*	14 June 2006	Base Sub/C

*

Incorporated by reference

1.4   Contract Type

GSD and Subcontractor have negotiated and mutually agreed upon the Subcontract requirements establishing a Firm Fixed Price agreement in the amount of $50,224,667.

1.5   Representations, Certifications and Compliance with Statutes/Regulations

The Subcontractor's Section 11, Representations and Certifications, previously submitted, are incorporated herein by reference and made a part hereof.

In the performance of this Subcontract, the parties shall comply with all applicable statutes and Governmental rules, regulations and orders, to include, but not be limited to, those statutes and Governmental rules related to labor and employment, environmental, and export control.

1.6   Finalization of Technical Data Pack (TDP)

Subcontractor shall provide the preliminary Technical Data Pack for the ILAV to include engineering drawings and data, and the baseline Bill of Material (BOM), collectively referred to as "TDP". As a condition to Subcontractor's acceptance of the Delivery Schedule and Contract Price, GSD agrees to provide at no cost to Subcontractor the engineering resources necessary to finalize the TDP and the (Transition to Production) (TTP) identified in Section 1.8 as soon as possible. For planning purposes Subcontractor estimates three (3) hull design engineers, two (2) cab interior design engineers, and three (3) CAD designers will be required in addition to the TDP for the Marine Corps TAGS.

Subcontractor shall at all times retain control over all design and engineering changes to the TDP and GSD shall not make any final changes without Subcontractor's prior approval.

2

1.7   General Division of Responsibility ("X" Denotes Primary Responsibility)

        The Prime Contract effort shall be principally divided between the parties as follows:

Contract	Structure	GSD	Subcontractor
Vehicle Engineering	Customer POC	X
		License from Subcontractor
	ILAV		X
	Finalize Design		X
	Configuration Control		X
	Finalize TDP	X
	Develop TTP	X
	Vehicle Testing	X	Support
Procurement	Finalize BOM	X	Support
	Vendor Selection	X
	Planning	X
	Purchasing	X	8 Veh's
	Steel Supply	X	8 Veh's
	Material Distribution	X	8 Veh's
Production*	Hull Fabrication	50% of Veh's	50% of Veh's
	Automotive	50% of Veh's	50% of Veh's
	Integration	Spartan Chassis	Spartan Chassis
	Final Assembly	50% of Veh's	50% of Veh's
	Q/A + Inspection	50% of Veh's	50% of Veh's
	Deliver to DCMA		X
CLS	Spares List		X
	Technical Manuals		X
	Training		X
	Field Service Reps		X

*

Reference General Subcontract Information—Section 1.1

GSD shall provide Subcontractor with pertinent GSD information on, and access to, GSD vehicles at its or other facilities to enable Subcontractor to complete the CLS work. Subcontractor shall provide Spartan with pertinent Subcontractor information on and access to it facilities, with respect to final assembly.

1.8   Manufacturing Engineering

GSD agrees to provide, at no cost to the Subcontractor, complete TTP documentation for the Vehicles to include without limitation, manufacturing processes, fixtures, tooling, routing and work instruction. The TTP shall be sufficient for Subcontractor to create a Vehicle Production Line substantially similar to GSD's Production Line.

1.9   Production License Agreement

The Production License between GSD and Subcontractor is hereby incorporated by reference and is appended hereto as Attachment 10.10. This reference is stated with the same force and effect as if provided in full text.

3

1.10 Export License

GSD shall be responsible for securing all export licenses and other authorizations required in order for the Subcontractor to perform its obligations hereunder for this program.

1.11 Logistic Support Agreement

The Logistic Support Agreement, dated 13 June2006 (informally referred to as "5 Year Agreement") between GSD and Subcontractor is hereby incorporated by reference and is appended hereto as Attachment 10.11. This reference is stated with the same force and effect as if provided in full text.

1.12 Confidentiality

The parties shall comply with the terms of the Confidentiality Agreement signed and dated April 21, 2006.

1.13 Entire Agreement

This Subcontract, including any documents incorporated by reference, is intended to be a complete integration and there are no prior or contemporaneous different or additional agreements pertaining to the subject matter of this Subcontract. Upon Subcontractor's acceptance, this document shall be the complete and exclusive document pertaining to any effort under this Subcontract.

NOTE: Only GSD's Authorized Subcontract Representative and Subcontractor's Authorized Contract Representative have authority to modify this Subcontract on behalf of GSD. All changes and modifications to this Subcontract shall be entered into in accordance with Section 9, Clause 9.3, Changes, of this Subcontract.

1.14 Subcontractor Acceptance

The Subcontractor's acceptance of this Subcontract shall be indicated by affixing authorized signature on two (2) originals of this Subcontract and returning one (1) fully executed original to GSD's Authorized Subcontracts Representative identified in Section 7, Subcontract Administrative Data.

SIGNATURES

Force Protection Industries, Inc.		BAE Systems Land & Armaments L.P. Ground Systems Division
By:	/s/ RAYMOND POLLARD	By:	/s/ TERRENCE LABORDE
Name:	Raymond W. Pollard	Name:	Terrence L. LaBorde
Title:	COO	Title:	Senior Subcontract Specialist
Date:	Aug 8, 2006	Date:	August 8, 2006

[END OF SECTION 1]

4

BAE SYSTEMS LAND & ARMAMENTS L.P., GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 2—SUPPLIES OR SERVICES AND PRICES/COSTS
03 AUGUST 2006

2.1   Base Supplies or Service Requirements

Item	Description	Quantity	Unit Price	Price
001	Provide supplies and/or services in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.
	PERFORMANCE BASELINE:	8	$158,495	$1,267,960
	Material—8 Vehicles—Supply material kits for
	8 ILAV vehicles per SOW requirements.	TOTAL SLIN 001	N/A	$1,267,960
002	Provide supplies and/or services in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.
	PERFORMANCE BASELINE:	1	$30,459	$30,459
	Weld Capsule—Provided labor to weld 1 each
	capsule per SOW requirements.	TOTAL SLIN 002	N/A	$30,459
003	Provide supplies and/or services in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.
	PERFORMANCE BASELINE:	8	$202,496	$1,619,968
	95 Vehicles—Supply Labor per SOW requirements
	for fabrication and final integration of 95 vehicles.	48	$202,556	$9,722,688
	GSD to provide all material in accordance with the Prime Contract other than Automotive Integration material from Spartan.	39	$237,541	$9,264,099
	Subcontractor shall contract with Spartan for Automotive Integration for 95 vehicles.	TOTAL SLIN 003	N/A	$20,606,755
004	Provide services in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.
	PERFORMANCE BASELINE:	75	$77,992	$5,849,400
	75 Vehicles—Supply Labor per SOW requirements for fabrication and final integration of 75 vehicles. GSD to provide all material in accordance with the Prime Contract. No Automotive Integration, including materials required from subcontractor. GSD will contract with Spartan for the Automotive Integration including materials.	TOTAL SLIN 004	N/A	$5,849,400

5

Item	Description	Quantity	Unit Price	Price
005	Provide Logistic Support (CLS) in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.
	PERFORMANCE BASELINE: (Based on Maximum 378 Vehicles)	378	$59,445	$22,470,093
	A. Maintenance B. Training C. Instruction Manuals
	D. Shakedown Test Support	TOTAL SLIN 005	N/A	$22,470,093
006	Provide Data Items as Required in accordance with SOW requirements and SDRL contained in Attachment 10.3	N/A	N/A	NSP

Total Program Price: $50,224,667
Total Funding Authorized: $50,224,667
SLINS 001, 002, 003, 004 and 005 are fully funded.

Note: Unit Prices do not include BAE Vehicle build Royalty/License payment requirements. This shall be performed under the Production License in accordance with the terms stated therein.

2.2   Option Requirements

Option Year	Description	Vehicle Ranges		Unit Price & UM		Extended Price	Funding Status
1	Provide services in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.		1–74	$	77,992 Ea	TBD	Unfunded
	PERFORMANCE BASELINE:
	Supply Labor per SOW requirements for fabrication and final integration for a maximum of 74 vehicles. GSD to provide all material in accordance with the Prime Contract. No Automotive Integration, including materials required from subcontractor. GSD will contract with Spartan for the Automotive Integration including materials.

6

Option Year	Description	Vehicle Ranges		Unit Price & UM		Extended Price	Funding Status
2	Provide services in accordance with Subcontract, Section 3, Description/Specifications/Statement of Work.		1–262	$	77,491 Ea	TBD	Unfunded
	PERFORMANCE BASELINE:
	Supply Labor per SOW requirements for fabrication and final integration for a maximum of 262 vehicles. GSD to provide all material in accordance with the Prime Contract. No Automotive Integration, including materials required from subcontractor. GSD will contract with Spartan for the Automotive Integration including materials.

Note: Unit Prices do not include BAE Vehicle build Royalty/License payment requirements.

7

BAE SYSTEMS LAND & ARMAMENTS L.P., GROUND SYSTEMS DIVISION
MODIFICATION NO: 01 SUBCONTRACT NO: SCT004135
SECTION 3—DESCRIPTION / SPECIFICATIONS / STATEMENT OF WORK
03 AUGUST 2006

    3.1    The Statement of Work (SOW) as referenced below is hereby incorporated by reference and is stated to include all paragraphs, subparagraphs and referenced performance requirements noted within the subject document and associated supplemental attachments unless otherwise stated.

    3.2    Documents referenced herein are hereby incorporated by reference and are stated to include all paragraphs, subparagraphs and referenced performance requirements noted within the subject document and associated supplemental attachments unless otherwise stated.

    3.3    Attachment References:

STATEMENT OF WORK
Statement of Work:	Section 10, Attachment 10.2
Titled:	Statement of Work for Iraqi
	Light Armored Vehicle (ILAV)
Original Date:	13 June 2006
Revision:	001
Revision Date:	14 June 2006
EXHIBIT A
Exhibit:	Section 10, Attachment 10.3
Titled:	Contract Data Requirements List
Original Date:	2 May 2006
Revision:	N/A
Revision Date:	N/A
PERFORMANCE SPECIFICATION
Performance Specification:	Section 10, Attachment 10.4
Titled:	Specification (Prime Contract)
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A
TECHNICAL INFORMATION
Technical Information:	Section 10, Attachment 10.5
Titled:	Technical Information
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A

8

SHAKEDOWN TEST PLAN
Test Plan:	Section 10, Attachment 10.6
Titled:	ILAV Shakedown Test Plan
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A
DATA ITEM DESCRIPTIONS (DID's)
DID:	Section 10, Attachment 10.7
Titled:	Data Item Descriptions for
	Exhibit A
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A
VEHICLE ACCEPTANCE TEST
Acceptance Tests:	Section 10, Attachment 10.8
Titled:	ILAV Production Vehicle
	Acceptance Test
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A
VEHICLE SURVIVABILITY
Technical Information:	Section 10, Attachment 10.9
Titled:	Technical Information—Vehicle
	Survivability
Original Date:	25 May 2006
Revision:	N/A
Revision Date:	N/A

9

PRODUCTION LICENSE AGREEMENT
Production License:	Section 10, Attachment 10.10
Titled:	Production License
Original Date:	13 June 2006
Revision:	N/A
Revision Date:	N/A
LOGISTIC/SPARES AGREEMENT
Technical Information:	Section 10, Attachment 10.11
Titled:	Logistic Support Agreement
Original Date:	13 June 2006
Revision:	N/A
Revision Date:	N/A

        [END OF SECTION 3]

10

BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 4—PACKAGING AND MARKING
03 AUGUST 2006

4.1   Reserved

4.2   Packaging

        All goods shall be packaged by the Subcontractor in accordance with good commercial practice, unless expressly referenced otherwise within this Subcontract or documents referenced therein, in a manner sufficient to ensure arrival in a condition free of damage and deterioration. Parts packaged in each container shall be wrapped or separated by such protective barrier material to protect surfaces, machined finishes, etc., as is necessary for the particular commodity shipped. Commingling of parts will not be accepted; each item must be packaged in a separate container and so identified. Containers within a container are permissible. GSD reserves the right to reject and/or refuse delivery of goods damaged in transit as a result of improper packaging or material improperly segregated and/or identified. In such cases, goods will be returned to Subcontractor at Subcontractor's expense.

4.3   Labeling of Packaging Cartons, Crates, Etc.

        Subcontractor must label all cartons, crates, etc. All labeling must be legible and easily discernible. All materials, regardless of commodity, assemblies, and all rubber products will bear the following data on the exterior of cartons, crates, etc., either by stenciling or permanently affixed label:

Line 1—Subcontract Number and Subcontractor's Name
Line 2—Subcontractor's Address
Line 3—Ordnance Part Number (and WIP Number, if applicable)
Line 4—Quantity, unit weight
Line 5—Box number                  of                
Line 6—Packing slip fastened to outside of carton, crate, etc.
Line 7—Work Center (if applicable)

4.4   Part Identification

        Every part supplied must be identified by assigned Subcontract Number. The assigned Subcontract Number appears above the face page of the Subcontract. The Subcontract Number may be stamped, engraved, etched or otherwise permanently applied. Small parts (bolts, nuts, screws, washers, springs, gaskets, shims and similar items) will be tagged and/or the box or container in which these parts are packaged shall be marked as stated above.

4.5   Shipment of Rework/Replacement Material

        (A)  Subcontractor shall ship rework/replacement material to GSD clearly identified as "Reworked Material" or "Replacement Material" and state in the Non-Conformance (material) Report (NCR) the number and data specified in Clause D.2, Labeling of Packaging Cartons, Crates, Etc, above, on all correspondence including packing list, invoice, and the Supplier Corrective Action Report (SCAR).

        (B)  Orange tag, otherwise known as "Reject Tag" (GSD Inspection Form 23), which is attached to rejected material when returned to Subcontractor, or similar identifier, shall be attached to the rework/replacement material stating part number, NCR number, and contract number. Do not mix with material reworked on a different Non-Conformance (material) Report (NCR) number or with new material.

        (C)  Regardless of the original production Subcontract number (number used on initial shipment), Subcontractor shall use the Subcontract number under which the material is returned to the Subcontractor on all correspondence including packing list, invoice, and the Supplier Corrective Action Report.

[END OF SECTION 4]

11

BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 5—INSPECTION AND ACCEPTANCE
03 AUGUST 2006

5.1   52.252-2, Clauses Incorporated By Reference (FEB 1998) (Deviation)

        This Subcontract incorporates the following clauses by reference, with the same force and effect as if they were given in full text. Upon request, GSD will make their full text available. Also, the full text of a clause may be accessed electronically at the following addresses: http://www/desktop.osd.mil or http://www.arnet.gov/far/ or http://farsite.hill.af.mil/

Regulatory Cite	Title	Date
	/ / /Federal Acquisition Regulation Clauses/ / /
52.246-2	Inspection of Supplies—Fixed Price [Wherever this FAR Clause refers to the "Government" they shall be read as referring to the "Government and/or GSD except when the clause refers to Acceptance Requirements, "]		AUG 1996
52.246-4	Inspection of Services—Fixed Price Price [Wherever this FAR Clause refers to the "Government" they shall be read as referring to the "Government and/or GSD except when the clause refers to Acceptance Requirements, "]		AUG 1996
52.246-16	Responsibility for Supplies		APR 1984

5.2   Quality Assurance System

        The Subcontractor shall provide and maintain a quality control system acceptable to GSD and, when applicable, the Government, for the goods or services purchased under this Subcontract, and the Subcontractor shall permit GSD and the Government to review procedures, practices, processes and related documents to determine such acceptability.

        The quality system shall achieve (1) defect prevention and (2) process control, providing adequate quality controls throughout all areas of Subcontract performance.

        You represent that your performance under this Subcontract shall be in accordance with your quality system, which is in compliance with:

XXX    ISO 9001: 2000 or equivalent*
             QS 9000
             ANSI/ASQ Q9001
             Other, specifically                                     

*FORCE PROTECTION BUSINESS OPERATING SYSTEM

        Certification of compliance for the quality system identified above, by an independent standards organization, or auditor, is not required under this Subcontract at this time. However, you shall attach a copy of any such certification(s) as proof of system compliance, as applicable. At any point during Subcontract performance, GSD and/or GSD's Customer reserve the right to review your system to assess its effectiveness in meeting quality objectives.

12

5.3   Reserved

5.4   Acceptance Inspection Equipment (AIE)

        The Subcontractor shall provide all AIE necessary to ensure conformance of components and end items to Subcontract requirements.

        Except as otherwise expressly provided for under this Subcontract, the Subcontractor is responsible for the maintenance and calibration of all inspection and test equipment necessary to ensure that the end item and its components conform to the Subcontract requirements.

        The Subcontractor shall provide all operations required to ensure continued availability of adequate and accurate inspection equipment. As such, the Subcontractor shall establish and maintain a system for the calibration of that equipment used in fulfillment of Subcontract requirements. The calibration system shall prescribe equipment calibration intervals and sources, and may be maintained on the documents normally used by the Subcontractor to define inspection operations.

        GSD and its Customer reserve the right to disapprove, at any time during performance of this Subcontract, any AIE not meeting the requirements of accepted design and calibration. All equipment shall be made available to GSD and its Customer representative, at no additional cost, when required for product verification purposes.

5.5   Data Inspection and Acceptance

        Acceptance of each data item submitted to GSD does not, in itself, constitute approval of the quality of the contents of that data item. GSD reserves the right to review each data item submittal for content quality, either unilaterally or in conjunction with the Subcontractor, or in a joint GSD/Customer/Subcontractor meeting prior to final acceptance of the data item.

        If it is determined by GSD that the quality of the data submitted is unacceptable, the Subcontractor shall be required to correct any deficiencies and resubmit the data item.

        Acceptance of each data item shall be provided in writing by GSD's authorized personnel.

5.6   Government Source Surveillance (GSS)

        Government surveillance is required prior to shipment from your plant. Upon receipt of this Subcontract, promptly notify the Government representative who normally services your plant so that appropriate planning for Government inspection can be accomplished. In the event the representative or office cannot be located, the BAE Systems Authorized Procurement Representative shall be notified immediately. Unauthorized shipment of product without Government source surveillance may result in a withholding of invoice payment.

NOTE: Three (3) days' written notice is required prior to submission for inspection for resident and seven (7) days' for itinerant Government representatives. Obtain Government inspection prior to shipment. Receipt of material without GSS shall be cause for rejection. GSS shall not replace Subcontractor inspection nor relieve Subcontractor of its responsibility for furnishing an acceptable end item.

5.7   Reserved

[END OF SECTION 5]

13

BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 6—DELIVERIES OR PERFORMANCE
03 AUGUST 2006

6.1   52.252-2, Clauses Incorporated By Reference (FEB 1998)(Deviation)

        This solicitation incorporates the following clauses by reference, with the same force and effect as if they were given in full text. Upon request, GSD will make their full text available. Also, the full text of a clause may be accessed electronically at the following addresses: http://www/desktop.osd.mil or http://www.arnet.gov/far/ or http://farsite.hill.af.mil/

Regulatory Cite	Title	Date
	///Federal Acquisition Regulation Clauses/ / /
52.242-15	Stop Work Order [Wherever this FAR Clause refers to the "Government" they shall be read as referring to the "Government and/or GSD"]		AUG 1989
52.247-65	F.O.B. Origin—Prepaid Freight—Small Package Shipments		JAN 1991

6.2   Delivery

        A     In the performance of this Subcontract any and all deliveries are to be made in quantities and at times specified within the Subcontract. Delivery shall occur at the place and in the manner indicated in Clause 6.3, Method and Place of Delivery shown below. Delivery is subject to the Subcontractor's receipt of GSD Furnished Material pursuant to Section 8.18 and GSD information pursuant to Section 1.6.

DELIVERY SCHEDULE

MONTH & YEAR	JUL 06	AUG 06	SEPT 06		OCT 06		NOV 06		DEC 06		JAN 07		FEB 07		MAR 07		APR 07		TOTAL
UNITS				2		10		20		30		32		32		32		13		171
CUM				2		12		32		62		94		126		158		171

ACCELERATED DELIVERIES ARE ACEPTABLE AND ENCOURAGED.

        B     Unless otherwise stated elsewhere within the Subcontract, all deliveries shall be F.O.B. Subcontractor's receiving dock at its plant in the location indicated on the face of the Subcontract. Subcontractor shall ship, pack, identify, and label goods in accordance with the "General Shipping Requirements" identified in Clause 6.4, Shipping.

        C     Subcontractor shall strictly adhere to the delivery and completion schedules specified in this Subcontract. If, at any time, Subcontractor believes it may be unable to comply with the delivery or completion schedules, Subcontractor shall immediately notify GSD's Authorized Subcontract Representative in writing of the probable length of any anticipated delay and the reasons for it, and shall continue to notify GSD's Authorized Subcontract Representative of any material change in the situation. In the event of such notification or of an actual failure by Subcontractor to comply with the delivery or completion schedules, GSD may, in addition to all the other remedies available to GSD hereunder, require Subcontractor, at Subcontractor's expense, to ship goods via air freight or expedited routing to avoid or minimize delay.

14

6.3   Method and Place of Delivery

        Method and place of delivery for items stated within Section 2, Supplies or Services and Prices/Costs shall be as follows:

        A     Place: All hardware deliverables shall be shipped to locations TBD in accordance with the DD 250 requirements.

        B     All data items as identified in the Subcontract Data Requirements List (SDRL) shall be issued/shipped to the following location as shown below:

BAE Systems Land & Armaments L.P.
Ground Systems Division
Attention: Terry LaBorde
PO Box 15512
York, PA 17405-1502

        C     Method: All hardware deliverables shall be shipped via common carrier to ensure timely delivery of the product in accordance with Subcontract requirements.

        All data items shall be issued / shipped prepaid by the Postal Service, UPS, Federal Express, or similar service to ensure timely delivery of the data as specified by Subcontract requirements. Advance copies of data items shall be accepted via email transmission to the following address:

terry.laborde@baesystems.com

NOTE: Data items shall be provided in hard copy. Email transaction is only for advance information and does not waive the requirement for data deliverables to be provided in hardcopy format.

6.4   SHIPPING

        Unless otherwise provided in the Subcontract, Subcontractor shall, for the price of goods indicated in the Subcontract as amended if applicable, pack and mark material as specified in accordance with the following instructions; failure to comply will result in a charge-back:

        A     All shipments F.O.B. Subcontractor's loading dock must be shipped collect to GSD.

        B     Shipments less than 150 pounds (no more than 50 pounds per package) must be routed via FEDEX GROUND COLLECT using Account Number 01710448-9 for all shipments to York, PA. For shipments to BAE Systems facilities other than York, PA please contact the GSD Traffic and Distribution Department at the number(s) shown in Paragraph C, below for the appropriate account number.

        C     Shipments of Less Than Truckload (LTL) (i.e., between 150 pounds to 15,000) must use the routing carrier identified by State as shown on the chart below: If Subcontractor's F.O.B. point ZIP code differs from the Subcontractor's Subcontract ZIP code, the Subcontractor must contact the GSD Traffic and Distribution Department at 717-225-8092 or 717-225-8236.

Shipping from:	Shipping to: York / Aiken /Fayette	Shipping to Santa Clara:
Alabama	Con-Way Systems	Roadway
Arizona	Roadway	Con-Way Systems
Arkansas	Con-Way Systems	Roadway
California	Roadway	Con-Way Systems
Colorado	Roadway	Con-Way Systems
Connecticut	Con-Way Systems	Roadway
Delaware	Con-Way Systems	Roadway

15

Florida	Con-Way Systems	Roadway
Georgia	Con-Way Systems	Roadway
Idaho	Roadway	Con-Way Systems
Illinois	Con-Way Systems	Roadway
Indiana	Con-Way Systems	Roadway
Iowa	Con-Way Systems	Roadway
Kansas	Roadway	Con-Way Systems
Kentucky	Con-Way Systems	Roadway
Louisiana	Con-Way Systems	Roadway
Maine	Con-Way Systems	Roadway
Maryland	Con-Way Systems	Roadway
Massachusetts	Con-Way Systems	Roadway
Michigan	Roadway	Con-Way Systems
Minnesota	Roadway	Con-Way Systems
Mississippi	Con-Way Systems	Roadway
Missouri	Con-Way Systems	Roadway
Montana	Roadway	Con-Way Systems
Nebraska	Roadway	Con-Way Systems
Nevada	Roadway	Con-Way Systems
New Hampshire	Con-Way Systems	Roadway
New Jersey	Con-Way Systems	Roadway
New Mexico	Roadway	Con-Way Systems
New York	Con-Way Systems	Roadway
North Carolina	Con-Way Systems	Roadway
North Dakota	Roadway	Con-Way Systems
Ohio	Con-Way Systems	Roadway
Oklahoma	Roadway	Con-Way Systems
Oregon	Roadway	Con-Way Systems
Pennsylvania	Con-Way Systems	Roadway
Rhode Island	Con-Way Systems	Roadway
South Carolina	Con-Way Systems	Roadway
South Dakota	Roadway	Con-Way Systems
Tennessee	Con-Way Systems	Roadway
Texas	Roadway	Con-Way Systems
Utah	Roadway	Con-Way Systems
Vermont	Con-Way Systems	Roadway
Virginia	Con-Way Systems	Roadway
Washington	Roadway	Con-Way Systems
Washington DC	Con-Way Systems	Roadway
West Virginia	Con-Way Systems	Roadway
Wisconsin	Con-Way Systems	Roadway
Wyoming	Roadway	Con-Way Systems
//////////////	//////////////	//////////////
Canada	Roadway	Roadway

NOTE: GSD WILL NOT, reimburse FOB origin charges that are prepaid and added to Subcontractor invoices without prior explicit authorization from GSD's Authorized Subcontract Representative. This includes purchases made on credit card orders.

16

A Valid Subcontract Number MUST appear on shipping documents in the "Shipper's No." or "PO Number" area of the Bill of Lading. For Federal Express waybills—the Subcontract Number must be indicated in the "Your reference" field. Failure to indicate such information on waybills could result in back charges to the Subcontractor. Third party subcontractors MUST also adhere to the same procedure.

        D     The Subcontractor must contact the GSD Traffic and Distribution Department 717-225-8092 or 717-225-8236 for shipping instructions if the shipment is more than a full truckload of 15,000 pounds or Premium Expedite.

NOTE 1: ANY SUBCONTRACTOR SHIPPING WEIGHTS OVER 15,000 POUNDS BY LTL CARRIERS (ROADWAY OR CON-WAY SYSTEMS) WILL BE BACKCHARGED THE DIFFERENCE BETWEEN THE LTL RATE AND A TRUCKLOAD RATE.

NOTE 2: ALL DROP SHIPMENTS SHOULD ADHERE TO THE ABOVE INSTRUCTIONS WITH THE EXCEPTION OF LTL. INSTEAD OF USING THE LTL CARRIER BY STATE SHOWN IN THE CHART ABOVE, DROP SHIPMENTS CAN BE SHIPPED BY ROADWAY OR CON-WAY SYSTEMS. ALL SHIPMENTS SHOULD BE THIRD PARTY BILLING TO BAE SYSTEMS, P.O. BOX 15512, YORK, PA 17405

        E     All shipments must contain a legible packing list for each Subcontract, as well as Certificates of Conformance, if required by the Subcontract. The packing list must contain at least the following information: Subcontractor Name, Entire Part Number, Description of Material, GSD Subcontract Number, Quantity, and reference numbers keyed to any applicable GSD forms such as Engineering Change Notice number (GSD-5018), Requests for Deviation and/or Requests for Waiver number (DD 1694).

        Multiple listing of Subcontracts on a packing list will not be accepted.

        F      All material delivered under this Subcontract must be on shipping pallets. To use a means other than pallets, written authorization must be received from the GSD's Authorized Subcontract Representative. Pallets shall be constructed of high quality raw materials and parts, preferably mixed hardwoods, held together by coated or acid etched .8 penny nails or equivalent staples. Stringers shall be notched to allow four-way (two-fork) entry; entry boards shall be chamfered. The size of the pallet shall conform to the amount of material shipped thereon.

[END OF SECTION 6]

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BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 7—SUBCONTRACT ADMINISTRATIVE DATA
03 AUGUST 2006

7.1   Subcontractor Administrative Information

        (A)  The Subcontractor is requested to list below the names and telephone numbers of cognizant persons pertaining to Subcontractor's response to this solicitation or resulting Subcontract.

(1)	Administration
	Name:	Miranda Hall
	Title:	Subcontract Administrator
	Phone:	843-740-7015, Ext: 502
(2)	Programs or Engineering
	Name:	Damon Walsh
	Title:	Vice President—Program Management
	Phone:	843-740-7015, Ext: 496
(3)	Classified Security Officer
	Name:	Ashley Patton
	Title:	Facilities Security Officer
	Phone:	843-740-7015, Ext: 507

        (B)  Subcontractor shall enter below the full address and attention line (street and number, city, county, state and zip code) for the following requirements under the proposed subcontract:

(1)	Payments to be made to:	Force Protection Industries, Inc. 9801 Highway 78, Building 1 Ladson, SC 29456
(2)	Where the Subcontract will be administered, if different than in (1) above:
(3)	Where items will be manufactured, if different than in (1) above:
(4)	Where items may be inspected or accepted, if different than (1) above:
(5)	Where Government Furnished Property, if any, may be sent, if different than (1) above:

        (C)  The Subcontractor shall enter below the following information (if none, so state) where electronic messages may be sent to the Subcontractor's Administrator:

Facsimile: 843-329-0380                             Email: miranda.hall@forceprotection.net

        (D)  The Subcontractor represents that the following person are the Authorized Subcontract Representative to negotiate on its behalf with GSD in connection with this Subcontract:

(1)	Name	Damon Walsh
	Title:	Vice President—Program Management
	Phone:	843-740-7015, Ext: 496
(2)	Name:	Otis Byrd
	Title:	Director of Contracts
	Phone:	843-740-7015, EXT 283

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7.2   Ground Systems Division (GSD) Administrative Information

        (A)  Subcontract Technical Representative

(1)	Name:	Brian Harrison (BAE Location—York, PA)
	Title:	Engineering Lead BAE Systems Land & Armaments L.P. Ground Systems Division PO Box 15512 York, PA 17405-1512
	Telephone:	717-225-8264
	Fax:	717-225-8160
	E-mail:	brian.harrison@baesystems.com

        (B)  Authorized Subcontract Representative

Name:	Terry LaBorde
Title:	Senior Subcontract Specialist BAE Systems Land & Armaments L.P. Ground Systems Division PO Box 15512 York, PA 17405-1512
Telephone:	(717) 225-8181
Fax:	(717) 225-8100
E-mail:	terry.laborde@baesystems.com

7.3   Invoicing Payment

        (A)  Invoicing: Invoices for this requirement shall either be mailed to the following address or provided via electronic submittal/email as follows:

Mail: BAE Systems Land & Armaments LP
Ground Systems Division
P.O. Box 15512
York, PA 17405-1512
Attn.: Accounts Payable

Electronic Submittal: terry.laborde@baesystems.com

         NOTE:    A copy of each invoice is to be provided to the GSD Authorized Subcontract Representative listed Clause 7.2 (B), above via U.S. mail or electronic submittal.

        (B)  Performance Based Payments—Vehicles/Material Requirements (Ref: Section 2.1 Item 001 through 004).

        Performance Based Payments are an acceptable method of payment under this Subcontract for Vehicle requirements. The payment plan and verification requirement documents are incorporated as follows:

Performance Based Payments Certification—Attachment 10.12
Performance Based Payment Plan—Attachment 10.13

        (C)  Logistic Support Payments—CLS Support Requirement (Ref: Section 2.1 Item 005).

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        Monthly Payments are an acceptable method of payment under this Subcontract for Logistics Support requirements. The payment plan is incorporated as follows:

        Logistic Support Payment Plan—Attachment 10.14

        Payment shall be made to the address provided by the Subcontractor in this Section 7, Clause 7.1, Paragraph (B), Subparagraph (1).

7.4   Payment Terms

        Payment terms shall be Net 20 from GSD receipt of invoice.

[END OF SECTION 7]

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BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 8—SPECIAL SUBCONTRACT REQUIREMENTS
03 AUGUST 2006

8.1   52.252-2, Clauses Incorporated By Reference (FEB 1998) (Deviation)

        This solicitation incorporates the following clauses by reference, with the same force and effect as if they were given in full text. Upon request, GSD will make their full text available. Also, the full text of a clause may be accessed electronically at the following addresses: http://www/desktop.osd.mil or http://www.arnet.gov/far/ or http://farsite.hill.af.mil/

Regulatory Cite	Title	Date
	/ / /Federal Acquisition Regulation Clauses/ / /
252.204-7000	Disclosure of Information		DEC 1991
252.225-7013	Duty-Free Entry		JUN 2005
252.225-7043	Antiterrorism/Force Protection For Defense Contractors Outside The United States (See DFARS 225.7401 (b) for paragraph C fill-in.		MAR 2006
252.228-7003	Capture and Detention		DEC 1991

8.2   Option Clause

        During the performance period of GSD's prime contract, GSD reserves the right to exercise options in accordance with terms and performance requirement of this Subcontract for the quantity ranges specified within Section 2, Supplies or Services and Prices/Cost, Subparagraph 2.2, Option Requirements.

8.3   Reserved

8.4   Reserved

8.5   Reserved

8.6   Reserved

8.7   Reserved

8.8   Modifications

        The Subcontract shall not be modified by, or interpreted by reference to, any course of dealing and shall not be modified by any course of performance. No modification of the Subcontract shall be effective unless it is in writing and signed by the party to be charged with the modification.

8.9   Warranty

(A)

Subcontractor warrants that all goods delivered, under this Subcontract shall be conveyed to GSD with good title and shall be rightful and free from any security interest or other lien or encumbrance or rightful claim of any third person by way of infringement or the like. Subcontractor agrees to indemnify GSD and hold GSD harmless against any direct expense, loss or liability for any breach of this warranty.

GSD warrants that all goods delivered under this Subcontract shall be conveyed to Subcontractor with good title and shall be rightful and free from any security interest or other lien or encumbrance or rightful claim of any third person by way of infringement or the like. GSD agrees to indemnify Subcontractor and hold Subcontractor harmless against any direct expense, loss or liability for any breach of this warranty.

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(B)

Until Government Acceptance, each party warrants that all goods and/or services furnished by it to the other party under this Subcontract shall conform to the requirements of this Subcontract if supplied by Subcontractor or the Prime Contract if supplied by GSD (including all applicable descriptions, specifications and drawings) and shall be free from all defects in materials and workmanship.

Goods and services corrected or replaced by either party shall be subject to all of the provisions of this Subcontract in the manner and to the extent as goods and services originally furnished under this Subcontract.

THERE ARE NO OTHER WARRANTIES WHETHER STATUTORY, EXPRESS OR IMPLIED INCLUDING ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE.

        In no event will either party be liable to the other for consequential or incidental damages arising out of the actual or alleged breach of this Subcontract, even if that party has been advised of the possibility of such damages.

8.10 Indemnification and Insurance

(A)

The Subcontractor shall indemnify, defend and save harmless GSD from any and all claims, losses, damages, expenses, suits or actions whatsoever brought by any person or persons for, or as the result of, any personal injury, including accidental and wrongful death, suffered by any employee of Subcontractor, or any employee of any of Subcontractor's lower-tier Subcontractors, agents or suppliers, while the said employee was in, or within the vicinity of, a GSD facility.

The Subcontractor shall indemnify, defend and save harmless GSD from any and all claims, losses, damages, expenses, suits or actions whatsoever alleging any property damages or personal injuries, including claims for accidental and wrongful death, which may arise or result from Subcontractor's operations or work performed at a GSD facility.

(B)

From the time of commencement of the Subcontract requirements until completion and removal of all remaining materials, supplies and personnel from the worksite, the Subcontractor shall provide and maintain in effect the types and amounts of insurance indicated in this Clause 8.10 with insurance companies satisfactory to GSD. The Subcontractor agrees to carry:



(1)

Worker's compensation insurance for its employees at the GSD facility where the work is being performed, including occupational disease coverage, in accordance with the laws of the state where the work is being performed and employers liability insurance with limits of not less than $1,000,000 for each incident at a GSD facility.



(2)

Automobile liability insurance covering all vehicles owned or used by the Subcontractor in the performance of this Subcontract, with limits of not less than $1,000,000 combined single limit bodily injury and property damage liability.



(3)

Commercial General Liability (CGL) insurance with an "occurrence" basis (including completed operations and contractual liability insuring the indemnity agreement, above) in the amounts of $1,000,000 combined single limit for bodily injury and property damage liability covering all Subcontractor's activities in and around a GSD facility. The commercial general liability insurance must be endorsed naming GSD as an additional insured and must contain the following cross liability statement thereon:

"In the event of claims being made by reason of personal or bodily injuries suffered by any employee or employees of one insured hereunder for which another insured

22

hereunder is or may be liable, then this policy shall cover such insured against whom a claim is made or may be made in the same manner as if separate policies had been issued to each insured hereunder."

"In the event of claims being made by reason of damage to property belonging to any insured hereunder for which another insured is or may be liable, then this policy shall cover such insured against whom a claim is made in the same manner as if separate policies had been issued to each insured hereunder."

As an alternative to naming GSD as an additional insured and providing the cross liability statement on the Subcontractor's CGL policy, the Subcontractor may provide a separate owner's protective liability policy naming GSD as the insured with limits of $1,000,000 combined single limit bodily injury and property damage liability, the Subcontractor must submit evidence of the above insurance coverage to GSD before work can begin. The Certificate shall provide that thirty (30) days prior written notice shall be given GSD in the event of cancellation or material change in the policies. Certificates of insurance must contain reference to endorsements (i.e., additional insured, cross liability) as required above.

8.10(A)  GSD Indemnification

        GSD shall indemnify, defend and save harmless the Subcontractor from any and all claims, losses, damages, expenses, suits or actions whatsoever brought by any person or persons for, or as a result of, any personal injury, including accidental and wrongful death, suffered by any employee of GSD, or any employee of any of GSD's subcontractors, agents or suppliers, while the said employee was in, or within the vicinity of Subcontractor's facility.

        GSD shall indemnify, defend and save harmless Subcontractor from any and all claims, losses, damages, expenses, suits or actions whatsoever alleging any property damages or personal injuries, including claims for accidental and wrongful death, which may arise or result from GSD's operations or work performed at a Subcontractor facility.

8.11 Waiver and Severability

        Any action or inaction by either party or the failure of either party, on any occasion, to enforce any right or provision of this Subcontract shall not be constructed to be a waiver by either party of their rights hereunder, and shall not prevent either party from enforcing such provision or right on any future occasion. A determination that any portion of this Subcontract is unenforceable or invalid shall not affect the enforceability or validity of any of the remaining portions of this Subcontract.

8.12 Rights and Remedies

        The rights and remedies of GSD herein are cumulative, and are in addition to any other rights or remedies that GSD may have hereunder.

8.13 Reserved

8.14 Reserved

8.15 Reserved

8.16 Notice Regarding Late Delivery

        If for any reason either party anticipates or encounters difficulties in complying with the Subcontract delivery schedule/dates or in meeting other requirements of the Subcontract, the party shall immediately notify the other party in writing, providing all the pertinent information. This data shall be informational only and its receipt by either party shall not be construed as a waiver of—

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(A)

any delivery schedule or date; or,



(B)

compliance with any other Subcontract requirement by the Subcontractor.

8.17 Responsibility in Subcontracting

        It is the sole responsibility of the Subcontractor to assure performance of their lower-tier subcontractors. Further, the Subcontractor shall be fully responsible for assuring that all appropriate contractual provisions and clauses are passed down to all lower-tier subcontractors, and that those provisions are strictly enforced.

8.18 GSD Furnished Materials

(A)

Material Responsibility

        GSD shall be responsible for the quality, count, distribution and delivery of all items procured by it to be used by Subcontractor. GSD supplied materials rejected by Subcontractor will be replaced or repaired at no cost to Subcontractor to meet the Delivery Schedule. Any expediting, freight charges or direct costs resulting from a rejection, delay or shortage of GSD Furnished Materials will be the responsibility of GSD.

(B)

Subcontractor Claims

        Relative to a Subcontractor claim to recover direct costs resulting from a rejection, delay or shortage of GSD Furnished Materials, Subcontractor shall provide GSD with information to the extent required to allow GSD to assess and evaluate the proposed claim. The proposed claim shall be negotiated and agreed upon by the parties. Further, the Subcontractor shall, to the maximum extent practical, maintain production flows in accordance with Subcontractor's standard manufacturing processes with the aim toward eliminating production work a rounds and Subcontractor claims to recover direct costs resulting from a rejection, delay or shortage of GSD Furnished Materials.

(C)

GSD Furnished Material Notification

        Subcontractor shall promptly, within 48 hours of the discovery, notify GSD of any damage, rejection or shortage of material furnished by GSD and/or its subcontractors. Physical access to the questioned material shall be available to allow GSD to perform analysis, corrective active and repair or replacement. Subcontractor shall provide pertinent information pertaining to the questioned material including Part Number, Description and assumed problem/issue. If applicable, on a monthly basis material issues shall be stated within the Progress Report required by this Subcontract. This information shall be addressed to the GSD Subcontract personnel stated within Section 7 of this Subcontract.

(D)

Subcontracting—Lower-Tiers

        Subcontractor may use lower-tier subcontractors and vendors of its choice; provided that all automotive integration shall be subcontracted through Spartan Chassis.

(E)

GSD Material Listing

        The GSD Material Listing, dated                        2006 agreed to between GSD and Subcontractor is hereby incorporated by reference and is appended hereto as Attachment                        . This reference is stated with the same force and effect as if provided in full text.

        Note: A definitive listing of GSD Furnished Materials and times to be provided shall be agreed to by the parties and provided via modification to this Subcontract within twenty (20) days of Subcontract issuance.

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8.19 Executive Order 13201: Notice of Employee Rights Concerning Payment of Union Dues

NOTE: This Executive Order does not apply to Subcontractors who meet the following criteria:

1.

Employs fewer than 15 people

2.

Establishments at which there is no union formally recognized by the subcontractor being audited; and,

3.

Establishments located in the "Right-to-Work" states of Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Mississippi, Nebraska, Nevada, North Carolina, North Dakota, Okalahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia and Wyoming.

        Under Federal law, employees cannot be required to join a union or maintain membership in a union in order to retain their jobs. Under certain conditions, the law permits a union and an employer to enter into a union-security agreement requiring employees to pay uniform periodic dues and initiation fees. However, employees who are not union member can object to the use of their payments for certain purposes and can only be required to pay their share of union costs relating to collective bargaining, contract administration, and grievance adjustment.

        If you do not want to pay that portion of dues of fees used to support activities not related to collective bargaining, contract administration, or grievance adjustment, you are entitled to an appropriate reduction in your payment. If you believe that you have been required to pay dues or fees used in part to support activities not related to collective bargaining, contract administration, or grievance adjustment, you may be entitled to a refund and to an appropriate reduction in future payments.

        For further information concerning your rights, you may wish to contract the National Labor Relations Board (NLRB) either at one of its Regional offices or at the following address or toll-free number:

National Labor Relations Board
Division of Information
1099 14^th Street, NW
Washington, DC 20570
1-866-667-6572
1-866-315-6572 (TTY)

        To locate the nearest NLRP office, see NLRB's website at www.nlrb.gov.

8.20 DEPLOYMENT—Contractor personnel deployed in support of the ILAV contract and identified by the Procurement Contracting Officer (PCO) in a separate signed Contractor Letter of Authorization (LOA) are to be granted the following privileges:

a.

Common Access Card (CAC), Geneva Convention Card (DD Form 489), and ration cards.

b.

Army and Air Force Exchange Services Facilities (MIL Exchange) (includes rationed items) (See AR 60-20).

c.

Military Clothing Sales for repair and replacement of issued equipment (See AR 60-20).

d.

Military Banking Facilities and Finance Accounting Office (FAO).

e.

Government transportation (i.e., aircraft, auto, bus, train, etc.) for official government travel.

f.

Morale and Welfare Recreational Facilities (i.e., Clubs, Theaters, Gyms, etc.).

g.

Commissary (including rationed items).

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h.

Issue of petroleum and oil products for Rental and/or Government Vehicles (See AR 60-20).

i.

Billets

j.

Messing facilities.

k.

Customs Exemption.

l.

Medical/Dental services: (Must be Specific, and coordinate with theater Surgeon's office (subject to availability)).

m.

Military postal Services (APO) (subject to availability).

n.

Dependants are not authorized to accompany the contractor.

o.

Contractor is considered as "Key Personnel, Department of the Army Civilian" in connection with the Non-Combatant Evacuation Orders at the equivalent civil service grade listed on the LOA.

p.

If the vendor permits, the named bearer on the LOA is eligible and authorized to use available travel discount rates in accordance with Government contracts and/or agreements. Government Contract City Pair is not available to Contractors.

q.

Emergency medical support will be determined by the appropriate supported commander. Contractor authorization aboard military aircraft will be determined by the supported commander. Necessary identification badges will be determined and provided by the supported command.

8.21 252.225-7040, CONTRACTOR PERSONNEL SUPPORTING A FORCE DEPLOYED OUTSIDE THE UNITED STATES (JUN 2005)

(A)

Definitions. As used in this clause—

Combatant Commander means the commander of a unified or specified combatant command established in accordance with 10 U.S.C. 161.
Theater of operations means an area defined by the combatant commander for the conduct or support of specific operations.

(B)

General.



(1)

This clause applies when contractor personnel deploy with or otherwise provide support in the theater of operations to U.S. military forces deployed outside the United States in—



(i)

Contingency operations;



(ii)

Humanitarian or peacekeeping operations; or



(iii)

Other military operations or exercises designated by the Combatant Commander.



(2)

Contract performance in support of U.S. military forces may require work in dangerous or austere conditions. The Contractor accepts the risks associated with required contract performance in such operations.



(3)

Contractor personnel are not combatants and shall not undertake any role that would jeopardize their status. Contractor personnel shall not use force or otherwise directly participate in acts likely to cause actual harm to enemy armed forces.



(C)

Support.



(1)

The Combatant Commander will develop a security plan to provide protection, through military means, of Contractor personnel engaged in the theater of operations unless the terms of this contract place the responsibility with another party.

26

(2)    (i)     All Contractor personnel engaged in the theater of operations are authorized resuscitative care,
                 stabilization, hospitalization at level III military treatment facilities, and assistance with patient
                 movement in emergencies where loss of life, limb, or eyesight could occur. Hospitalization will be
                 limited to stabilization and short-term medical treatment with an emphasis on return to duty or
                 placement in the patient movement system.

(ii)

When the Government provides medical treatment or transportation of Contractor personnel to a selected civilian facility, the Contractor shall ensure that the Government is reimbursed for any costs associated with such treatment or transportation.



(iii)

Medical or dental care beyond this standard is not authorized unless specified elsewhere in this contract.



(3)

Unless specified elsewhere in this contract, the Contractor is responsible for all other support required for its personnel engaged in the theater of operations under this contract.



(D)

Compliance with laws and regulations. The Contractor shall comply with, and shall ensure that its personnel supporting a force deployed outside the United States as specified in paragraph (b)(1) of this clause are familiar with and comply with, all applicable—



(1)

United States, host country, and third country national laws;



(2)

Treaties and international agreements;



(3)

United States regulations, directives, instructions, policies, and procedures; and,



(4)

Orders, directives, and instructions issued by the Combatant Commander relating to force protection, security, health, safety, or relations and interaction with local nationals.



(E)

Pre-deployment requirements. The Contractor shall ensure that the following requirements are met prior to deploying personnel in support of U.S. military forces. Specific requirements for each category may be specified in the statement of work or elsewhere in the contract.



(1)

All required security and background checks are complete and acceptable.



(2)

All deploying personnel meet the minimum medical screening requirements and have received all required immunizations as specified in the contract. The Government will provide, at no cost to the Contractor, any theater-specific immunizations and/or medications not available to the general public.



(3)

Deploying personnel have all necessary passports, visas, and other documents required to enter and exit a theater of operations and have a Geneva Conventions identification card from the deployment center.



(4)

Country and theater clearance is obtained for personnel. Clearance requirements are in DoD Directive 4500.54, Official Temporary Duty Abroad, and DoD 4500.54-G, DoD Foreign Clearance Guide. Contractor personnel are considered non-DoD personnel traveling under DoD sponsorship.



(F)

Processing and departure points. Deployed contractor personnel shall—

27

(1)

Process through the deployment center designated in the contract, or as otherwise directed by the Contracting Officer, prior to deploying. The deployment center will conduct deployment processing to ensure visibility and accountability of contractor personnel and to ensure that all deployment requirements are met;



(2)

Use the point of departure and transportation mode directed by the Contracting Officer; and



(3)

Process through a Joint Reception Center (JRC) upon arrival at the deployed location. The JRC will validate personnel accountability, ensure that specific theater of operations entrance requirements are met, and brief contractor personnel on theater specific policies and procedures.



(G)

Personnel data list.



(1)

The Contractor shall establish and maintain with the designated Government official a current list of all contractor personnel that deploy with or otherwise provide support in the theater of operations to U.S. military forces as specified in paragraph (b)(1) of this clause. The Contracting Officer will inform the Contractor of the Government official designated to receive this data and the appropriate automated system(s) to use for this effort.



(2)

The Contractor shall ensure that all employees on the list have a current DD Form 93, Record of Emergency Data Card, on file with both the Contractor and the designated Government official.



(H)

Contractor personnel.



(1)

The Contracting Officer may direct the Contractor, at its own expense, to remove and replace any contractor personnel who jeopardize or interfere with mission accomplishment or who fail to comply with or violate applicable requirements of this clause. Such action may be taken at the Government's discretion without prejudice to its rights under any other provision of this contract, including the Termination for Default clause.



(2)

The Contractor shall have a plan on file showing how the Contractor would replace employees who are unavailable for deployment or who need to be replaced during deployment. The Contractor shall keep this plan current and shall provide a copy to the Contracting Officer upon request. The plan shall—



(i)

Identify all personnel who are subject to military mobilization;



(ii)

Detail how the position would be filled if the individual were mobilized; and



(iii)

Identify all personnel who occupy a position that the Contracting Officer has designated as mission essential.



(I)

Military clothing and protective equipment.



(1)

Contractor personnel supporting a force deployed outside the United States as specified in paragraph (b)(1) of this clause are prohibited from wearing military clothing unless specifically authorized in writing by the Combatant Commander. If authorized to wear military clothing, Contractor personnel must wear distinctive patches, arm bands, nametags, or headgear, in order to be distinguishable from military personnel, consistent with force protection measures and the Geneva Conventions.

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(2)

Contractor personnel may wear military-unique organizational clothing and individual equipment (OCIE) required for safety and security, such as ballistic, nuclear, biological, or chemical protective clothing.



(3)

The deployment center, or the Combatant Commander, shall issue OCIE and shall provide training, if necessary, to ensure the safety and security of contractor personnel.



(4)

The Contractor shall ensure that all issued OCIE is returned to the point of issue, unless otherwise directed by the Contracting Officer.



(J)

Weapons.



(1)

If the Contractor requests that its personnel performing in the theater of operations be authorized to carry weapons, the request shall be made through the Contracting Officer to the Combatant Commander. The Combatant Commander will determine whether to authorize in-theater contractor personnel to carry weapons and what weapons will be allowed.



(2)

The Contractor shall ensure that its personnel who are authorized to carry weapons—



(i)

Are adequately trained;



(ii)

Are not barred from possession of a firearm by 18 U.S.C. 922; and



(iii)

Adhere to all guidance and orders issued by the Combatant Commander regarding possession, use, safety, and accountability of weapons and ammunition.



(3)

Upon redeployment or revocation by the Combatant Commander of the Contractor's authorization to issue firearms, the Contractor shall ensure that all Government-issued weapons and unexpended ammunition are returned as directed by the Contracting Officer.



(K)

Vehicle or equipment licenses. Contractor personnel shall possess the required licenses to operate all vehicles or equipment necessary to perform the contract in the theater of operations.



(L)

Purchase of scarce goods and services. If the Combatant Commander has established an organization for the theater of operations whose function is to determine that certain items are scarce goods or services, the Contractor shall coordinate with that organization local purchases of goods and services designated as scarce, in accordance with instructions provided by the Contracting Officer.



(M)

Evacuation.



(1)

If the Combatant Commander orders a mandatory evacuation of some or all personnel, the Government will provide assistance, to the extent available, to United States and third country national contractor personnel.



(2)

In the event of a non-mandatory evacuation order, unless authorized in writing by the Contracting Officer, the Contractor shall maintain personnel on location sufficient to meet obligations under this contract.



(N)

Next of kin notification and personnel recovery.



(1)

The Contractor shall be responsible for notification of the employee-designated next of kin in the event an employee dies, requires evacuation due to an injury, or is missing, captured, or abducted.

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(2)

In the case of missing, captured, or abducted contractor personnel, the Government will assist in personnel recovery actions in accordance with DoD Directive 2310.2, Personnel Recovery.



(O)

Mortuary affairs. Mortuary affairs for contractor personnel who die while providing support in the theater of operations to U.S. military forces will be handled in accordance with DoD Directive 1300.22, Mortuary Affairs Policy.



(P)

Changes. In addition to the changes otherwise authorized by the Changes clause of this contract, the Contracting Officer may, at any time, by written order identified as a change order, make changes in Government-furnished facilities, equipment, material, services, or site. Any change order issued in accordance with this paragraph (p) shall be subject to the provisions of the Changes clause of this contract.



(Q)

Subcontracts. The Contractor shall incorporate the substance of this clause, including this paragraph (q), in all subcontracts that require subcontractor personnel to be available to deploy with or otherwise provide support in the theater of operations to U.S. military forces deployed outside the United States in—



(1)

Contingency operations;



(2)

Humanitarian or peacekeeping operations; or



(3)

Other military operations or exercises designated by the Combatant Commander.

8.22 52.225-4040 (TACOM), ARMY MATERIEL COMMAND (AMC) ADMINISTRATIVE REQUIREMENTS FOR DEPLOYED CONTRACTORS (JUN 2005)

(A)

In order to maintain accountability of all deployed personnel in the Theater of Operations (see DFARS clause 252.225-7040 for definition), the Contractor shall follow instructions issued by the Army Materiel Commands Logistics Support Element (AMC LSE) or other Contracting Officers designated representative to provide, and keep current, requested data on Contractor Personnel for entry into military personnel database systems.



(B)

The Contractor shall coordinate with the AMC LSE or other Contracting Officers designated representative for logistics support, as follows:



(1)

Upon initial entry into the Theatre of Operations;



(2)

Upon initiation of contract performance;



(3)

Upon relocation of contract performance within the Theatre of Operations; and,



(4)

Upon exiting the Theatre of Operations.

8.23 52.237-4000 (TACOM), CONTRACTOR MANPOWER REPORTING (CMR) (NOV 2005)

        The Office of the Assistant Secretary of the Army (Manpower & Reserve Affairs) operates and maintains a secure Army data collection site where the contractor will report ALL contractor manpower (including subcontractor manpower) required for performance of this contract. The contractor is required to completely fill in all the information in the format using the following web address: https://contractormanpower.army.pentagon.mil. The required information includes the following:

(1)

Contracting Office, Contracting Officer, Contracting Officer's Technical Representative;



(2)

Contract number, including task and delivery order number;



(3)

Beginning and ending dates covered by reporting period;

30

(4)

Contractor name, address, phone number, e-mail address, identity of contractor employee entering data;



(5)

Estimated direct labor hours (including sub-contractors);



(6)

Estimated direct labor dollars paid this reporting period (including sub-contractors);



(7)

Total payments (including sub-contractors);



(8)

Predominant Federal Service Code (FSC) reflecting services provided by contractor (and separate predominant FSC for each subcontractor if different);



(9)

Estimated data collection cost;



(10)

Organizational title associated with the Unit Identification Code (UIC) for the Army Requiring Activity (the Army Requiring Activity is responsible for providing the contractor with its UIC for the purposes of reporting this information);



(11)

Locations where contractor and sub-contractors perform the work (specified by zip code in the United States and nearest city, country, when in an overseas location, using standardized nomenclature provided on web site);



(12)

Presence of deployment or contingency language; and,



(13)

Number of contractor and sub-contractor employees deployed in theater this reporting period (by country).

        As part of its submission, the contractor will also provide the estimated total cost (if any) incurred to comply with this reporting requirement. Reporting period will be the period of performance not to exceed 12 months ending September 30 of each government fiscal year and must be reported by 31 October of each calendar year. Contractors may use a direct SML data transfer to the database server or fill in the fields on the website. The XML direct transfer is a format for transferring files from a contractor's systems to the secure web site without the need for separate data entries for each required data element at the web site. The specific formats for the SML direct transfer may be downloaded from the web site.

        [END OF SECTION 8]

31

BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 9—SUBCONTRACT CLAUSES
03 AUGUST 2006

9.1   52.252-2, Clauses Incorporated By Reference (FEB 1998)(Deviation)

        This Subcontract incorporates one or more clauses by reference with the same force and effect as if they were provided in full text. Upon request, GSD will make their full text available. Also, the full text of a clause may be accessed electronically at the following addresses: http://www/desktop.osd.mil or http://www.arnet.gov/far/ or http://farsite.hill.af.mil/

Regulatory Cite	Title	Date
	/ / / / / / / / / / / Federal Acquisition Regulation Clauses / / / / / / / / / / /
52.203-7	Anti-Kickback Procedures		JUL 1995
52.203-8	Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity		JAN 1997
52.203-10	Price or Fee Adjustment for Illegal or Improper Activity		JAN 1997
52.204-2	Security Requirements		AUG 1996
52.204-9	Personal Identity Verification of Contractor Personnel		JAN 2006
52.211-15	Defense Priority and Allocation Requirements		SEP 1990
52.219-16	Liquidated Damages—Small Business Subcontracting Plan		JAN 1999
52.223-3	Hazardous Material Identification and Material Safety Data		JAN 1997
52.223-6	Drug—Free Workplace		MAY 2001
52.225-8	Duty—Free Entry		FEB 2000
52.228-3	Workers' Compensation Insurance (Defense Base Act)		APR 1984
52.228-4	Workers' Compensation and War-Hazard Insurance Overseas		APR 1984
52.229-3	Federal, State, and Local Taxes		APR 2003
52.239-1	Privacy, or Security Safeguards		AUG 1996
52.242-10	F.O.B. Origin—Government Bills of Lading or Prepaid Postage		APR 1984
52.243-7	Notification of Changes		APR 1984
52.245-1	Property Records		APR 1984
52.245-2	Government Property—Fixed Price Contracts		MAY 2004
52.245-17	Special Tooling		MAY 2004
52.245-18	Special Test Equipment		FEB 1993
52.246-16	Responsibility for Supplies		APR 1984
52.246-23	Limitation of Liability		FEB 1997
52.246-24	Limitation of Liability—High Value Items		FEB 1997
52.247-1	Commercial Bill of Lading Notations		FEB 2006
52.247-29	F.O.B. Origin		JUN 1988
	/ / / / / Defense Federal Acquisition Regulation Supplements / / / / /
252.209-7004	Subcontracting With Firms That Are Owned or Controlled By the Government of A Terrorist Country Per DoD Interim Rule, Federal Register 27 Mar 98		MAR 1998
252.211-7005	Substitutions For Military or Federal Specifications and Standards		NOV 2005
252.228-7000	Reimbursement For War-Hazard Losses		DEC 1991
252.232-7010	Levies on Contract Payments		SEP 2005
252.247-7023	Transportation of Supplies by Sea		MAY 2002

32

9.2   Federal Acquisition Regulation Text Clauses

9.2.1  Reserved

9.2.2  Reserved

9.2.3  Reserved

9.2.4  Reserved

9.2.5  Reserved

9.2.6  52.252-6, Authorized Deviations in Clauses (APR 1984)

(A)

The use in this solicitation or subcontract of any Federal Acquisition Regulation (48 CFR Chapter 1) clause with an authorized deviation is indicated by the addition of (DEVIATION) after the name of the regulation.



(B)

The use in this solicitation or subcontract of any DoD FAR Supplement (DFARS) (48 CFR 2) clause with an authorized deviation is indicated by the addition of (DEVIATION) after the name of the regulation.

9.3   Changes

        Changes in the terms and conditions of this Subcontract may be made only by written agreement between the parties.

9.4   Termination

        GSD may terminate this Subcontract for its convenience in whole or in part upon receipt of a Government prime contract termination notice. In the event of such termination, the Subcontractor shall immediately stop all work hereunder and shall immediately cause any and all of its suppliers to cease work. Subject to the terms of this Subcontract, the Subcontractor shall be paid a percentage of the Subcontract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Subcontractor can demonstrate to the satisfaction of the GSD and/or the Government using its standard record keeping system, have resulted from the termination. The Subcontractor shall not be required to comply with the cost accounting standards or contract cost principles for this purpose. This paragraph does not give GSD any right to audit the Subcontractor's records. The Subcontractor shall not be paid for any work performed or costs incurred which reasonably could have been avoided.

9.5   Termination for Cause

(A)

GSD may, by written notice, terminate the whole or any part of this Subcontract in any of the following circumstances:



(1)

if Subcontractor fails to deliver the goods or to perform the services required by this Subcontract within the time specified herein, or any extension thereof granted by GSD in writing;



(2)

if Subcontractor fails to perform any material provision of this Subcontract or so fails to make progress as to endanger performance of this Subcontract and, if in either of these two circumstances, Subcontractor does not cure such failure within a period of eight (8) working days after receipt of written notice from GSD specifying such failure. The Subcontractor shall prepare a recovery plan acceptable to GSD provided a cure can not be determined within the above stated eight (8) working days;



(3)

Subcontractor files or declares bankruptcy; or

33

(4)

in the event of suspension of Subcontractor's business, insolvency, liquidation proceedings by or against Subcontractor, appointment of a trustee or receiver for Subcontractor's property or business, or any assignment, reorganization or arrangement by Subcontractor for the benefit of creditors.



(B)

If GSD terminates this Subcontract in whole or in part, it may acquire, under the terms and in the manner GSD considers appropriate, goods or services similar to those terminated, and Subcontractor will be liable to GSD for any excess costs for those goods or services. However, Subcontractor shall continue the work not terminated.



(C)

GSD may require Subcontractor to transfer title and deliver to GSD in the manner and to the extent directed by GSD for—



(1)

any completed goods; and,



(2)

such partially completed goods, materials, and fixtures paid for by GSD (hereinafter called manufacturing materials) as Subcontractor has produced or acquired for the performance of this Subcontract, including the assignment to GSD of Subcontractor's lower-tier subcontracts. Subcontractor shall protect and preserve property in possession of Subcontractor in which GSD has an interest.



(D)

Payment for completed goods delivered to and accepted by GSD shall be at the Subcontract price. Payment for manufactured materials delivered to and accepted by GSD, and for the protection and preservation of property, shall be at a price determined in the same manner as provided in Clause 9.4, Termination hereof, except that Subcontractor shall not be entitled to profit. Failure to agree will be a dispute under Clause 9.6, Disputes. GSD may withhold from Subcontractor moneys otherwise due Subcontractor for completed goods and/or manufacturing materials in such amounts as GSD determines necessary to protect GSD against loss due to outstanding liens or claims against said goods or for any amounts otherwise due from GSD to Subcontractor.



(E)

Reserved



(F)

If the failure to perform is caused by the default of a Subcontractor at any tier, and if the cause of the default is beyond the control of both subcontractor and a lower-tier subcontractor, and without the fault or negligence of either, Subcontractor shall not be liable for any excess costs for failure to perform, unless the subcontracted goods or services were obtainable from other sources in sufficient time for Subcontractor to meet the required delivery schedule.



(G)

If after notice of Termination for Cause, it is determined for any reason that Subcontractor was not in default, or that the default was excusable, the rights and obligations of the parties shall be the same as if the Notice of Termination had been issued for convenience pursuant to Clause 9.4, Termination.

9.6   Disputes

(A)

Pending the final resolution of any dispute arising out of or relating to this Subcontract, Subcontractor shall proceed diligently with performance of this Subcontract, including the delivery of goods or services, and comply with any decision of GSD's Authorized Subcontract Representative. GSD will continue payment to the Subcontractor for acceptable performance rendered during any period under dispute.



(B)

Subcontractor shall submit to GSD's Authorized Subcontract Representative a written demand for GSD's final decision regarding the disposition of any dispute between the parties arising out of or relating to this Subcontract, unless GSD, on its own initiative, has already rendered

34

such a final decision. Any final decision of GSD shall be expressly identified as such, shall be in writing, and shall be signed by GSD's Authorized Subcontract Representative, except that GSD's failure to render a final decision within ninety (90) days after receipt of Subcontractor's demand shall be deemed a final decision adverse to Subcontractor's contentions.

(C)

GSD's final decision shall be conclusive and binding regarding the dispute unless Subcontractor commences an action to contest such decision in a court of competent jurisdiction in accordance with this Clause 9.6, Disputes, Paragraph (D) within ninety (90) days following the date of the final decision or one (1) year following the accrual of the cause of action, whichever is later.



(D)

Any dispute arising under this Subcontract which is not settled by agreement of the parties following a good faith effort to resolve such dispute by negotiations or discussions between managers at the appropriate level of either side, and after exploring various alternate dispute resolution options, may be resolved by appropriate legal proceedings. Subcontractor and GSD agree to submit to the jurisdiction of the laws and the Courts of New York, and agree that venue for any action relating to any dispute arising under this Subcontract shall be in a court located in New York state, or the United States District Court. Notwithstanding the parties' desire to resolve disputes through negotiation or other form of alternate dispute resolution, in the event that immediate action is required to protect a party's rights under the Subcontract, the aggrieved party may take whatever immediate action is appropriate to protect its rights, to include, but not be limited to injunctive relief. Nothing contained in this Subcontract or in any other document related hereto is intended to or shall have the effect of requiring either party hereto to consider, resort to, participate in, or abide by any binding arbitration process or mechanism, or any device or arrangement of a nature or intent similar to binding arbitration.



(E)

If the dispute relates to the Government and GSD elects to prosecute any dispute involving this Subcontract under the disputes procedure applicable to the U.S. Government prime or higher-tier contract, Subcontractor shall cooperate fully with GSD in prosecuting the dispute, and Subcontractor shall not be entitled to demand a final decision under Paragraph (B) of this Clause until the dispute is resolved. Subcontractor shall be bound by the final outcome of the disputes procedure if:



(i)

GSD has afforded Subcontractor an opportunity to participate in GSDs' prosecution of the dispute, or;



(ii)

GSD, having decided to discontinue its own prosecution of the dispute, has afforded Subcontractor an opportunity to continue to prosecute the dispute in GSD's name.



(F)

GSD and Subcontractor shall each bear their own costs of prosecuting any dispute.

9.7   Notice of Labor Disputes

(A)

Whenever either party has knowledge that any actual or potential labor dispute is delaying or threatens to delay the timely performance of this Subcontract, the party shall immediately give notice to the other party hereof, and all relevant information with respect thereto, to the party's Authorized Representative and shall clearly identify to that parties Authorized Representative of any material changes in the information required hereunder.



(B)

Subcontractor agrees to insert the substance of this Clause 9.7, Notice of Labor Disputes, including this Paragraph (B), in any lower-tier subcontract hereunder wherein a labor dispute may delay the timely performance of this Subcontract.

35

9.8   Notice of Bankruptcy

        In the event either party enters into proceedings relating to bankruptcy, whether voluntary or involuntary, the party affected shall furnish written notification of the bankruptcy to the other parties Authorized Representative. This notification shall be furnished within five (5) days of the initiation of the proceedings relating to bankruptcy filing. The notification shall include the date on which the bankruptcy petition was or is to be filed, and the court in which it was or is to be filed.

9.9   Gratuities

        Both parties warrants and represents that neither party shall not offer to any employee of GSD Subcontractor, or an officer, official, or employee of the Government any gratuity or other favor with the intent to influence that employee's or Government representative's decisions with respect to Subcontractor. Breach of this warranty and representation shall entitle either party to terminate the Subcontract for cause. No business hospitality shall be offered except those that are both (i) moderate and customary in the defense industry and (ii) in compliance with each party's published policy.

9.10 Assignment

        Subcontractor shall not assign any of its rights or interests in this Subcontract, or all or substantially all of its performance of this Subcontract without GSD's prior written consent. Subcontractor shall not delegate any of its duties or obligations under this Subcontract, except that Subcontractor may without GSD consent assign this Subcontract to any successor of Subcontractor by way of merger, consolidation or the acquisition of substantially all of the business assets of Subcontractor. Subcontractor may assign its right to monies due or to become due. No assignment, delegation or subcontracting by Subcontractor, with or without GSD's consent, shall relieve the Subcontractor of any of its obligations under this Subcontract or prejudice any of GSD's rights against Subcontractor whether arising before or after the date of any assignment. GSD's consent shall not be unreasonably withheld.

9.11 Applicable Law

        Any provision of the Federal Acquisition Regulation or any agency supplement thereto that is expressly incorporated herein by reference shall be governed by and construed in accordance with the Federal Common Law of Government Contracts as enunciated and applied by Federal judicial bodies, Boards of Contract Appeals, and quasi-judicial agencies of the Federal Government and not any state law or the Convention on Contracts for the International Sale of Goods. Likewise, the Changes, Termination, Termination for Cause, and Stop Work provisions herein shall in the same manner be governed by and construed in accordance with the Federal Common Law of Government Contracts. To the extent an issue arises under any of these provisions that is not addressed by the Federal Common Law of Government Contracts the laws of the state of New York, regardless of the place of execution or performance shall apply.

9.12 52.212-5, CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR EXECUTIVE ORDERS—COMMERCIAL ITEMS (JAN 2006) (DEVIATION)

(A)

The Contractor shall comply with the following Federal Acquisition Regulation (FAR) clauses, which are incorporated in this contract by reference, to implement provisions of law or Executive orders applicable to acquisitions of commercial items:



(1)

Reserved



(2)

In Accordance With Clause 9.11

36

(B)

The Contractor shall comply with the FAR clauses in this paragraph (b) that the contracting officer has indicated as being incorporated in this contract by reference to implement provisions of law or Executive orders applicable to acquisitions of commercial items:

        [Contracting Officer shall check as appropriate.]

[XX] (1) 52.203-6, Restrictions on Subcontractor Sales to the Government (Jul 1995), with Alternate I (Oct 1995)(41 U.S.C. 253g and 10 U.S.C. 2402).

[            ] (2) 52.219-3, Notice of Total HUBZone Set-Aside (Jan 1999)(15 U.S.C. 657a).

[XX] (3) 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns (Jul 2005) (if the offer or elects to waive the preference, it shall so indicate in its offer)(15 U.S.C. 657a).

[            ] (4) [Reserved]

(5) Reserved

(6) Reserved

[XX] (7) 52.219-8, Utilization of Small Business Concerns (May 2004) (15 U.S.C. 637(d)(2) and (3)).

(8)

[XX] (i) 52.219-9, Small Business Subcontracting Plan (Jul 2005)(15 U.S.C. 637 (d)(4)).

[            ] (i) Alternate I (Oct 2001) of 52.219-9.

[            ] (ii) Alternate II (Oct 2001) of 52.219-9.

[            ] (9) Reserved

(10)

[            ] (i) 52.219-23, Notice of Price Evaluation Adjustment for Small Disadvantaged Business Concerns (Sep 2005)(10 U.S.C. 2323) (if the offeror elects to waive the adjustment, it shall so indicate in its offer).

[            ] (ii)Alternate I (June 2003) of 52.219-23.

[XX] (11) 52.219-25, Small Disadvantaged Business Participation Program- Disadvantaged Status and Reporting (Oct 1999)(Pub. L.103-355, section 7102, and 10 U.S.C. 2323).

[XX] (12) 52.219-26, Small Disadvantaged Business Participation Program-Incentive Subcontracting (Oct 2000)(Pub. L. 103-355, section 7102, and 10 U.S.C. 2323).

[            ] (13) 52.219-27, Notice of Total Service-Disabled Veteran-Owned Small Business Set-Aside (May 2004).

[            ] (14) 52.222-3, Convict Labor (June 2003)(E.O. 11755).

[XX] (15) 52.222-19, Child Labor-Cooperation with Authorities and Remedies (Jan 2006) (E.O. 13126).

[XX] (16) 52.222-21, Prohibition of Segregated Facilities (Feb 1999).

[XX] (17) 52.222-26, Equal Opportunity (Apr 2002)(E.O. 11246).

[XX] (18) 52.222-35, Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Dec 2001)(38 U.S.C. 4212).

37

[XX] (19) 52.222-36, Affirmative Action for Workers with Disabilities (Jun 1998)(29 U.S.C. 793).

[XX] (20) 52.222-37, Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Dec 2001)(38 U.S.C. 4212).

[XX] (21) 52.222-39, Notification of Employee Rights Concerning Payment of Union Dues or Fees (Dec 2004) (E.O. 13201).

(C)

The Contractor shall comply with the FAR clauses in this paragraph (c), applicable to commercial services, that the Contracting Officer has indicated as being incorporated in this contract by reference to implement provisions of law or executive orders applicable to acquisitions of commercial items:

No Clauses or provisions required

(D)

Comptroller General Examination of Record. The Contractor shall comply with the provisions of this paragraph (d) if this contract was awarded using other than sealed bid, is in excess of the simplified acquisition threshold, and does not contain the clause at 52.215-2, Audit and Records—Negotiation.



(1)

The Comptroller General of the United States, or an authorized representative of the Comptroller General, shall have access to and right to examine any of the Contractors directly pertinent records involving transactions related to this contract.



(2)

The Contractor shall make available at its offices at all reasonable times the records, materials, and other evidence for examination, audit, or reproduction, until 3 years after final payment under this contract or for any shorter period specified in FAR Subpart 4.7, Contractor Records Retention, of the other clauses of this contract. If this contract is completely or partially terminated, the records relating to the work terminated shall be made available for 3 years after any resulting final termination settlement. Records relating to appeals under the disputes clause or to litigation or the settlement of claims arising under or relating to this contract shall be made available until such appeals, litigation, or claims are finally resolved.



(3)

As used in this clause, records include books, documents, accounting procedures and practices, and other data, regardless of type and regardless of form. This does not require the Contractor to create or maintain any record that the Contractor does not maintain in the ordinary course of business or pursuant to a provision of law.



(E)

(1)    Notwithstanding the requirements of the clauses in paragraphs (A), (B), (C) and (D) of this clause, the Contractor is not required to flow down any FAR clause, other than those in paragraphs (i) through (vii) of this paragraph in a subcontract for commercial items. Unless otherwise indicated below, the extent of the flow down shall be as required by the clause—



(i)

52.219-8, Utilization of Small Business Concerns (May 2004)(15 U.S.C. 637(d)(2) and (3)), in all subcontracts that offer further subcontracting opportunities. If the subcontract (except subcontracts to small business concerns) exceeds $500,000 ($1,000,000 for construction of any public facility), the subcontractor must include 52.219-8 in lower tier subcontracts that offer subcontracting opportunities.



(ii)

52.222-26, Equal Opportunity (Apr 2002)(E.O. 11246).



(iii)

52.222-35, Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Dec 2001)(38 U.S.C. 4212).

38

(iv)

52.222-36, Affirmative Action for Workers with Disabilities (June 1998)(29 U.S.C. 793).



(v)

52.222-39, Notification of Employee rights Concerning Payment of Union Dues or Fees (Dec 2004) (E.O. 13201).



(vi)

52.222-41, Service Contract Act of 1965, as Amended (Jul 2005), flow down required for all subcontracts subject to the Service Contract Act of 1965 (41 U.S.C. 351, et seq.)



(vii)

52.247-64, Preference for Privately-Owned U.S. Flag Commercial Vessels (Apr 2003)(46 U.S.C. Appx 1241 and 10 U.S.C. 2631). Flow down required in accordance with paragraph (d) of FAR clause 52.247-64.



(2)

While not required, the contractor may include in its subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligations.

9.13 252.212-7001, CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR EXECUTIVE ORDERS APPLICABLE TO DEFENSE ACQUISITIONS OF COMMERCIAL ITEMS (MAR 2006) (DEVIATION)

(A)

The Contractor agrees to comply with the following Federal Acquisition Regulation (FAR) clause which, if checked, is included in this contract by reference to implement a provision of law applicable to acquisitions of commercial items or components.

[XX] 52.203-3 Gratuities (Clause 9.9)

(B)

The Contractor agrees to comply with any clause that is checked on the following list of Defense FAR Supplement clauses which, if checked, is included in this contract by reference to implement provisions of law or Executive orders applicable to acquisitions of commercial items or components.

[XX] 252.219-7003 Small, Small Disadvantaged and Women-Owned Small Business Subcontracting Plan (DoD Contracts) (APR 1996) (15 U.S.C. 637).

[XX] 252.225-7012 Preference for Certain Domestic Commodities (JUN 2004) (10 U.S.C. 2533a).

[      ] 252.225-7014 Preference for Domestic Specialty Metals (JUN 2005) (10 U.S.C. 2533a).

[XX] 252.225-7016 Restriction on Acquisition of Ball and Roller Bearings (JUN 2005) (

[XX] 252.225-7021 Trade Agreements (DEC 2005) (19 U.S.C. 2501-2518 and 19 U.S.C. 3301 note).

[XX] 252.225-7027 Restriction on Contingent Fees for Foreign Military Sales (APR 2003) (22 U.S.C. 2779).

[XX] 252.225-7028 Exclusionary Policies and Practices of Foreign Governments (APR 2003) (22 U.S.C. 2755).

[XX] 252.226-7001 Utilization of Indian Organizations, 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 appropriations acts).

[XX] 252.227-7015 Technical Data—Commercial Items (NOV 1995) (10 U.S.C. 2320).

[XX] 252.227-7037 Validation of Restrictive Markings on Technical Data (SEP 1999) (10 U.S.C. 2321).

39

[XX] 252.247-7023 Transportation of Supplies by Sea (MAY 2002) ([            ] Alternate I) (MAR 2000) ([            ] Alternate II) (MAR 2000) ([            ] Alternate III) (MAY 2002) (10 U.S.C. 2631).

(C)

In addition to the clauses listed in paragraph (e) of the Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items clause of this contract (FAR 52.212-5), the Contractor shall include the terms of the following clauses, if applicable, in subcontracts for commercial items or commercial components, awarded at any tier under this contract:

252.225-7014 Preference for Domestic Specialty Metals, Alternate I (APR 2003) (10 U.S.C. 2533a).

252.237-7019 Training for Contractor Personnel Interacting with Detainees (SEP 2005) (Section 1092 of Pub. L. 108-375).

252.247-7023 Transportation of Supplies by Sea (MAY 2002) (10 U.S.C. 2631).

252.247-7024 Notification of Transportation of Supplies by Sea (MAR 2000) (10 U.S.C. 2631).

40

9.14 52.212-4, CONTRACT TERMS AND CONDITIONS—COMMERCIAL ITEMS (SEP 2005) (DEVIATION)

(A)

Inspection / Acceptance. Subcontract Section 3/5.



(B)

Assignment. Subcontract Clause 9.10



(C)

Changes. Subcontract Clause 9.3.



(D)

Disputes. Subcontract Clause 9.6



(E)

Definitions. The clause at FAR 52.202-1, Definitions, is incorporated herein by reference.



(F)

Excusable delays. The Subcontractor shall be liable for default unless nonperformance is caused by an occurrence beyond the reasonable control of the Subcontractor and without its fault or negligence such as, acts of God or the public enemy, acts of the Government in either its sovereign or contractual capacity, acts of GSD or any of its subcontractors, fires, floods, epidemics, quarantine restrictions, strikes, unusually severe weather, and delays of common carriers. The Subcontractor shall notify the GSD Authorized Representative in writing as soon as it is reasonably possible after the commencement of any excusable delay, setting forth the full particulars in connection therewith, shall remedy such occurrence with all reasonable dispatch, and shall promptly give written notice to the GSD Authorized Representative of the cessation of such occurrence.



(G)

Invoice.



(1)

The Contractor shall submit an original invoice and three copies (or electronic invoice, if authorized) to the address designated in the contract to receive invoices. An invoice must include—



(i)

Name and address of the Contractor;



(ii)

Invoice date and number;



(iii)

Contract number, contract line item number and, if applicable, the order number;



(iv)

Description, quantity, unit of measure, unit price and extended price of the items delivered;



(v)

Shipping number and date of shipment, including the bill of lading number and weight of shipment if shipped on Government bill of lading;



(vi)

Reserved;



(vii)

Name and address of official to whom payment is to be sent;



(viii)

Name, title, and phone number of person to notify in event of defective invoice; and



(ix)

Taxpayer Identification Number (TIN). The Contractor shall include its TIN on the invoice only if required elsewhere in this contract.



(x)

Reserved



(H)

Patent indemnity. The Subcontractor shall indemnify the Government and BAE Systems and its officers, employees and agents against liability, including costs, for actual or alleged direct or contributory infringement of, or inducement to infringe, any United States or foreign patent, trademark or copyright, arising out of the performance of this contract, provided the Contractor is reasonably notified of such claims and proceedings.



(I)

Reserved

41

(J)

Risk of loss. Unless the contract specifically provides otherwise, risk of loss or damage to the supplies provided under this Subcontract shall remain with the Subcontractor until, and shall pass to others as follows:



(1)

To GSD upon delivery of the supplies to a carrier, if transportation is f.o.b. Subcontractors loading dock or



(2)

To the Government upon delivery of the supplies to the Government at the destination specified in the contract, if transportation is f.o.b. destination. GSD shall have the risk of loss for all GSD Furnished Material until receipt by Subcontractor at its receiving dock.



(K)

Reserved



(L)

Termination for Convenience. Subcontract Clause 9.4



(M)

Termination for Cause. Subcontract Clause 9.5



(N)

Reserved



(O)

Warranty. Subcontract Clause 8.9 (A) and (B)



(P)

Reserved



(Q)

Other compliances. The parties shall comply with all applicable Federal, State and local laws, executive orders, rules and regulations applicable to its performance under this contract.



(R)

Compliance with laws unique to Government contracts. The parties agree to comply with 31 U.S.C. 1352 relating to limitations on the use of appropriated funds to influence certain Federal contracts; 18 U.S.C. 431 relating to officials not to benefit; 40 U.S.C. 3701, et seq., Contract Work Hours and Safety Standards Act; 41 U.S.C. 51-58, Anti-Kickback Act of 1986; 41 U.S.C. 265 and 10 U.S.C. 2409 relating to whistleblower protections; 49 U.S.C. 40118, Fly American; and 41 U.S.C. 423 relating to procurement integrity.



(S)

Order of precedence. Any inconsistencies in this solicitation or contract shall be resolved by giving precedence in the following order:



(1)

The Production License



(2)

The schedule of supplies/services.



(3)

The Assignments, Disputes, Payments, Invoice, Other Compliances, and Compliance with Laws Unique to Government Contracts paragraphs of this clause.



(4)

The clause at 52.212-5 as modified and / or deviated



(5)

Addenda to this Subcontract, including any license agreements for computer software.



(6)

Other paragraphs of this clause.



(7)

Other documents, exhibits, and attachments (excluding the Production License).



(8)

The specification.



(T)

Limitation of Liability

        Except as otherwise provided by an express warranty, the Subcontractor will not be liable to GSD for consequential damages resulting from any defect or deficiencies in accepted items.

42

9.15 52.222-39, NOTIFICATION OF EMPLOYEE RIGHTS CONCERNING PAYMENT OF UNION DUES OR FEES (DEC 2004)

(A)

Definition. As used in this clause—
United States means the 50 States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, Guam, the U.S. Virgin Islands, and Wake Island.



(B)

Except as provided in paragraph (e) of this clause, during the term of this contract, the Contractor shall post a notice, in the form of a poster, informing employees of their rights concerning union membership and payment of union dues and fees, in conspicuous places in and about all its plants and offices, including all places where notices to employees are customarily posted. The notice shall include the following information (except that the information pertaining to National Labor Relations Board shall not be included in notices posted in the plants or offices of carriers subject to the Railway Labor Act, as amended (45 U.S.C. 151-188)).

Notice to Employees

        Under Federal law, employees cannot be required to join a union or maintain membership in a union in order to retain their jobs. Under certain conditions, the law permits a union and an employer to enter into a union-security agreement requiring employees to pay uniform periodic dues and initiation fees. However, employees who are not union members can object to the use of their payments for certain purposes and can only be required to pay their share of union costs relating to collective bargaining, contract administration, and grievance adjustment.

        If you do not want to pay that portion of dues or fees used to support activities not related to collective bargaining, contract administration, or grievance adjustment, you are entitled to an appropriate reduction in your payment. If you believe that you have been required to pay dues or fees used in part to support activities not related to collective bargaining, contract administration, or grievance adjustment, you may be entitled to a refund and to an appropriate reduction in future payments.

        For further information concerning your rights, you may wish to contact the National Labor Relations Board (NLRB) either at one of its Regional offices or at the following address or toll free number:

National Labor Relations Board
Division of Information
1099 14th Street, N.W.
Washington, DC 20570
1-866-667-6572
1-866-316-6572 (TTY)

        To locate the nearest NLRB office, see NLRB's website at http://www.nlrb.gov.

(C)

The Contractor shall comply with all provisions of Executive Order 13201 of February 17, 2001, and related implementing regulations at 29 CFR part 470, and orders of the Secretary of Labor.



(D)

In the event that the Contractor does not comply with any of the requirements set forth in paragraphs (b), (c), or (g), the Secretary may direct that this contract be cancelled, terminated, or suspended in whole or in part, and declare the Contractor ineligible for further Government contracts in accordance with procedures at 29 CFR part 470, Subpart B—Compliance Evaluations, Complaint Investigations and Enforcement Procedures. Such other sanctions or remedies may be imposed as are provided by 29 CFR part 470, which implements Executive Order 13201, or as are otherwise provided by law.

43

(E)

The requirement to post the employee notice in paragraph (b) does not apply to-



(1)

Contractors and subcontractors that employ fewer than 15 persons;



(2)

Contractor establishments or construction work sites where no union has been formally recognized by the Contractor or certified as the exclusive bargaining representative of the Contractor's employees;



(3)

Contractor establishments or construction work sites located in a jurisdiction named in the definition of the United States in which the law of that jurisdiction forbids enforcement of union-security agreements;



(4)

Contractor facilities where upon the written request of the Contractor, the Department of Labor Deputy Assistant Secretary for Labor-Management Programs has waived the posting requirements with respect to any of the Contractor's facilities if the Deputy Assistant Secretary finds that the Contractor has demonstrated that-



(i)

The facility is in all respects separate and distinct from activities of the Contractor related to the performance of a contract; and



(ii)

Such a waiver will not interfere with or impede the effectuation of the Executive order; or



(5)

Work outside the United States that does not involve the recruitment or employment of workers within the United States.



(F)

The Department of Labor publishes the official employee notice in two variations; one for contractors covered by the Railway Labor Act and a second for all other contractors. The Contractor shall—



(1)

Obtain the required employee notice poster from the Division of Interpretations and Standards, Office of Labor-Management Standards, U.S. Department of Labor, 200 Constitution Avenue, NW, Room N-5605, Washington, DC 20210, or from any field office of the Department's Office of Labor-Management Standards or Office of Federal Contract Compliance Programs;



(2)

Download a copy of the poster from the Office of Labor-Management Standards website at http://www.olms.dol.gov; or



(3)

Reproduce and use exact duplicate copies of the Department of Labor's official poster.



(G)

The Contractor shall include the substance of this clause in every subcontract or purchase order that exceeds the simplified acquisition threshold, entered into in connection with this contract, unless exempted by the Department of Labor Deputy Assistant Secretary for Labor-Management Programs on account of special circumstances in the national interest under authority of 29 CFR 470.3(c). For indefinite quantity subcontracts, the Contractor shall include the substance of this clause if the value of orders in any calendar year of the subcontract is expected to exceed the simplified acquisition threshold. Pursuant to 29 CFR part 470, Subpart B—Compliance Evaluations, Complaint Investigations and Enforcement Procedures, the Secretary of Labor may direct the Contractor to take such action in the enforcement of these regulations, including the imposition of sanctions for noncompliance with respect to any such subcontract or purchase order. If the Contractor becomes involved in litigation with a subcontractor or vendor, or is threatened with such involvement, as a result of such direction, the Contractor may request the United States, through the Secretary of Labor, to enter into such litigation to protect the interests of the United States.

44

9.16 Reserved

9.17 252.229-7011, REPORTING OF FOREIGN TAXES—U.S. ASSISTANCE PROGRAMS (SEP 2005)

(A)

Definition. Commodities, as used in this clause, means any materials, articles, supplies, goods, or equipment.



(B)

Commodities acquired under this contract shall be exempt from all value added taxes and customs duties imposed by the recipient country. This exemption is in addition to any other tax exemption provided through separate agreements or other means.



(C)

The Contractor shall inform the foreign government of the tax exemption, as documented in the Letter of Offer and Acceptance, country-to-country agreement, or interagency agreement.



(D)

If the foreign government or entity nevertheless imposes taxes, the Contractor shall promptly notify the Contracting Officer and shall provide documentation showing that the foreign government was apprised of the tax exemption in accordance with paragraph (c) of this clause.



(E)

The Contractor shall insert the substance of this clause, including this paragraph (e), in all subcontracts for commodities that exceed $500.

9.18 52.211-4019(TACOM), SOURCES OF SUPPLY FOR TIRES ON TACTICAL WHEELED VEHICLES—ALTERNATE I (APR 2000)(Deviation)

(A)

Definition.

Qualified Tire Part Numbers: means any tire part number that you, as the vehicle manufacturer, have qualified for possible inclusion on the vehicle at the time of government final acceptance of the vehicle.

(B)

Except as provided in (c) below, you must identify and list on the following lines, a minimum of three qualified tire part numbers, their corresponding manufacturer and National Stock Number (if an NSN is available), to provide alternate sources of supply for future spare tire procurements for the vehicles deliverable under this contract. By identifying tires on the lines below, you represent that (1) such tires comply with all applicable requirements in the vehicle specification; and (2) when such tires are applied at any wheel position, they shall not cause any adverse vehicle handling effects, when combined with the other approved manufacturers' tires listed below. List on the first line the tire you expect to have on the vehicle at time of government final acceptance.

MANUFACTURER	MFG PN	NSN	QPL Number
1. TBD
2. TBD
3. TBD

(C)

In the event you cannot provide at least three (3) qualified sources of supply for tires, you must give reasons to GSD prior to contract award to explain why only two (2), or only one (1) source is available. Your rationale, as a minimum, shall include your methodology for qualifying/disqualifying alternate sources of supply for tires. Also, your rationale shall provide data to support any restrictions on mixing tires (e.g. a restriction that requires a single brand of tire to be used for all positions on a given axle).

45

(D)

Indicate which of the above tires if any, are on one of the following Cooperative Approved Tire List (CATL) or Federal Specification Qualified Products Lists (QPL):

CATL 1922	Tires, Pneumatic, Vehicular (Highway)
QPL-ZZ-T-410	Tires, Pneumatic, Industrial
CATL 1923	Tires, Pneumatic, Low Speed, Off Highway
QPL-ZZ-T-1619	Tires, Pneumatic, Agricultural

If applicable, list, in the space above, the CATL or QPL number and the NSN for each tire. In the event one or more tires selected above does not have an assigned NSN, provide reasons to the PCO prior to contract award for the non-NSN tire selection over other NSN assigned tires.

(E)

After contract award, you must perform Component Qualification Testing on the tires listed in (b) above. Testing will determine the suitability of tires for use on equipment deliverable under this contract and will demonstrate that mixing different tire tread designs on a single vehicle will not degrade equipment performance below the requirements set forth in the system specification.



(1)

Component Qualification Test.    You shall conduct all necessary qualification testing and selection of test samples under Government surveillance at locations you designate. The test shall be conducted in accordance with the Government Component Qualification Test Plan (located in the purchase description or specification) and completed within 60 days prior to government acceptance of the first production vehicles offered under this contract. You shall submit Qualification Test Reports detailing all test results in accordance with Data Item DI-T-1900 and the Contract Data Requirements List (DD Form 1423).



(2)

Component Qualification Test Deficiencies.    Failure of the Qualification Test tires to meet specified requirements as a result of any deficiency during or as a result of such testing shall be cause for rejection. Failure to meet specified requirements shall be prima facie evidence that all tires which the test sample represents are similarly deficient unless you furnish evidence satisfactory to the Contracting Officer that they are not similarly deficient. Any failure of a manufacturer's tires during system testing will require additional component qualification testing to be approved.



(F)

In the event Component Qualification Testing is waived, you shall be responsible for certifying that all tires identified in (b) above are suitable for use on vehicles deliverable under this contract and that mixing of these tires will not degrade vehicle performance in terms of mobility, durability, ride and handling below the contract requirements.

9.19 52.211-4069 (TACOM), WELDING INSPECTION REQUIREMENTS (MAR 2001)

(A)

INSPECTION: As the contractor, during performance of this contract you will verify weld quality and workmanship using qualified inspectors trained to perform these inspection functions. Acceptable qualification of your inspectors may be based on:



(1)

current or previous certification as an AWS Certified Welding Inspector; or



(2)

current or previous certification by the Canadian Welding Bureau (CWB); or



(3)

inspection performed by an engineer or technician who is competent in the use of weld inspection techniques and equipment, on the basis of (i) formal training or (ii) experience, or both, in metals fabrication, inspection, and testing.

46

(B)

NON BALLISTIC VISUAL INSPECTION. You will perform all non-ballistic visual inspections of weld quality and workmanship for structural steel in accordance with Section 6 of AWS D1.1-96. For structural aluminum, you may perform non-ballistic visual inspections of weld quality and workmanship using the guidelines given in MIL-STD-370A, dated 21 Sep 93.



(C)

BALLISTIC VISUAL INSPECTION. You will perform all ballistic visual inspections in accordance with Section 6 of the UDLP/TACOM Ground Combat Vehicle Code—Aluminum, dated July 1996. Copies of this document can be obtained by written request to:

Commander, US Army Tank-automotive and Armaments Command
ATTN: AMSTA-TR-E/Materials
Warren, MI 48397-5000

9.20 52.223-4000 (TACOM), ENVIRONMENTAL, SAFETY, AND ENERGY STANDARDS AND REGULATIONS (SEP 1978)(Deviation)

(A)

The contract price includes Contractor compliance with all federal vehicle emission, fuel economy, safety, and noise requirements and standards, hereinafter referred to as requirements, affecting the supplies to be delivered under this contract which, as of the time of bid opening in the case of sealed bidding, or as of the time for receipt of Best and Final Offers (BAFOs) in the case of a negotiated solicitation, were in effect or scheduled to become effective during the term of this contract.



(B)

In the event any of these requirements are subsequently changed (i.e., altered, rescinded or postponed) and such changes have not been otherwise provided for prior to the award of this contract, and compliance is mandatory upon the Contractor, and such changes cause an increase or decrease in the cost of, or time required to perform the contract, Contractor compliance with these changes shall be subject to equitable adjustment.



(C)

If any of these requirements are changed as described above, but compliance is optional on the part of the Contractor, the Contractor shall promptly notify GSD in writing and GSD shall have the right to decide whether the supplies yet to be accepted and delivered to the Government shall incorporate the optional changes. After receipt of this written notice GSD shall provide timely written advice to the Contractor of the Government's decision and, if applicable, the effective data of such change(s). If GSD's election constitutes a change which causes an increase or decrease in the cost of, or time required to perform this contract, Contractor compliance therewith shall be subject to equitable adjustment.

9.21 52.247-4458 (TACOM), GUARANTEED SHIPPING CHARACTERISTICS—F.O.B. DESTINATION (SEP 2000)(Deviation)

(A)

The Subcontractor is required to complete subparagraph (b)(1), (2), and (3), of this clause, for each part or component, including all of its packaging. This information will be used by the Government to perform logistics management functions such as providing item sustainment, planning (e.g., estimating storage costs), and redistribution. You are not liable if you give us wrong information, however since the DOD uses this data in-house in existing data bases and because this information may be used in contingency planning it, we request that the information provided be as accurate as possible.



(B)

Definitions of terms commonly used in the packaging and distribution environments are defined in ASTM D996 and should be consulted if any term used herein is in question.

47

(1)

Unit Package:



(i)

Specify the type of UNIT PACKAGE for each single unit of issue: A container in direct contact with and enclosing the product along with any required protective materials(s)(e.g., item is wrapped in neutral paper, polyethylene foam cushion wrapped, sealed in a waterproof bag, and placed in a fiberboard box).



(ii)

Unit Package Exterior Size/Weight of Unit Package with contents:

Length              × Width              × Depth             (expressed in inches)/Weight expressed in      pounds

(2)

Shipping Container:



(i)

Exterior Size of SHIPPING CONTAINER AND CONTENTS THEREIN:

Length,              × Width,              × Height,             (expressed in feet and inches)

(ii)

Number of unit packages per shipping container             each



(iii)

Gross weight of Shipping container and contents             Lbs.



(3)

Unitized Loads:



(i)

Is the Load palletized, skidded, or some other platform device used as a base for handling and transporting as a single entity. Yes [    ] No [    ]; describe:

                        .

(ii)

Number of Shipping containers per pallet/skid             each.



(iii)

Weight of empty pallet, skid, platform, dolly, other device used as a base for handling and transporting materials             Lbs



(iv)

Size of Unit Load(pallet/skid including shipping container(s)assembled for handling and transportation as a single entity:

Length,              × Width,              × Height,             (expressed in feet and inches)

(v)

Gross Weight of Unit Load       Lbs;

9.22 PROGRESS REPORT

        Subcontractor shall provide to GSD electronically a monthly progress report. The report shall contain written summaries of activities including work accomplished, emerging results, problems encountered and expected solutions, if applicable, information pertaining to GSD Furnished Material issues encountered during the performance period. The progress report shall be delivered to GSD within seven working days after the last working day of the month. The progress report shall be addressed to the GSD Subcontract personnel stated within Section 7 of this Subcontract.

        Note: The requirements of this clause are subject to revision based upon the requirements agreed on by the parties in the Master Program Plan.

        [END OF SECTION 9]

48

BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION
MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135
SECTION 10—LIST OF ATTACHMENTS
03 AUGUST 2006

10.1—GSD Certifications
(A) Debarment, Suspension, Proposed Debarment	GSD-5147
(B) Annual Certification of Toxic Chemical Release Report	GSD-5926
(C) Equal Employment Opportunity Certification	GSD-5154

10.2—STATEMENT OF WORK
Statement of Work:	Section 10, Attachment 10.2
Titled:	Statement of Work for Iraqi Light Armored Vehicle (ILAV)
Original Date:	13 June 2006
Revision:	001
Revision Date:	14 June 2006

10.3—EXHIBIT A
Exhibit:	Section 10, Attachment 10.3
Titled:	Contract Data Requirements List
Original Date:	2 May 2006
Revision:	N/A
Revision Date:	N/A

10.4—PERFORMANCE SPECIFICATION (Note: All References to CLS is Superseded by Attachment 10.2, Statement of Work)
Performance Specification:	Section 10, Attachment 10.4
Titled:	Specification (Prime Contract)
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A

10.5—TECHNICAL INFORMATION
Technical Information:	Section 10, Attachment 10.5
Titled:	Technical Information
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A

10.6—SHAKEDOWN TEST PLAN
Test Plan:	Section 10, Attachment 10.6
Titled:	ILAV Shakedown Test Plan
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A

49

10.7—DATA ITEM DESCRIPTIONS (DID's)
DID:	Section 10, Attachment 10.7
Titled:	Data Item Descriptions for Exhibit A
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A

10.8—VEHICLE ACCEPTANCE TEST
Acceptance Test:	Section 10, Attachment 10.8
Titled:	ILAV Production Vehicle Acceptance Test
Original Date:	24 May 2006
Revision:	N/A
Revision Date:	N/A

10.9—VEHICLE SURVIVABILITY
Technical Information:	Section 10, Attachment 10.9
Titled:	Technical Information—Vehicle Survivability
Original Date:	25 May
Revision:	N/A
Revision Date:	N/A

10.10—PRODUCTION MANUFACTURING LICENSE
License:	Section 10, Attachment 10.10
Titled:	Production Manufacturing License
Original Date:	13 June 2006
Revision:	N/A
Revision Date:	N/A

10.11—LOGISTIC SUPPORT AGREEMENT
Logistic Support Agreement:	Section 10, Attachment 10.11
Titled:	Logistic Support Agreement
Original Date:	13 June 2006
Revision:	N/A
Revision Date:	N/A

50

10.12—PERFORMANCE BASED PAYMENT (PBP) CERTIFICATION
PBP Certification:	Section 10, Attachment 10.12
Titled:	Certification of Completion
Original Date:	N/A
Revision:	N/A
Revision Date:	N/A

10.13—PERFORMANCE BASED PAYMENTS (PBP) PLAN
PBP Payment Plan:	Section 10, Attachment 10.13
Titled:	Performance Based Payment Plan
Original Date:	07 August 2006
Revision:	N/A
Revision Date:	N/A

10.14—LOGISTICS SUPPORT PAYMENTS PLAN
Logistic Support Payment Plan:	Section 10, Attachment 10.14
Titled:	Logistic Support Payment Plan
Original Date:	24 July 2006
Revision:	N/A
Revision Date:	N/A

10.15—CONTRACTOR LOGISTICS SUPPORT EQUIPMENT LIST
Equipment List:	Section 10, Attachment 10.15
Titled:	Contractor Support Equip. List
Original Date:	02 August 2006
Revision:	N/A
Revision Date:	N/A

[END OF SECTION 10]

51

SUBCONTRACT ATTACHMENT 10.2
FPII DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
Doc# ILV00033 Revision 001

STATEMENT OF WORK

(SOW)

For

Iraqi Light Armored Vehicle (ILAV)

PREPARATION DATE: June 14, 2006
REVISION NUMBER: 001 DATE: June 14, 2006

CONTRACT NUMBER
W56HZV-06-D-VB01

PREPARING ORGANIZATION: BAE Systems
PO Box 15512, York PA, 17405

        Proprietary rights are included in the information disclosed herein. Recipient, by accepting this document, agrees that neither this document nor the information disclosed herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for any purpose except as specifically authorized in writing by BAE SYSTEMS Land & Armaments L.P. This information is exempt from disclosure under Exemptions 3 and 4 of the Freedom of Information Act. Any unauthorized disclosure by a Government employee is a violation of the Trade Secrets Act.

52

SUBCONTRACT ATTACHMENT 10.2
FPII DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
Doc# ILV00033 Revision 001

TABLE OF CONTENTS

Table of Contents			2
C.1 Purpose and Scope:			3
C.2 Production Effort:			3
C.3 Test Support:			3
	C.3.1 Vehicles to be produced		3
		C.3.1.1 Automotive Test	3
		C.3.1.1.1 Failure Reporting, Analysis and Corrective Action System (FRACAS)	3
		C.3.1.2 Transportation of Vehicles	4
	C.3.2 Deficiencies Identified During Testing		4
	C.3.3 Production Vehicle Acceptance Test (PVAT)		4
C.4 Program Reviews and Documentation:			5
	C.4.1 Start of Work Meetings		5
		C.4.1.1 Subcontract Start of Work Meeting	5
		C.4.1.2 Prime Contract Start of Work Meeting	5
		C.4.1.3 Pre and Post Test Meetings	5
	C.4.2 Weekly Subcontract Status Report		5
C.5 Subcontractor Logistics Support:			5
	C.5.1 General		5
		C.5.1.1 Actions Necessary for CLS Effort	6
		C.5.1.2 Unused Spare and Repair Parts	6
	C.5.2 Maintenance		6
		C.5.2.1 Tools, Test, Measurement, and Diagnostic Equipment	6
		C.5.2.2 Vehicle Maintenance and Repair	7
		C.5.2.3 Safety and HAZMAT	7
	C.5.3 Training		8
		C.5.3.1 Training Facilities	8
		C.5.3.2 Operator, Maintenance, and Driving Training	8
		C.5.3.3 Training Tools, Aids, Devices	8
		C.5.3.3.2 Maintenance Training	9
	C.5.4 Spare and Repair Parts Support		9
		C.5.4.1 Usage Data on All Supplies	9
		C.5.4.2 Reserved	10
		C.5.4.3 Recommended Spare and Repair Parts List	10
		C.5.4.4 Spare Parts Source of Supply	10
		C.5.4.5 Spare Parts Distribution	10
	C.5.5 Manuals		10
		C.5.5.1	10
	C.5.6 Living Facilities and Security		11
		C.5.6.1 Secure Transportation	11
		C.5.6.2 Living Facilities	11
		C.5.6.3 Meals	11
	C.6 Reserved		11

Proprietary rights are included in the information disclosed herein. Recipient, by accepting this document, agrees that neither this document nor the information disclosed herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for any purpose except as specifically authorized in writing by BAE SYSTEMS Land & Armaments L.P. This information is exempt from disclosure under Exemptions 3 and 4 of the Freedom of Information Act. Any unauthorized disclosure by a Government employee is a violation of the Trade Secrets Act.

53

SUBCONTRACT ATTACHMENT 10.2
FPII DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
Doc# ILV00033 Revision 001

C.1 Purpose and Scope:    This statement of work (SOW) describes the outcomes that the subcontractor is required to achieve. The subcontractor shall produce and deliver ILAVs meeting the requirements of the specification set forth in Attachments 001 and 006, and the incorporated approved Technical Information, Attachment 002 of this subcontract.

C.2 Production Effort:    The subcontractor shall produce and deliver ILAVs which meet the requirements of the specification as set forth in Attachments 001, 002 and 006 of this contract. As they are discovered, the Subcontractor shall immediately report to BAE Systems lead time issues that may impact schedule.

C.3 Test Support:

C.3.1 Vehicles to be produced

One of the initial vehicles produced by the subcontractor will be selected by the Government for a Government conducted automotive shakedown test. Although it is not planned, the Government reserves the right to conduct tests in order to verify ballistic performance.

C.3.1.1 Automotive Test

The automotive test will be conducted in accordance with Attachment 003 to verify the subcontractors' vehicle safety, performance and durability. The subcontractor shall provide on-site technical assistance and spare parts support at the Aberdeen Proving Ground, MD test site to support the automotive testing up to sixty (60) days. The subcontractor shall assist in resolution of any test incidents that occur during the test process by participating in a Failure Analysis and Corrective Action process.

C.3.1.1.1 Failure Reporting, Analysis and Corrective Action System (FRACAS)

The Failure Reporting, Analysis and Corrective Action System (FRACAS) process, a BAE System ISO 9000 controlled process, defines the closed loop system for the ILAV team to address test incidents or failures during Shakedown Test. BAE System's Failure Review Board (FRB) will manage the test incident reporting, failures, analyses and corrective actions during Shakedown Test. The responsibilities and procedure for the FRACAS System is detailed in BAE Systems engineering procedure ENG_10r1. This procedure describes the FRACAS process flow and definitions relative to the FRACAS. It details management of test incident reporting, failure analysis and corrective actions. The procedure is attached as Attachment 008 to this SOW.

BAE Systems will electronically transmit all applicable Test Incident Report (TIR) on the BAE Systems or Government TIR form for each incident related to FPII design. A Government TIR form is shown within ENG_10r1 as Attachment C. A failure and corrective action analysis shall be performed by FPII to address the problem identified by the TIR and a Corrective Action Report (CAR) submitted as follows:

Critical/Safety:    A response will be faxed or electronically mailed to BAE Systems within two (2) days of BAE Systems transmittal of TIR to FPII. FPII will be advised of rejected CARs via electronic mail by BAE Systems. FPII shall submit a revised CAR incorporating BAE Systems comments within 4 calendar days.

Major:    A response will be telefaxed or electronically mailed to BAE Systems within four (4) days of BAE Systems transmittal of TIR to FPII. FPII will be advised of rejected CARs via electronic mail by

54

BAE Systems. FPII shall submit a revised CAR incorporating BAE Systems comments within 4 calendar days.

Minor:    A response will be telefaxed or electronically mailed to BAE Systems within nine (9) days of BAE Systems transmittal of TIR to FPII. FPII will be advised of rejected CARs via electronic mail by BAE Systems. FPII shall submit a revised CAR incorporating BAE Systems comments within 4 calendar days.

Informational: A response will be provided to BAE upon request only.

A CAR form is shown within the Engr 10 procedure as Attachment B. All incidents are resolved when the CAR is approved by BAE Systems and the Government. Supplemental data, such as updated drawings or other technical documentation, will be required to support the CAR. The CAR will be deemed complete upon BAE Systems approval.

C.3.1.2 Transportation of Vehicles

The subcontractor shall be responsible for transportation of their vehicle to the Government test facility, the return transportation to the subcontractors' facility, and the return of the test vehicle to like new condition. This vehicle will be retained at the subcontractors' facility, and it will be the last vehicle accepted of the first ordering year estimated quantity.

C.3.2 Deficiencies Identified During Testing

The subcontractor will be allowed to continue production and delivery of vehicles during the Government shakedown test, but the subcontractor shall correct any deficiencies identified during testing on all ILAVs, including vehicles already shipped to Iraq, at no additional cost to BAE Systems. The Government also reserves the right to re-test the vehicle in order to verify ballistic performance.

C.3.3 Production Vehicle Acceptance Test (PVAT)

The subcontractor will conduct a Production Vehicle Acceptance Test (PVAT) on every production vehicle in accordance with Attachment 005.

C.4 Program Reviews and Documentation:

C.4.1 Start of Work Meetings

C.4.1.1 Subcontract Start of Work Meeting

Subcontract Start of Work Meeting: Not later than seven (7) days after subcontract award, the subcontractor shall host a start of work meeting with BAE Systems.

C.4.1.2 Prime Contract Start of Work Meeting

Prime Contract Start of Work Meeting: The subcontractor shall support BAE Systems during the Start of Work meeting with the Government on or about 15-16 Jun 2006, with up to 3 persons attending on-site in York, and with presentation materials in accordance with the agenda set for the meeting in advance.

C.4.1.3 Pre and Post Test Meetings

Pre and Post Test Meetings: If required, the subcontractor shall host a pre and/or post test meeting at their facility.

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C.4.2 Weekly Subcontract Status Report

For the initial 180 days after prime contract award, the subcontractor shall provide a weekly subcontract status report in accordance with CDRL A001. The report shall describe in narrative format, all significant issues/activities for the subcontract to include status of each deliverable. The subcontractor shall conduct a verbal monthly review of all ILAV efforts with BAE Systems as directed by the subcontract administrator or their technical representative via video conference or teleconference.

C.5 Subcontractor Logistics Support

C.5.1 General

The Subcontractor shall provide Contractor Logistics Support (CLS) for the Iraqi Light Armored Vehicle (ILAV). The CLS shall consist of the following elements: vehicle maintenance to cover Routine and Non-Routine maintenance through Depot Level support; train-the-trainer "operator/driver" and "maintenance" training to an "intermediate" or Direct Support Level; spare and repair parts support; and manuals. The CLS effort shall include and be focused on transitioning from the subcontractor providing and performing all effort and being totally responsible, through the subcontractor being responsible and the Iraqi personnel performing, to the end state of the Iraqi personnel performing and being responsible and the subcontractor providing guidance. The location of this effort will be at a location to be determined in Iraq (provided in Attachment 006).

C.5.1.1 Actions Necessary for CLS Effort

The subcontractor is responsible for performing all actions necessary in preparation for, support to, and performance of the actual in-country portion of the CLS effort. The duration of the in-country portion of the CLS effort will be twenty-four (24) months in length, commencing at the delivery of the first vehicle to the at a location to be determined in Iraq (provided in Attachment 006). For planning purposes the subcontractor should expect initial vehicle delivery at a location to be determined in Iraq (provided in Attachment 006), no later than sixty (60) days after departure from the subcontractors loading dock. Anything not specifically stated as provided within this document, must be provided by the subcontractor.

C.5.1.2 Unused Spare and Repair Parts

At the end of the in-country period of performance, the subcontractor shall leave behind at the ILAV Maintenance Facility at a location to be determined in Iraq (provided in Attachment 006) all unused spare and repair parts, lubricants, oil, grease, test, measurement and diagnostic equipment, vehicle specific equipment, and tools and office equipment (such as desks, computers, filing cabinets).

C.5.2 Maintenance

A Maintenance Facility will be provided at a location to be determined in Iraq (provided in Attachment 006) by the Multi-National Security Transition Command—Iraq for the Vehicle Maintenance mission. This facility will be a heavy canvas clamshell with concrete floor (sprung). It will be approximately 300 feet by 120 feet. This space will be used for the Vehicle Maintenance mission as well as for the Training mission and parts storage. It will also provide working space for subcontractor office use. A translator(s) will be provided to the subcontractor personnel as necessary. All utilities will be provided free of charge to the subcontractor for the subcontractors use. Fuel and generators will be provided for the use of the subcontractor personnel. Bathroom facilities will be available. There is sufficient real estate at a location to be determined in Iraq (provided in Attachment 006) compound to provide safe, secure areas for driving vehicles during maintenance actions.

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C.5.2.1 Tools, Test, Measurement, and Diagnostic Equipment

The subcontractor shall provide any and all tools, test, measurement, and diagnostic and vehicle specific equipment necessary, as incorporated by Attachment 007 which includes a minimum level of equipment necessary for this effort, for the maintenance of 378 ILAVs in accordance with the Prime Contract delivery schedule. The subcontractor shall provide mechanics skilled in all areas of maintenance for the ILAV, to include the opaque and transparent armor. All tools, test, measurement, and diagnostic equipment and vehicle specific equipment shall be left at a location to be determined in Iraq (provided in Attachment 006) at the end of the CLS subcontract period of performance. The subcontractor shall not be responsible for facilitating the Maintenance shop for follow-on tool, test, measurement, diagnostic or vehicle specific equipment support after the period of performance is completed, other than the previously mentioned left behind shop items.

C.5.2.2 Vehicle Maintenance and Repair

The subcontractor shall provide any and all vehicle maintenance, repair, and spare parts, as incorporated by Attachment 007 which includes a minimum level of equipment necessary for this effort, to support 378 each ILAVs. The maintenance and repair responsibility is for all routine and non-routine maintenance requirements of the vehicles. Routine Maintenance, for this effort, is defined as the scheduled actions necessary to adhere to manufacturer recommend service intervals. Non-Routine, for this effort, is defined as all unscheduled actions necessary to service and / or repair vehicles. Accident and / or Combat Damage repair is not included in this scope of work. The subcontractor shall inspect each ILAV upon delivery, repair any damages, correct fluid and grease levels as appropriate, and replace anything that may be missing. The subcontractor shall provide vehicle maintenance and repair from the lowest level maintenance through Depot Level. Depot Level maintenance and repair entails repair, rebuilding, and major overhaul of vehicles, parts, assemblies, and subassemblies. For planning purposes the subcontractor should base Maintenance projection on the vehicles being driven 36,000 miles per one (1) year period of time. The subcontractor shall have personnel qualified to perform all levels of routine and non-routine maintenance, to include armor (transparent and opaque) maintenance and repair. The subcontractor shall have personnel qualified to assess, trouble shoot, and repair all vehicles. Subcontractor shall schedule and perform routine maintenance on each ILAV at the appropriate scheduled interval. All service shall be performed within reasonable timelines. Subcontractor shall establish a seven (7) day a week, twelve (12) hour a day operation of the Maintenance Facility with an on-call and after hour response availability. The required response time for on-call and an after-hours situation is six (6) hours. The standard for maintenance action completion shall be as follows: all routine maintenance per vehicle will be completed within one (1) day of vehicle induction and all non-routine maintenance will be completed within three (3) days of vehicle induction for service. The fleet operational readiness goal is ninety percent (90%). The subcontractor personnel shall notify the subcontract administrator or technical representative if a vehicle has been assessed to be non-repairable under the auspices of this subcontract.

C.5.2.3 Safety and HAZMAT

The subcontractor will be responsible for ensuring the work area is secured properly at the end of each business day. Subcontractor personnel shall be responsible for the cleanup of their work areas daily and for knowledge of and compliance with local safety standards. The subcontractor should ensure that quality service and repair work is performed on all vehicles, at all times. In the event of a maintenance shop accident or any other incident involving hazardous materials (HAZMAT), subcontractor personnel shall take appropriate action to contain the problem immediately and notify proper authorities, in accordance with local requirements. HAZMAT will be identified with appropriate Material Safety Data Sheets (MSDS), labeled and stored accordingly. Unserviceable tires and batteries will be stored in one location and coordinated with the local representative for disposal instructions.

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C.5.3 Training

C.5.3.1 Training Facilities

The Maintenance Facility provided by the Multi-National Security Transition Command—Iraq for vehicle maintenance under this subcontract, will also be used for the Vehicle Training (See C.5.2.2.). A translator(s) will be provided to the subcontractor, as necessary. The subcontractor is responsible for providing qualified instructors to meet the goals of this Training Mission. All training will be performed inside a location to be determined in Iraq (provided in Attachment 006). The subcontractor shall determine how many vehicles will be required for the training mission and to obtain these vehicles from vehicles that have been delivered under this subcontract. The subcontractor shall coordinate any issues on vehicle availability with BAE Systems' Authorized Subcontract Representative.

C.5.3.2 Operator, Maintenance, and Driving Training

The training shall be performed as "Train-the-Trainer" training and shall consist of both Operator and Maintenance Training. The goal of the training is to train the Iraqi personnel to be able to take over the operation of the Maintenance Facility and to perform future Operator/Drive Training themselves. The Subcontractor shall plan to reach this goal through a phased approach. The initial phase shall consist of the subcontractor personnel being totally responsible, in charge, and providing training; phase two (2) shall consist of the subcontractor personnel starting to transition responsibility for work accomplishment to the Iraqi personnel while the subcontractor continues to provide strong subcontractor presence, side-by-side work, and tutelage; and in phase three (3) the Iraqi personnel should be fully trained and responsible for the performance of all maintenance and operator/driver missions with only support and coaching from the subcontractor personnel. There will be a different set of students for the Operator / Driver training and for the Maintenance Training. There is sufficient real estate within a location to be determined in Iraq (provided in Attachment 006) to provide safe, secure areas for the operation and driving of vehicles during training classes. Upon course completions, the Subcontractor shall provide a Certificate of Course Completion to each student who successfully completes the course of instruction.

C.5.3.3 Training Tools, Aids, Devices

In accordance with CDRL A005, the subcontractor shall provide all necessary training aids, tools, and devices. The subcontractor shall develop Student Guides and Instructor Guides to be utilized during the training and to be provided to each student upon completion of the training course for their use in future training. These guides shall be translated into Arabic. An English and a translated Arabic version of these guides shall be provided to BAE Systems' Authorized Subcontract Representative for approval prior to initiation of training and prior to mass reproduction of the guides. Once approved, mass reproduction of the guides can be done and training can commence. The subcontractor is responsible for providing hard copies sufficient for the training effort. In addition, an Instructor Guide and a Student Guide shall be downloaded to Compact Disk (CD) and six (6) CDs of each type training ("Operator / Driver" and "Maintenance") are to be furnished as follows, five (5) CDs to the Maintenance Shop and one (1) CD to the COR for future reference and use. C.5.3.3.1 the "Operator/Driver" Training, in accordance with CDRL A002, shall consist of basic drivers training, Operator Preventive Maintenance Checks and Services (PMCS) and safety. The training shall ensure safe operation of the vehicle. The training provided shall be specific to the ILAV and shall be performed on the ILAV (CDRL A002). There will be approximately ninety (90) students to be trained for the Operator / Driver training. The subcontractor shall provide up to ten (10) iterations of the course. Each iteration shall be limited to ten (10) students. The subcontractor should expect the skill level of students to be basic. The students will be available immediately to begin training. It is anticipated that an Operator Training course may take up to two (2) weeks to complete.

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C.5.3.3.2 Maintenance Training

The "Maintenance" Training, in accordance with CDRL A002, shall consist of "intermediate" or Direct Support Level vehicle training and shall be provided to the Iraqi Army's Regional Support Unit (RSU) Maintenance Companies. Students from three (3) RSUs will receive this training (Al Asad, Al Kasik and KMTB). The training provided shall be specific to the ILAV and shall be performed on the vehicle. There will be approximately fifty (50) students to be trained in all maintenance actions from Operator Preventive Maintenance Checks and Services (PMCS) through Direct Support Level maintenance. The subcontractor should expect the skill level of the students to be basic. The students will be available to begin training immediately. The subcontractor shall provide a phased approach to this training to ensure the goal of Iraqi performance of the Maintenance mission at the completion of the subcontractors' twenty-four (24) month in-country period of performance, as cited in C.5.1.

C.5.4 Spare and Repair Parts Support

C.5.4.1 Usage Data on All Supplies

The subcontractor shall determine and stock at a location to be determined in Iraq (provided in Attachment 006), Iraq spare and repair parts and vehicle lubricant, oil, and grease sufficient to support vehicle maintenance as defined in C.5.2. and the training mission. The Maintenance Facility clamshell (see Para C.5.2.2.), provided for the subcontractors use during the term of the performance period, will be available for spare and repair parts storage. The subcontractor shall keep usage data on all supplies. On a weekly basis, the subcontractor shall provide this spare and repair parts, lubricant, oil, and grease usage data in a written report to the COR in accordance with CDRL A003. The subcontractor shall maintain a reasonable stockage at all times during the period of performance of the contract, replenishing the parts, lubricant, oil, and grease in the stockage as they are used; and adding or revising the specified parts listings to reflect actual usage. All unused Spare and Repair Parts, lubricant, oil, and grease shall be left behind at the ILAV Maintenance Facility at a location to be determined in Iraq (provided in Attachment 006) at the end of the contract performance period.

C.5.4.2 Reserved.

C.5.4.3 Recommended Spare and Repair Parts List

Six (6) months prior to the end of the in-country subcontract period of performance, the Subcontractor shall provide BAE Systems' Authorized Subcontract Representative and the US Army TACOM Procuring Contracting Officer (PCO), through BAE Systems' Authorized Subcontract Representative, a recommended spare and repair parts, lubricant, oil and grease listing based upon actual usage data accumulated by the subcontractor during the period of performance in accordance with CDRL A004. This listing shall be sufficient to maintain a fleet of 378 vehicles for a period of one (1) year.

C.5.4.4 Spare Parts Source of Supply

The subcontractor shall ensure future availability of both spare and repair parts for the ILAV. The subcontractor shall be the responsible source of supply for all spare and repair parts or provide the applicable contact information and sources of supply to ensure the future availability of parts support.

C.5.4.5 Spare Parts Distribution

The subcontractor is not responsible to supply any parts, lubricant, oil, or grease distribution from a location to be determined in Iraq (provided in Attachment 006) to any location outside of a location to be determined in Iraq (provided in Attachment 006). The subcontractor is not responsible for any distribution to any other location within Iraq or outside Iraq. The subcontractors responsibility is a location to be determined in Iraq (provided in Attachment 006), within the compound only.

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C.5.5 Manuals

C.5.5.1 Operators; Service / Maintenance; Armor Care & Maintenance; and Parts Manuals and CDs

The subcontractor shall provide Standard Commercial Operators Manuals with each vehicle delivered by the subcontractor and for each vehicle delivered by BAE Systems, in accordance with CDRL A007, one (1) in English and one (1) translated into common Arabic read by everyday people in Iraq. The subcontractor shall provide 5 complete hard copy sets of Manuals, each set consisting of one (1) each of the Standard Commercial Manuals and Supplements (to cover major components) as follows: Operators; Service/Maintenance; Armor Care & Maintenance; and Parts. Additionally six (6) Compact Disks shall be provided, each disk containing one (1) complete set in both languages. Five (5) CDs and the five (5) complete hard copy sets of manuals are to be furnished to the ILAV Maintenance Shop at a location to be determined in Iraq (provided in Attachment 006) in both English and Arabic (Iraqi). One (1) of the six (6) CDs shall be provided to BAE Systems. These manuals will be left at a location to be determined in Iraq (provided in Attachment 006) at the conclusion of the performance period. The subcontractor will produce 378 manual sets, and deliver 184 in vehicles produced under this subcontract, 5 in vehicles under another subcontract, and 189 sets delivered to BAE Systems, Steel Products Division, Anniston, AL.

C.5.6 Living Facilities and Security

C.5.6.1 Secure Transportation

At a location to be determined in Iraq (provided in Attachment 006) is a Coalition base with U.S. and Coalition Forces providing security. Secure transportation will be provided to subcontractor personnel by the National Maintenance Contractor, free of charge to the subcontractor. The subcontractor shall provide armor vests and helmets to their in-country personnel.

C.5.6.2 Living Facilities

The compound in Iraq at which the CLS effort will be performed has sufficient life support for students and subcontractors. Subcontractors will have housing provided for them. This housing will be within the secure compound at a location to be determined in Iraq (provided in Attachment 006). It will be near to the ILAV Maintenance and Training Facility. Bathroom facilities will be available. Meals will be furnished free of charge to the subcontractor personnel. U.S. Military Medical facilities will be available for the use of the subcontractors at a location to be determined in Iraq (provided in Attachment 006).

C.5.6.3 Meals

The students will have meals furnished free of charge by the Iraqi Armed Forces (IAF), in the IAF dining rooms.

C.6 Reserved

*** END OF NARRATIVE C 001 ***

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SUBCONTRACT ATTACHMENT 10.3
FPI SDRL Requirements

Data Item #	Description	Frequency Of Submittal	Formal: & Data Item Description Reference
A001(a)	Contractor Progress, Status & Management Report	Weekly	Subcontractor Format is Acceptable, DI-MGMI-80227
A001(b)	CLS Project Management Plan	Quarterly	Subcontractor Format is Acceptable, DI-MGMI-80227
A002	Course Training Report	End of Course	Subcontractor Format is Acceptable
A003	Progress and Status Report (Maintenance)	Weekly	Subcontractor Format is Acceptable
A004	Contractor Proposed Spare Parts List	180 Days Prior to EOC	DI-ILSS-80134A
A005(a)	Training Plan	15 Days ACA	DI-ILSS-80872
A005(b)	Draft Training Materials	30 Days ACA	DI-ILSS-80872
A005(c)	Training Package	Start of Each Class	DI-ILSS-80872
A006	Failure Analysis and Corrective Action Report	As Required	Electronic Submission, DI-RELI-81315
A007(a)	Vehicle Manuals	Each Vehicle	Both English & Arabic
A007(b)	Vehicle Manual Sets	60 Days ACA	Both English & Arabic

*

Formal Subcontract Data Item Documents (SDRL) shall be provided within 30 days from date of subcontract via modification.

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SUBCONTRACT ATTACHMENT 10.4
Solicitation W56HZV-06-D-VB01
SPECIFICATIONS
ATTACHMENT 001
24 MAY 06

IRAQI LIGHT ARMORED VEHICLE (ILAV) SPECIFICATION

It is the intent of these specifications to provide for the furnishing and delivery of a complete motorized, wheeled, armored vehicle that is designed to resist attack from small arms and medium mines. These specifications cover only the general requirements as to the type of equipment and performance criteria to which the vehicle must conform, together with certain details to finish and appliances. Minor details of construction, materials, and essential accessories where not otherwise specified, are left to the discretion of the contractor who shall be solely responsible for the design and assembly/construction of all apparatus.

The vehicle shall be provided with all new parts, manufacturer standard equipment, and the following minimum equipment/capability:

3.1.1	STANDARD EQUIPMENT:
	3.1.1.1	LIGHT PACKAGE TO INCLUDE: HEADLIGHTS, TURN SIGNALS, TAILLIGHTS, AND BRAKE LIGHTS.
	3.1.1 1.1	THE VEHICLE SHALL BE EQUIPPED WITH A MINIMUM OF 3 DOME LIGHTS. 1 IN THE CREW AREA AND 2 IN THE SQUAD AREA.
	3.1.1.2	EXTERNAL REARVIEW MIRRORS RIGHT AND LEFT SIDES OF VEHICLE.
	3.1.1.3	WINDSHIELD WIPING AND WASHING SYSTEM SHALL BE PROVIDED.
	3.1.1.4	THREE (3) PORTABLE FIRE FIGHTING EXTINGUISHERS, TYPE ABC. TWO STORED IN SQUAD AREA (10 LB EACH). ONE STORED IN CREW AREA (5 LB).
	3.1.1.5	ENGINE COMPARTMENT FIRE EXTINGUISHER SYSTEM SHALL BE MANUALLY ACTIVATED FROM INSIDE THE VEHICLE.
	3.1.1.6	VEHICLE JACK, TO INCLUDE STOWAGE, APPROPRIATE TO LIFT VEHICLE DURING TIRE CHANGE.
	3.1.1.7	VEHICLE SHALL BE EQUIPPED WITH MECHANICAL ASSIST TO RAISE AND LOWER SPARE TIRE FROM VEHICLE.
	3.1.1.8	STANDARD TOOLS REQUIRED FOR OPERATOR LEVEL MAINTENANCE.
	3.1.1.9	VEHICLE SHALL BE EQUIPPED WITH TIRE CHANGING TOOLS.
	3.1.1.10	VEHICLE SHALL BE EQUIPPED WITH PIONEER TOOLS.
	3.1.1.11	STOWAGE PROVISIONS FOR ALL TOOLS NOT TO IMPEDE USER MISSION.
	3.1.1.12	JUMPER CABLES, ONE SLAVE-TO-SLAVE STYLE (NATO) MINIMUM 12 FEET.
	3.1.1.13	AMMETER, CHARGING INDICATOR OR VOLTMETER.
	3.1.1.14	OIL PRESSURE GAGE OR INDICATOR.

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	3.1.1.15	ENGINE TEMPERATURE GAGE OR HIGH COOLANT TEMPERATURE WARNING LIGHT/INDICATOR AND LOW COOL- ANT LEVEL WARNING LIGHT/INDICATOR.
	3.1.1.16	SPEEDOMETER WITH RECORDING ODOMETER.
	3.1.1.17	TACHOMETER.
	3.1.1.18	WARNING LIGHT/INDICATOR AND BUZZER FOR LOW OIL PRESSURE.
	3.1.1.19	AIR CONDITIONING SYSTEM SHALL BE PROVIDED WHICH IS CAPABLE OF MAINTAINING THE INTERIOR TEMPERATURE OF ALL OCCUPANT AREAS TO 80°F OR LOWER, AT AN AMBIENT TEMPERATURE OF 130°F WHEN VEHICLE IS IN LOCK DOWN SITUATION WITH FULL SOLAR LOADING.
	3.1.1.20	HEATING SYSTEM SHALL BE PROVIDED WHICH IS CAPABLE OF MAINTAINING THE INTERIOR TEMPERATURE OF THE OCCUPANT AREAS TO A MINIMUM OF 65°F, AT AN AMBIENT TEMPERATURE OF -20°F WHEN VEHICLE IS IN LOCK DOWN SITUATION. VEHICLE SHALL ALSO HAVE DEFROSTING/DEFOGGING CAPABILITY.
	3.1.1.21	VEHICLE SHALL BE PROVIDED WITH REMOVABLE POTABLE WATER STORAGE CONTAINERS CAPABLE OF BEING SECURELY STOWED INSIDE PERSONNEL AREA WITHOUT INTERFERRING WITH NORMAL VEHICLE OPERATIONS. TOTAL CAPACITY OF WATER NOT LESS THAN 10 GALLONS.
	3.1.1.22	VEHICLE SHALL HAVE ALL NECESSARY PROVISIONS TO INSTALL THE HARRIS MULTI-BAND SYSTEM (RF 5800M-V201). THE FOLLOWING WEB SITE CAN BE USED FOR ADDITIONAL DETAILS: http://www.rfcomm.harris.com
	3.1.1.23	THE VEHICLE SHALL BE PROVIDED WITH AN INTRA-VEHICLE INTERCOM SYSTEM FOR COMMUNICATION BETWEEN CREW AND SQUAD. THE DRIVER AND GUNNER SHALL HAVE SIMULTANEOUS ACCESS TO THE INTERCOM SYSTEM.
	3.1.1.24	UNIVERSAL SYMBOLS (ISO 3287—SYMBOLS FOR OPERATOR'S CONTROLS AND OTHER DISPLAYS) SHALL BE USED. IF UNIVERSAL SYMBOLS NOT AVAILABLE, USE ARABIC OR ENGLISH SYMBOLS/WORDS.
3.1.2	RATINGS:
	3.1.2.1	VEHICLE RATINGS SHALL BE THE MANUFACTURER'S PUBLISHED RATING.
	3.1.2.2	COMPONENT RATINGS SHALL NOT BE RAISED TO MEET REQUIREMENTS.
	3.1.2.3	ALL INDIVIDUAL COMPONENTS, INCLUDING BUT NOT LIMITED TO ENGINE, TRANSMISSION, DRIVELINE, AXLES, SUSPENSION AND TIRES SHALL BE RATED AT OR ABOVE THE GROSS COMBINATION WEIGHT (GCW) OR GROSS VEHICLE WEIGHT (GVW) RATINGS, WHICHEVER IS GREATER.
3.1.3	COLOR:
	3.1.3.1	VEHICLE EXTERIOR COLOR TO BE DESERT TAN 686A, COLOR CHIP 33446 IN ACCORDANCE WITH FED-STD-595 OR EQUIVALENT.

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3.1.4	TOWING:
	3.1.4.1	VEHICLE SHALL HAVE TOW BAR AND RECOVERY CABLE (MINIMUM LENGTH 20 FEET) TO ALLOW TOWING OR BEING TOWED BY A SIMILAR SIZED VEHICLE AND TO SUPPORT VEHICLE RECOVERY. BOTH TOW BAR AND RECOVERY CABLE SHALL BE RATED AT GVW.
	3.1.4.2	VEHICLE SHALL HAVE 2 TOW EYES LOCATED ON THE FRONT AND 2 TOW EYES LOCATED ON THE REAR OF THE VEHICLE TO INTERFACE WITH THE PROVIDED TOW BAR.
	3.1.4.3	SHACKLES (4 EACH) SHALL BE PROVIDED WHICH INTERFACE WITH THE TOW EYES.
	3.1.4.4	IF VEHICLE IS PROVIDED WITH AN AIR BRAKE SYSTEM THEN THE VEHICLE SHALL BE PROVIDED WITH FRONT AND REAR AIR BRAKE CONNECTIONS FOR USE IN TOWING LIKE VEHICLES/TRAILERS.
	3.1.4.5	VEHICLE SHALL HAVE STORAGE SPACE FOR BOTH TOW BAR AND RECOVERY CABLE WHICH SHALL NOT IMPEDE VEHICLE MISSION.
	3.1.4.6	VEHICLE SHALL BE CAPABLE OF ASSISTED RECOVERY.
	3.1.4.7	VEHICLE SHALL BE EQUIPPED WITH PINTLE CAPABLE OF TOWING LIKE VEHICLE/TRAILER.
3.1.5	ENGINE:
	3.1.5.1	VEHICLE SHALL BE PROVIDED WITH A TURBOCHARGED DIESEL ENGINE, CAPABLE OF PERFORMING AS SPECIFIED ON BOTH HIGH SULFUR CONTENT (~1%) DIESEL FUEL AND JP8.
	3.1.5.2	THE ENGINE COOLING SYSTEM AND AIR FILTER SYSTEM SHALL BE ABLE TO HANDLE HOT, DUSTY (VERY FINE PARTICULATES) DESERT ENVIRONMENT AND BE PROPERLY DESIGNED FOR SUSTAINING FLUID TEMPERATURES WHILE TOWING ANOTHER LIKE VEHICLE WHEN OPERATING IN A STEADY STATE CONDITION.
3.1.6	TRANSMISSION:
	3.1.6.1	VEHICLE SHALL BE EQUIPPED WITH AN AUTOMATIC TRANSMISSION.
	3.1.6.2	THE TRANSMISSION OIL COOLER SHALL BE ABLE TO HANDLE HOT, DUSTY (VERY FINE PARTICULATES) DESERT ENVIRONMENT AND BE PROPERLY DESIGNED FOR SUSTAINING FLUID TEMPERATURES WHILE TOWING ANOTHER LIKE VEHICLE WHEN OPERATING IN A STEADY STATE CONDITION.
	3.1.6.3	VEHICLE SHALL HAVE POWER TO ALL WHEELS.
3.1.7	STEERING:
	3.1.7.1	THE VEHICLE SHALL BE PROVIDED WITH POWER STEERING AND SHALL BE LEFT HAND DRIVE.
	3.1.7.2	THE VEHICLE SHALL HAVE A WALL TO WALL TURNING DIAMETER OF LESS THAN 70 FEET.

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3.1.8	TIRES:
	3.1.8.1	ALL TIRES SHALL BE OF THE SAME SIZE, LOAD RATING AND TREAD DESIGN, AND ALL WHEELS SHALL BE INTERCHANGEABLE, INCLUDING THE SPARE WHEEL AND TIRE ASSEMBLY.
	3.1.8.2	VEHICLE SHALL HAVE A SPARE WHEEL AND TIRE ASSEMBLY WITH HOLDER PROVIDED. STOWAGE LOCATION OF THE SPARE WHEEL AND TIRE ASSEMBLY SHALL NOT IMPEDE VEHICLE/USER MISSION.
	3.1.8.3	ALL TIRES, INCLUDING THE PROVIDED SPARE (1 PER VEHICLE), SHALL BE OF RADIAL CONSTRUCTION, RUN FLAT AND HAVE ON-OFF ROAD TREAD.
3.1.9	ELECTRICAL EQUIPMENT:
	3.1.9.1	A 24 VOLT ELECTRICAL SYSTEM SHALL BE PROVIDED. THE FOLLOWING CIRCUITS SHALL BE PROVIDED AND OPERATE AT 24 VOLTS:
	3.1.9.1.1	THE 24 VOLT CIRCUIT OF THE CENTER DASH-MOUNTED TERMINAL BLOCK FOR THE USER SUPPLIED RADIO.
	3.1.9.1.2	THE ENGINE STARTING CIRCUIT TO INCLUDE THE STARTER.
	3.1.9.1.3	THE VEHICLE SHALL BE PROVIDED WITH A 24 VOLT CHARGING SYSTEM.
	3.1.9.2	THE RADIO SHALL BE LOCATED IN THE CREW AREA.
	3.1.9.3	VEHICLE SHALL HAVE HEAVY DUTY BATTERIES.
	3.1.9.4	NATO SLAVE RECEPTACLE FOR VEHICLE STARTING.
3.1.10	VEHICLE CHARACTERISTICS:
	3.1.10.1	THE VEHICLE SHALL ACCOMMODATE 2 CREW MEMBERS (1 DRIVER AND 1 GUNNER) AND NOT LESS THAN 8 SQUAD.
	3.1.10.2	THE VEHICLE SHALL HAVE A DOOR CONFIGURATION WHICH SHALL ALLOW FOR SIMULTANEOUS INGRESS/EGRESS OF 2 FULLY EQUIPPED SOLDIERS (95TH PERCENTILE MALE WITH FULL COMBAT GEAR) THROUGH THE REAR OF THE VEHICLE. SIMULTANEOUS INGRESS/EGRESS OF ADDITIONAL SOLDIERS SHALL ALSO BE PROVIDED FOR BOTH THE DRIVER AND GUNNER (ONE EACH) IN THE CREW AREA.
	3.1.10.3	IN ADDITION TO THE HATCH PROVIDED WITH THE WEAPON STATION RING MOUNT (SEE 3.1.12.1), ONE ADDITIONAL HATCH SHALL BE PROVIDED IN THE SQUAD AREA.
	3.1.10.4	A SEAT SHALL BE PROVIDED FOR EACH CREW MEMBER (DRIVER AND GUNNER, 2 TOTAL).
	3.1.10.5	A SEAT SHALL BE PROVIDED FOR EACH SQUAD MEMBER.
	3.1.10.6	EACH CREW SEAT SHALL BE PROVIDED WITH A 4 POINT SEAT BELT ASSEMBLY.
	3.1.10.7	EACH SQUAD SEAT SHALL BE PROVIDED WITH A 4 POINT SEAT BELT ASSEMBLY.
	3.1.10.8	VEHICLE CAB SHALL PROVIDE THE DRIVER WITH 180 DEG FIELD OF UNOBSTRUCTED VIEW WHILE SEATED IN THE DRIVER'S SEAT.
	3.1.10.9	VEHICLE IS TO BE EQUIPPED WITH NOT LESS THAN 1 FIRING PORT WITH CORRESPONDING VISION BLOCK PER SIDE (RIGHT, LEFT, REAR) OF THE SQUAD AREA.
	3.1.10.10	SQUAD AREA SHALL BE PROVIDED WITH A MINIMUM FLOOR TO CEILING HEIGHT OF 60 INCHES.

65

	3.1.10.11	ALL SEATS SHALL HAVE A MINIMUM OF 42 INCHES OF CLEARANCE FROM SEAT CUSHIONS TO CEILING.
	3.1.10.12	VEHICLE SHALL BE EQUIPPED WITH NOT LESS THAN 3 ENCLOSED INTERIOR STORAGE BINS (1 IN THE CREW AREA AND 2 IN THE SQUAD AREA) WITH POSITIVE LATCHING DEVICES.
	3.1.10.13	VEHICLE FULLY OUTFITTED WITHOUT PERSONNEL SHALL NOT WEIGH MORE THAN 34,000LB.
	3.1.10.14	WIDTH NOT TO EXCEED 10 FEET (NOT INCLUDING MIRRORS).
	3.1.10.15	REDUCIBLE HEIGHT NOT TO EXCEED 9 FEET. TASK TO BE ACCOMPLISHED BY 2 PERSONNEL WITHOUT THE USE OF AUXILIARY LIFTING DEVICES (SHALL BE COMPLETED WITH ONLY ONBOARD TOOLS).
	3.1.10.16	THE GROUND CLEARANCE OF THE VEHICLE SHALL MEET BOTH OF THE FOLLOWING REQUIREMENTS; (a) THE VEHICLE SHALL BE CAPABLE OF PASSING OVER AN OBSTACLE 13.2 INCHES TALL AND 24 INCHES WIDE THAT IS CENTERED UNDER THE VEHICLE'S LONGITUDINAL CENTERLINE WITHOUT ANY PART OF THE VEHICLE CONTACTING THE OBSTACLE (b) NO PART OF THE VEHICLE, EXLUDING THE TIRE/WHEEL ASSEMBLIES, SHALL BE LESS THAN 10.2 INCHES FROM THE GROUND. NOTE: THE BELOW DIAGRAM IS A GRAPHICAL REPRESENTATION OF THE MINIMUM GROUND CLEARANCE REQUIREMENTS.
		24"
3.1.11	PERFORMANCE:
	3.1.11.1	VEHICLE SHALL BE CAPABLE OF BEING STARTED AND OPERATED IN TEMPERATURES RANGING FROM -20 TO 130 DEGREES FAHRENHEIT WITHOUT ADDITION OF STARTING KITS.
	3.1.11.2	SHALL BE PROVIDED WITH FUEL TANK(S) OF SUFFICIENT CAPACITY TO FACILITATE A RANGE FOR THE VEHICLE AT GVW OF 450 MILES.
	3.1.11.3	THE VEHICLE SHALL BE CAPABLE OF OPERATING 90% OF MISSION ON PAVED AND UNPAVED ROADS AND 10% OFF ROAD (TRAILS).
	3.1.11.4	VEHICLE SHALL OPERATE AT REDUCED SPEEDS OFF ROAD IN A RANGE OF ENVIRONMENTS INCLUDING SAND, MUD, LOOSE SOIL AND GRAVEL.
	3.1.11.5	VEHICLE SHALL BE CAPABLE OF PASSING THROUGH LIGHT OR MEDIUM VEGETATION AND LIGHT MAN MADE STRUCTURES.

66

	3.1.11.6	VEHICLE AT GVW SHALL BE CAPABLE OF OBTAINING A TOP SPEED OF 65 MPH ON LEVEL HIGHWAY.
	3.1.11.7	VEHICLE SHALL BE CAPABLE OF MAINTAINING A MINIMUM SPEED OF 40 MPH AT GCW ON A LEVEL HIGHWAY.
	3.1.11.8	VEHICLE AT GVW SHALL BE CAPABLE OF ACCELERATING FROM 0 TO 20 MPH WITHIN 6.0 SECONDS ON LEVEL HIGHWAY.
	3.1.11.9	VEHICLE AT GVW SHALL BE CAPABLE OF CLIMBING AND DESCENDING A 45% SLOPE.
	3.1.11.10	VEHICLE AT GVW SHALL BE CAPABLE OF TRAVERSING A 20% SIDE SLOPE ON EACH SIDE.
	3.1.11.11	VEHICLE AT GVW SHALL BE CAPABLE OF NAVIGATING AN 18 INCH VERTICAL WALL.
	3.1.11.12	VEHICLE SHALL HAVE A FORDING DEPTH OF NOT LESS THAN 36 INCHES.
3.1.12	WEAPON ACCOMMODATION:
	3.1.12.1	MINIMUM ONE WEAPON STATION RING MOUNT, LOCATED IN THE CREW OR SQUAD AREAS WITH HATCH ACCESS, CAPABLE OF ACCOMMODATING A PKM 7.62 MM MACHINE GUN. LOCATION AND OPERATION OF WEAPON STATION(S) SHALL NOT INTERFERE WITH DRIVER.
	3.1.12.2	STOWAGE FOR NOT LESS THAN 600 ROUNDS (BOXED) OF PKM 7.62 X 54 IN THE SQUAD AREA AND 200 ROUNDS (BOXED) OF PKM 7.62 X 54 IN THE CREW AREA.
	3.1.12.3	WEAPON STATION TO PROVIDE ADJUSTABLE HEIGHT GUNNER PLATFORM.
	3.1.12.4	WEAPON TO BE CAPABLE OF FIRING AT 45 DEGREE ELEVATION ABOVE THE HORIZON AND 8 DEGREES BELOW THE HORIZON. PKM RING MOUNT SHALL BE DESIGNED TO INHIBIT SHOOTING OF THE VEHICLE.
	3.1.12.5	WEAPON STATION TO BE ACCESSIBLE BY ANY PERSONNEL WITHIN THE VEHICLE WITHOUT HAVING TO EXIT THE VEHICLE.
	3.1.12.6	WEAPON STATION COMBINED FIELD OF FIRE TO PROVIDE 360 DEGREE OF COVERAGE.
	3.1.12.7	STOWAGE FOR 1 BOX OF 7.62 X 39 RIFLE AMMUNITION PER SQUAD MEMBER (LOCATED IN THE SQUAD AREA).
	3.1.12.8	STOWAGE FOR 1 BOX OF 7.62 X 39 RIFLE AMMUNITION SHARED BY THE GUNNER AND DRIVER (LOCATED IN THE CREW AREA).
	3.1.12.9	APPROPRIATE BRACKETS SHALL BE PROVIDED TO SECURELY HOLD CREW AND SQUAD AK-47 RIFLES DURING OPERATIONS.
3.1.13	VEHICLE SURVIVABILITY:
	3.1.13.1	VEHICLE, INCLUDING THE BALLISTIC GLASS, SHALL BE CAPABLE OF PREVENTING PENETRATION INTO VEHICLE OF THE THRESHOLD ROUNDS AS DESCRIBED IN ATTACHMENT 006.

67

	3.1.13.2	WEAPON STATION GUNNER TO HAVE 360 DEGREE BALLISTIC PROTECTION OF THE THRESHOLD ROUNDS AS DESCRIBED IN ATTACHMENT 006.
	3.1.13.3	VEHICLE SHALL HAVE PROTECTION AGAINST THE MINE THREAT AS DESCRIBED IN ATTACHMENT 006, UNDER ANY WHEEL.
3.1.14	BRAKES:
	3.1.14.1	VEHICLE SHALL BE PROVIDED WITH SERVICE BRAKES CAPABLE OF BRINGING THE VEHICLE TO A STOP FROM 20 MPH WITHIN 35 FEET WHILE AT GVW (DRIFT OF NO MORE THAN 1 FOOT LEFT OR RIGHT).
	3.1.14.2	VEHICLE SHALL BE PROVIDED WITH PARKING BRAKES WHICH SHALL BE CAPABLE OF HOLDING THE VEHICLE AT GVW ON A 45% LONGITUDINAL SLOPE.
	3.1.14.3	VEHICLE SHALL BE PROVIDED WITH EMERGENCY BRAKES.

68

SUBCONTRACT ATTACHMENT 10.5
Contract W56HZV-06-D-VB01
TECHNICAL INFORMATION
ATTACHMENT 002
24 MAY 06

IRAQI LIGHT ARMORED VEHICLE (ILAV)

2.     STANDARD EQUIPMENT:

(i)

Fire extinguisher with mounting bracket in crew area? 1 If yes, location and capacities: Centerline on top of the transfercase access hatch. 51b capacity type ABC.

(j)

Fire extinguisher with mounting bracket in squad area? 2 If yes, location and capacities: One forward and one aft. 10 lb capacity type ABC

(k)

Engine compartment fire extinguisher system? Manual If manual, location and number of activation handles? See Comments

(o)

Standard tools for operator maintenance? Yes If yes, list tools and stowage location: External tool box. See 2(o) comments for tool list below.

(p)

Pioneer tools? Yes If yes, list tools and stowage location: External tool box.

(v)

Describe the intercom system provided: GENTEX Light Vehicle Intercom System Does the intra-vehicle intercom system provide for communication between crew and squad? Yes If yes, are the gunner and driver provided with simultaneous access to the intercom? Yes

Comments:

2(k): Yes. A manual red activation handle is conveniently located for the driver or crew passenger on the centerline of the crew compartment below the dash.
2(o): (TOOL LIST)
HOSE, AIR ASSY ³/8 X 20FT 1EA
FLASHLIGHT HEAVY-DUTY lEA
BATTERIES D CELL 2EA
CHUCK, AIR ASSY W/GAUGE lEA
GREASE GUN lEA
HAMMER 16 OZ BALL PEEN lEA
HAMMER SLEDGE 8LB PR-800 lEA
PLIER SIDE CUTTER lEA
WRENCH ADJUSTABLE 15" IEA
WRENCH ADJUSTABLE 10" 2EA
SCREWDRIVER FLAT TIP 3/8X12 IEA
SCREWDRIVER CROSS TIP #4 lEA
SCREWDRIVER FLAT TIP 3/16X6 lEA
SCREWDRIVER CROSS TIP #2 1 EA
SET SOCKET 21PC 1/2DR 12PT MET IEA
HANDLE FLEX 3/4DR 22 lEA
SET HEX WRENCH STD lEA
SET HEX WRENCH METRIC lEA
KIT, PIONEER lEA
PADLOCK MASTER LOCK 2EA
FUNNEL, FLEX NECK lEA
STRAP CARGO TIEDOWN 4 EA
BAG TOOL BLACK 1 EA

69

PAD JACK 2 EA
RATCHET WEBBING 1" X 4' 1 EA
1 IN DRIVE 1¹/2 IN SOCKET 1 EA
WRENCH ALLEN 12mm 1 EA
KIT, RELEASE BOLT (CAGE BOLTS) 4 EA

5.     TOWING:

(b)

Is a swivel pintle and pintle mount provided? Yes, if yes:



1)

Load rating (capacity) 60,000 pounds



2)

What size lunette will the pintle accommodate? 3 inch ID with 1⁵/8 inch section

Comments:

6.     ENGINE:

(a)

Manufacturer Catepillar Model C7 Year 2004

(b)

Number of cylinders: 6; Displacement: 7.2 liters



(d)

Is an aftercooler provided? Yes If yes, describe: 401 sq. in. water-to-air Charge air cooler core mounted above and in-series with radiator core.

(e)

Net horsepower at engine governed speed 330 BHP at 2400 rpm



(f)

Maximum net torque 860 (foot-pounds) at 1440 rpm



(i)

Are the cooling system and air filter for the engine designed for a desert environment (very fine particulates)? Yes



4)

Radiator core dimensions: H 501 mm × W 1000 mm × Thickness 160 mm

5)

Radiator fins per inch: 10.2 fins per inch

Comments:

7.     TRANSMISSION:

(a)

Manufacturer Allison Model 3500sp Type: Automatic

(b)

Provide all gear ratios, forward and reverse: Forward: 1: 4.59x1, 2: 2.26x1, 3: 1.53x1, 4: 1.0x1, 5: .749x1, Reverse: 4.9987x1

(c)

Input torque capacity: 935 pound-feet



(d)

Output torque capacity: 80,000 pound-feet



(e)

Torque converter stall ratio: 1.77: 1

Comments:

8.     TRANSFER CASE:

(a)

Manufacturer Cushman

(b)

Model 315K

(c)

Type (describe): 2 speed-3 shaft

(d)

Provide all gear ratios: 1:1 and 2.5:1

(e)

Input torque capacity: 7,816 pound-feet

70

(f)

Output torque capacity: 10,200 pound-feet Comments:

9.     AXLES:

(a)

Front: Manufacturer Marmon-Herrington Model MT17 Load Rating 18,000 lbs. Ratio(s): 6.27:1 Reduction: Double Traction control: None



(b)

Rear: Manufacturer Marmon-Herrington Model R181 Load Rating 18,000 lbs. Ratio(s): 6.27: 1 Reduction: Double Traction control: Locking

Comments:

10.   SUSPENSION:

(a)

Front: Type Parabolic Leaf Spring Rate: 1,943 lbs/in Wheel Travel: 7.25 (inches)



(b)

Rear: Type Parabolic Leaf Spring Rate: 2,987 lbs/in Wheel Travel: 7.0 (inches)

Comments:

11.   STEERING:

(c)

What is the clockwise wall to wall turning diameter of the vehicle? 66 ft.



(d)

What is the counter-clockwise wall to wall turning diameter of the vehicle? 66 ft.

Comments:

12.   TIRES:

(f)

Tires: Manufacturer: Michelin Model: XZL—395/85 Size and load rating: 395/85R20 9,000 lbs.



(g)

Rims: Manufacturer: Titan Model: 05-10058-00 Size and load rating: 20" 9,000 LB

(k)

Are all tires, to include the spare, run flat design? Yes If yes, please describe the run flat system: Hutchinson run flat insert.

        Comments:

14.   VEHICLE CHARACTERISTICS:

(g)

Is the rear squad area equipped with not less than one vision block and corresponding firing port per side (right, left, rear)? Yes Describe: The rear squad area is equipped with a total of eight vision blocks. Three vision blocks on each side (L/R) and two vision blocks in the rear (one on each door). Firing ports are in the glass.

(h)

Is the vehicle equipped with the threshold requirement of allowing simultaneous ingress/egress of 2 fully equipped soldiers of which a minimum of 1 soldier shall be able to ingress/egress out the rear of the vehicle? Yes

1**) Does the vehicle exceed the threshold requirement? Yes If yes, describe the door configuration and how it supports the objective of allowing for simultaneous ingress/egress of additional soldiers. The rear door is designed to allow simultaneous ingress/egress of 2 fully equipped soldiers. The rear door dimensions are 50" wide by 58" tall. The two rear steps are 48" wide. The left and right front doors are 31.5" wide by 33.1". See rear door & side door drawings in TIQ supplemental data. 3) List and provide dimensions and locations of all doors. See 14 (h).1 above.

71

(i)

Is the vehicle equipped with the threshold requirement of one hatch in the crew area? Yes If additional hatch(es) is provided, answer the following:

1**) Given the objective of additional hatch(es) located in the squad area, describe number of additional hatches and location(s): 1. Located top, rear of the squad compartment.

(n)

What is the width (not including mirrors) of the vehicle? 9 ft.



(o)

What is the reducible height of the vehicle? 9 ft.



1)

List items, if any, and associated weights of those items that must be removed to meet the above height? Weapons mount and access hatch. The TAGS unit has been reconfigured to limit the max single piece weight to less than 951bs.

Comments:

15.   PERFORMANCE:

(b)

Provide the number of fuel tanks, capacity, and location(s) of each: 2: 51 gallons per side. Includes manual selector R/L selector valve with individual level gages for each tank.

(c)

Is the vehicle provided with a fuel tank(s) of sufficient capacity to facilitate the threshold range for the vehicle at GVW of 200 miles? Yes If a larger range is being proposed, answer the following: 1**) Given the objective of 450 miles, what is the vehicle range at GVW? 450 mi

(g)

Is the vehicle, at GVW, capable of obtaining the threshold top speed of 50 mph on a level highway? Yes If a higher top speed is being proposed, answer the following:

1**) Given the objective top speed, at GVW, on a level highway of 65 mph, what is the top speed of the vehicle? Capable of 65 mph for short duration operation. Max sustained speed limited by tires.

(i)

Is the vehicle, at GVW, capable of obtaining the threshold acceleration of 0 to 20 mph within 10 seconds on a level highway? Yes If a faster acceleration is being proposed, answer the following:

1**) Given the objective acceleration, at GVW, on a level highway of 0 to 20 mph within 6 seconds, how many seconds does it take the vehicle to accelerate from 0 to 20 mph? 6.0 seconds

(l)

Is the vehicle, at GVW, capable of navigating the 18 inch vertical wall threshold requirement? Yes If a higher vertical wall is being proposed, answer the following:

1**) Given the objective of 24 inches, how high of a wall can the vehicle navigate over? 18 inches

Comments:

16.   WEAPON ACCOMODATION:

(d)

Does the weapon station provide an adjustable height gunner platform? Yes What is the range of heights from the platform to the roof? Equal or less than 35 inches to greater than or equal to 52 inches



(e)

The mounted PKM machine gun is capable of firing at 45 degrees elevation above the horizon and 10 degrees below the horizon.

72

Comments:

18.   VEHICLE SURVIVABILITY:

See Attachment 006

73

SUBCONTRACT ATTACHMENT 10.6
W56HZV-06-D-VB01
ILAV SHAKEDOWN TEST PLAN
ATTACHMENT 003
24 May 06

Shakedown Test and Inspection Plan

Requirements Verification.

Shakedown Test Vehicle (STV).    To determine the contractor's capability to produce a vehicle in accordance with the specification, one vehicle will be delivered to an approved USG test site for testing. The vehicle, when completed, shall be submitted to the procuring activity for examination and testing to determine conformance to the requirements of the specification. The vehicle that will be submitted by the contractor shall be a production representative vehicle supplied from the production facility manufactured using tooling under the supply contract. The vehicle shall be provided with all new parts and manufacturer standard equipment.

The inspection and tests referenced in Table 1 may be modified at the discretion of the Government depending on the final configuration of the vehicle supplied.

TEST	LOCATION
Government Tests (Shakedown Test Vehicle (STV))	Government Test Facility

A visual inspection and a vehicle test will be required per Table 1 in addition to a 3,000 mile Shakedown Test (described in detail in Appendix 1 below).

74

TABLE 1
CLASSIFICATION OF INSPECTION AND TESTS

TITLE	REQUIREMENT	TEST PROCEDURE	STV VISUAL INSPECTION	STV TEST
Shakedown Test Vehicle (STV)
Armored Vehicle	3.1
Vehicle Standard Equipment	3.1.1	4.1.1
Light Package	3.1.1.1	4.1.1.1	X
Dome Lights	3.1.1.1.1	4.1.1.1.1	X
External Mirrors	3.1.1.2	4.1.1.2	X
Windshield Wipers With Washer Fluid Applicator	3.1.1.3	4.1.1.3	X
Portable Fire Extinguishers	3.1.1.4	4.1.1.4	X
Engine Fire Extinguisher	3.1.1.5	4.1.1.5	X
Vehicle Jack	3.1.1.6	4.1.1.6	X
Spare Tire Mechanical Assist	3.1.1.7	4.1.1.7	X
Standard Operator Tools	3.1.1.8	4.1.1.8	X
Tire Changing Tools	3.1.1.9	4.1.1.9	X
Pioneer Tools	3.1.1.10	4.1.1.10	X
Tool Stowage	3.1.1.11	4.1.1.11	X
Jumper Cables	3.1.1.12	4.1.1.12	X
Battery Charging System Gages	3.1.1.13	4.1.1.13	X
Oil Pressure Gage	3.1.1.14	4.1.1.14	X
Engine Coolant Temperature Gage	3.1.1.15	4.1.1.15	X
Speedometer/Odometer	3.1.1.16	4.1.1.16	X
Tachometer	3.1.1.17	4.1.1.17	X
Engine Low Pressure Warning	3.1.1.18	4.1.1.18	X
Air Conditioning System	3.1.1.19	4.1.1.19		X
Heating System	3.1.1.20	4.1.1.20	X
Water Storage	3.1.1.21	4.1.1.21	X
Radio Provisions	3.1.1.22	4.1.1.22	X
Intercom System	3.1.1.23	4.1.1.23		X
Universal Symbols	3.1.1.24	4.1.1.24	X
Ratings	3.1.2
Vehicle Ratings	3.1.2.1
Component Ratings	3.1.2.2
Individual Component Ratings	3.1.2.3
Vehicle Color	3.1.3
Vehicle Exterior Color	3.1.3.1	4.1.3.1	X
Towing Provisions	3.1.4
Tow Bar and Recovery Cable	3.1.4.1	4.1.4.1	X
Tow Eyes Front and Rear of Vehicle	3.1.4.2	4.1.4.2	X
Shackles	3.1.4.3	4.1.4.3	X
Front and Rear Air Brake Connections	3.1.4.4	4.1.4.4	X
Tow Bar and Cable Storage	3.1.4.5	4.1.4.5	X
Assisted Recovery	3.1.4.6

75

TITLE	REQUIREMENT	TEST PROCEDURE	STV VISUAL INSPECTION	STV TEST
Vehicle Pintle	3.1.4.7	4.1.4.7	X
Engine	3.1.5
Engine Type	3.1.5.1	4.1.5.1	X
Engine Cooling	3.1.5.2
Transmission	3.1.6
Type	3.1.6.1	4.1.6.1	X
Oil Cooler	3.1.6.2
Drive Line	3.1.6.3	4.1.6.3		X
Steering	3.1.7
Style and Mounting	3.1.7.1	4.1.7.1	X
Turning radius (Wall to Wall)	3.1.7.2	4.1.7.2		X
Tires	3.1.8
Tread Design	3.1.8.1	4.1.8.1	X
Spare	3.1.8.2	4.1.8.2	X
Construction	3.1.8.3	4.1.8.3	X
Electrical Equipment	3.1.9
Voltage Requirement	3.1.9.1
Dash Terminal Block	3.1.9.1.1	4.1.9.1.1	X
Engine Starting Circuit	3.1.9.1.2	4.1.9.1.2	X
Charging System	3.1.9.1.3	4.1.9.1.3	X
Radio Location	3.1.9.2	4.1.9.2	X
Heavy Duty Batteries	3.1.9.3	4.1.9.3	X
Slave Receptacle	3.1.9.4	4.1.9.4	X
Vehicle Characteristics	3.1.10
Crew Accommodations	3.1.10.1	4.1.10.1	X
Rear Door	3.1.10.2	4.1.10.2	X
Crew Hatch	3.1.10.3	4.1.10.3	X
Crew Seats	3.1.10.4	4.1.10.4	X
Squad Seats	3.1.10.5	4.1.10.5	X
Crew 4 Point Seat Belts	3.1.10.6	4.1.10.6	X
Squad 4 Point Seat Belts	3.1.10.7	4.1.10.7	X
Driver 180 deg Field of View	3.1.10.8	4.1.10.8		X
Firing Port & Corresponding Vision Block	3.1.10.9	4.1.10.9	X
Floor to Ceiling Height	3.1.10.10	4.1.10.10		X
Seat Cushion to Ceiling Height	3.1.10.11	4.1.10.11		X
Interior Storage Bins	3.1.10.12	4.1.10.12	X
Fully Outfitted Weight	3.1.10.13	4.1.10.13		X
Vehicle Width	3.1.10.14	4.1.10.14		X
Vehicle Reducible Height	3.1.10.15	4.1.10.15		X
Ground Clearance	3.1.10.16	4.1.10.16		X

76

TITLE	REQUIREMENT	TEST PROCEDURE	STV VISUAL INSPECTION	STV TEST
Performance	3.1.11
Vehicle starting	3.1.11.1
Range	3.1.11.2	4.1.11.1		X
Operating Summary	3.1.11.3	4.1.11.2		X
Operational Environments	3.1.11.4	4.1.11.3		X
Obstacle Navigation	3.1.11.5	4.1.11.4		X
Vehicle Top Speed	3.1.11.6	4.1.11.5	X
Vehicle Minimum Speed	3.1.11.7	4.1.11.6		X
Vehicle Acceleration	3.1.11.8	4.1.11.7		X
Vehicle Climbing and Descending	3.1.11.9	4.1.11.8		X
Slope Operation	3.1.11.10	4.1.11.9		X
Vertical Obstacle Negotiation	3.1.11.11	4.1.11.10		X
Vehicle Fording	3.1.11.12	4.1.11.11		X
		4.1.11.12		X
Weapons	3.1.12
Weapon Station	3.1.12.1	4.1.12.1	X
Stowage PKM Ammunition	3.1.12.2	4.1.12.2	X
Weapon Station	3.1.12.3	4.1.12.3	X
Weapon Station Range of Firing	3.1.12.4	4.1.12.4	X
Weapon Station Accessibility	3.1.12.5	4.1.12.5	X
Weapon Station Field of Fire	3.1.12.6	4.1.12.6	X
Stowage Squad Ammunition	3.1.12.7	4.1.12.7	X
Stowage Crew Ammunition	3.1.12.8	4.1.12.8	X
Rifle Stowage	3.1.12.9	4.1.12.9	X
Vehicle Survivability protection	3.1.13
Vehicle Armor Protection	3.1.13.1	4.1.13.1	X
Gunner Station Armor Protection	3.1.13.2	4.1.13.2	X
Vehicle Mine Protection	3.1.13.3	4.1.13.3	X
Additional Armor Protection	3.1.13.4	4.1.13.4	X
Brakes	3.1.14
Service Brakes	3.1.14.1	4.1.14.1		X
Parking Brakes	3.1.14.2	4.1.14.2		X
Emergency Brakes	3.1.14.3	4.1.14.3		X

77

SUBCONTRACT ATTACHMENT 10.06
W56HZV-06-D-VB01
ILAV SHAKEDOWN TEST PLAN
ATTACHMENT 003
24 May 06

4.1 Armored Vehicle. The Iraqi Light Armored Vehicle (ILAV) is an armored personnel carrier designed to operate in an urban setting the majority of the time with minimal off-road operations. Table 1 directs the type of testing that will be performed and at what level.

4.1.1 Vehicle Standard Equipment. The vehicle shall have a list of standard items not limited to the call-outs in Table 1.

4.1.1.1 Vehicle light package. A visual inspection to verify compliance of 3.1.1.1 is required to verify operation of the headlights, turn signals, tail lights and brake lights. All lights shall be tested for operation and compliance.

4.1.1.1.1 Dome Lights. To verify compliance of 3.1.1.1.1. The vehicle shall have 3 dome lights that work independently. Dome lights shall operate with engine running and not running. Testing will comprise of all the different scenarios.

4.1.1.2 External Rear View Mirrors. The vehicle shall be visually inspected to verify compliance to 3.1.1.2. The two rear view mirrors shall be an adjustable design.

4.1.1.3 Windshield Wipers and Washer Fluid Applicator. With the vehicle running, the windshield wipers and washer applicator shall be visually inspected to verify compliance to 3.1.1.3. When washer fluid switch is depressed fluid shall be applied to the windshields.

4.1.1.4 Portable Fire Extinguishers. The vehicle shall be visually inspected to verify the three extinguishers, type ABC, for compliance to 3.1.1.4. Each extinguisher bracket shall be inspected for location and design integrity.

4.1.1.5 Engine Fire Extinguisher. The vehicle shall be visually inspected for a manually activated fire extinguisher system, for the engine compartment, by the crew to verify conformance to 3.1.1.5.

4.1.1.6 Vehicle Jack. Vehicle shall be inspected for a vehicle Jack to verify conformance to 3.1.1.5. The Jack rating shall be inspected to confirm that it will support the GVW. Storage location of the Jack shall be visually inspected to ensure it will not interfere with vehicle/user mission operations.

4.1.1.7 Spare Tire Mechanical Assist. The vehicle shall be visually inspected for a mechanical assist mechanism which will raise and lower the spare tire.

4.1.1.8 Standard Operator Tools. The vehicle shall be visually inspected for a standard tool set to support the operator level maintenance.

4.1.1.9 Tire Changing Tools. The vehicle shall be visually inspected for a set of tire changing tools.

4.1.1.10 Pioneer Tools. The vehicle shall be visually inspected for a set of pioneer tools.

4.1.1.11 Tool Stowage. The vehicle shall be visually inspected for storage of all supplied tools. Tool storage shall be in a location that will not impede with vehicle/user operation.

4.1.1.12 Jumper Cables. The vehicle shall be visually inspected for one NATO slave to NATO slave cable not less than 12 feet. Cable storage shall not impede vehicle/user operation.

4.1.1.13 Ammeter, Charging Indicator or Volt Meter. Vehicle shall be visually inspected for compliance to 3.1.1.13.

4.1.1.14 Oil Pressure Gage or Indicator. Vehicle shall be visually inspected for compliance to 3.1.1.14.

78

4.1.1.15 Engine Coolant Temperature Gage. The vehicle shall be visually inspected for a high coolant temperature warning light or indicator and a low coolant warning light or indicator to verify compliance to 3.1.1.15.

4.1.1.16 Speedometer/Odometer. The vehicle shall be visually inspected for a speedometer and recording odometer to verify compliance to 3.1.1.16.

4.1.1.17 Tachometer. The vehicle shall be visually inspected for a tachometer.

4.1.1.18 Low Oil Pressure Gage. The vehicle shall be visually inspected for a low oil pressure warning light or indicator to verify compliance to 3.1.1.18.

4.1.1.19 Air Conditioning System. The vehicle shall be tested at an approved government test facility to verify compliance to 3.1.1.19. Vehicle interior temperature shall not exceed 80 deg f during high temperature testing with an ambient of 130 def F with solar loading. Testing will not be limited to standard equipment, electronic systems, engine starting, and static steering performance.

4.1.1.20 Heating Systems. The vehicle shall be visually inspected to confirm compliance to 3.1.1.20.

4.1.1.21 Potable Water. Vehicle shall be visually inspected for potable water container(s) capable of being securely stored inside the personnel area without interfering with vehicle/user operations.

4.1.1.22 Radio Provisions. Vehicle shall be visually inspected to confirm compliance to 3.1.1.22. All necessary connections will be required to operate the Harris Multi Band Radio (RF 5800M-V201).

4.1.1.23 Driver & Gunner Intra-Vehicle Intercom Access. The vehicle shall be visually inspected to confirm compliance with 3.1.1.23. The driver and gunner shall be provided the necessary hardware to access the intra-vehicle intercom system simultaneously.

4.1.1.24 Universal Symbols. The vehicle shall be visually inspected to confirm compliance to 3.1.1.24. Universal Symbols shall be used if available. If not, Arabic or English symbols/words shall be used.

4.1.3 Vehicle Color. Vehicle shall be painted desert tan.

4.1.3.1 Vehicle Exterior Color. Vehicle exterior color shall be visually inspected to paint chip Desert Tan 686A color chip 33446 in accordance with FED-STD-595 or equivalent.

4.1.4 Towing. Vehicle shall be configured to tow or be towed by a similar vehicle.

4.1.4.1 Towing and Recovery Provisions. Vehicle shall be visually inspected to verify conformance to 3.1.4.1. The vehicle shall have a tow bar and cable to support vehicle towing and recovery operations.

4.1.4.2 Tow Eyes. The vehicle shall be visually inspected to verify conformance to 3.1.4.2. The vehicle shall have 2 tow eyes in the front and 2 tow eyes in the rear of the vehicle that will interface with the provided tow bar.

4.1.4.3 Shackles. The Vehicle shall be visually inspected to verify conformance to 3.1.4.3. The vehicle shall have 4 shackles to interface with the 4 tow eyes.

4.1.4.4 Air Brake Connections. If the vehicle is equipped with air brakes, the vehicle shall be visually inspected for front and rear air brake connections conforming to 3.1.4.4.

4.1.4.5 Tow Bar and Recovery Cable Storage. The vehicle shall be visually inspected to verify confirmation to 3.1.4.5. The vehicle shall have storage provisions for the tow bar and recovery cable that does not impede vehicle/user operations.

4.1.4.7 Vehicle Pintle. The vehicle shall be visually inspected to verify conformance to 3.1.4.7. The tow pintle shall be rated to support towing a similar vehicle.

4.1.5 Engine. The vehicle shall have an engine as proposed.

79

4.1.5.1 Engine Type. The vehicle shall be visually inspected to verify conformance to 3.1.5.1. The vehicle shall have a turbocharged diesel engine.

4.1.6 Transmission. The vehicle shall have a transmission as proposed.

4.1.6.1 Transmission Type. The vehicle shall be visually inspected to verify the vehicle is provided with an automatic transmission conforming to 3.1.6.1.

4.1.6.3 Drive Line. The vehicle shall be tested to verify conformance to 3.1.6.3. The vehicle shall have power to all wheels.

4.1.7 Steering. The vehicle shall have a steering system as proposed and meet performance requirements.

4.1.7.1 Power Steering. The vehicle shall be visually inspected to verify conformance to 3.1.7.1. The vehicle shall have power steering and be left hand drive.

4.1.7.2 Wall to Wall Turning. The vehicle shall be tested to verify conformance to 3.1.7.2. The wall to wall turning diameter shall be tested in the clockwise and counter clockwise direction. The diameter shall be less than 70 feet in each direction.

4.1.8 Tires. All tires shall be inspected for conformance to size and type proposed.

4.1.8.1 Tire Size. Tires shall be visually inspected to verify conformance to 3.1.8.1. Tires shall be of the same size, load rating, and tread design which will be interchangeable with each other to include the spare tire.

4.1.8.2 Spare Assembly. The vehicle shall be visually inspected to verify conformance to 3.1.8.2. The vehicle shall have a spare wheel and tire assembly with stowage that will not impede vehicle/user operations.

4.1.8.3 Tire Construction. Tires shall be visually inspected to verify conformance to 3.1.8.3. All tires to include the spare shall be a radial design, run flat, and have on-off road tread.

4.1.9 Electrical Equipment. The vehicle shall have a 24 volt electrical system.

4.1.9.1 24 Voltage Requirement.

4.1.9.1.1 Terminal Block. The contractor shall supply vehicle electrical schematics/specs for review to verify conformance to 3.1.9.1.1. The terminal block shall operate on 24 volts.

4.1.9.1.2 Engine Starting. The contractor shall supply vehicle electrical schematics/specs for review to verify conformance to 3.1.9.1.2. The starting circuit shall operate on 24 volts.

4.1.9.1.3 Charging System. The contractor shall supply vehicle electrical schematics/specs for review to verify conformance to 3.1.9.1.3. The vehicle charging system shall operate on 24 volts.

4.1.9.2 Radio Location. The vehicle shall be visually inspected to verify conformance to 3.1.9.2. There shall be a space claim for a radio located in the crew compartment.

4.1.9.3 Batteries. The vehicle shall be visually inspected to verify conformance to 3.1.9.3. The vehicle shall be equipped with heavy duty batteries.

4.1.9.4 NATO Slave. The vehicle shall be visually inspected to verify conformance to 3.1.9.4. The vehicle shall be equipped with a NATO slave receptacle.

4.1.10 Vehicle characteristics.

4.1.10.1 Total Personnel. The vehicle shall be visually inspected to verify conformance to 3.1.10.1. The vehicle shall accommodate 2 crew (1 driver and 1 gunner) and not less than 8 squad.

80

4.1.10.2 Rear Door. The vehicle shall be visually inspected to verify conformance to 3.1.10.2. The vehicle shall have rear access with a one or two door configuration. Any additional doors shall be noted.

4.1.10.3 Hatches. The vehicle shall be visually inspected to verify conformance to 3.1.10.3. The vehicle shall have not less than one hatch in the crew area over the gunner's location. Any additional hatches shall be noted.

4.1.10.4 Crew Seats. The vehicle shall be visually inspected to verify conformance to 3.1.10.4. The vehicle shall have a seat for each crew member (driver and gunner).

4.1.10.5 Squad Seats. The vehicle shall be visually inspected to verify conformance to 3.1.10.5. The vehicle shall have a seat for each squad member.

4.1.10.6 Crew Seat Belts. The vehicle shall be visually inspected to verify conformance to 3.1.10.6. Each crew member shall be provided with a 4 point seat belt assembly.

4.1.10.7 Squad Seat Belts. The vehicle shall be visually inspected to verify conformance to 3.1.10.7. Each squad member shall be provided with a 4 point seat belt assembly.

4.1.10.8 Driver's Field of View. The vehicle shall be tested to verify conformance to 3.1.10.8. The driver shall have a 180 deg unobstructed field of view while seated in the driver seat.

4.1.10.9 Firing Ports. The vehicle shall be visually inspected to verify conformance to 3.1.10.9. The vehicle shall be equipped with not less than 1 firing port with corresponding vision block per side in the squad area (right, left, rear).

4.1.10.10 Floor to Ceiling Height. The vehicle shall be tested to verify conformance to 3.1.10.10. The vehicle shall have a minimum floor to ceiling height of 60 inches.

4.1.10.11 Seat to Ceiling Height. The vehicle shall be tested to verify conformance to 3.1.10.11. The vehicle shall have a minimum seat to ceiling height of 42 inches.

4.1.10.12 Storage Bins. The vehicle shall be visually inspected to verify conformance to 3.1.10.12. The vehicle shall have a minimum of 3 storage bins (1 in the crew area and 2 in the squad area) with positive latching devices. Record dimensions of each storage bin.

4.1.10.13 Vehicle Weight. The vehicle shall be tested to verify conformance to 3.1.10.13. The vehicle fully outfitted without personnel shall not weigh more than 34,000 lb.

4.1.10.14 Vehicle Width. The vehicle shall be tested to verify conformance to 3.1.10.14. The vehicle width shall not exceed 10 feet (not including mirrors).

4.1.10.15 Vehicle Height. The vehicle shall be visually inspected to verify conformance to 3.1.10.15. The reducible height of the vehicle shall not exceed 9 feet. The task shall be accomplished by 2 personnel and not require auxiliary lifting devices (shall be completed with only onboard tools).

4.1.10.16 Vehicle Ground Clearance. The vehicle shall be visually inspected to verify conformance to 3.1.10.16. The vehicle ground clearance shall not be less than 15 inches or the proposed objective value (if applicable).

4.1.11 Performance. The vehicle shall perform as proposed and meet all specified requirements.

4.1.11.1 Vehicle Starting. The vehicle shall be tested to verify the high temperature requirement of 3.1.11.1. Vehicle shall start and operate at 130 degrees Fahrenheit.

4.1.11.2 Range. The vehicle shall be tested at an approved government test facility to verify compliance to 3.1.11.2. The vehicle range at GVW while driving at normal operating speeds shall be not less than 200 miles or the proposed objective range (if applicable).

81

4.1.11.3 Operating Summary. The vehicle shall be tested at an approved government test facility to verify compliance to 3.1.11.3. Vehicle shall be capable of operating 80% of mission on paved and unpaved roads and 20% off road (trails).

4.1.11.4 Operational Environments. The vehicle shall be tested at an approved government test facility to verify compliance to 3.1.11.4. Vehicle shall be capable of operating at reduced speeds on sand, mud, loose soil and gravel.

4.1.11.5 Obstacle Navigation. The vehicle shall be visually inspected to verify conformance to 3.1.11.5. Vehicle features that support meeting this requirement shall be reviewed.

4.1.11.6 Vehicle Top Speed. The vehicle shall be tested at an approved government test facility to verify compliance to 3.1.11.6. The vehicle top speed at GVW on a level highway shall be not less than 50 mph or the proposed objective top speed (if applicable).

4.1.11.7 Vehicle Minimum Speed. The vehicle shall be tested at an approved government test facility to verify compliance to 3.1.11.7. Vehicle minimum speed at GCW on a level highway shall be not less than 40 mph.

4.1.11.8 Vehicle Acceleration. The vehicle shall be tested to verify compliance to 3.1.11.8. The vehicle shall accelerate from 0 to 20 mph within 10 seconds or the proposed objective time (if applicable).

4.1.11.9 Vehicle Climbing and Descending. The vehicle shall be tested to verify the conformance to 3.1.11.9. The vehicle shall climb and descend a 45% slope at GVW.

4.1.11.10 Vehicle Traversing. The vehicle shall be tested to verify conformance to 3.1.11.10. The vehicle shall traverse a 20% side slope in each direction at GVW.

4.1.11.11 Vertical Obstacle. The vehicle at GVW shall be tested to verify conformance with 3.1.11.11. The vehicle shall navigate an 18 inch vertical wall at GVW or the proposed vertical height (if applicable).

4.1.11.12 Fording Depth. The vehicle shall be tested to verify compliance with 3.1.11.12. The vehicle shall have a fording depth of not less than 36 inches.

4.1.12 Weapon Accommodation. The vehicle shall have weapon accommodation as proposed and meet the performance requirements.

4.1.12.1 Weapon Station. The vehicle shall be visually inspected to verify conformance to 3.1.12.1. Vehicle shall have one weapon station ring mount, located over gunner with hatch access, capable of accommodating a PKM 7.62 mm machine gun.

4.1.12.2 Stowage PKM Ammunition. The vehicle shall be visually inspected to verify conformance to 3.1.12.2. Vehicle shall have stowage for 600 rounds (boxed) of PKM 7.62 × 54 in squad area and 200 rounds (boxed) of the same in crew area.

4.1.12.3 Weapon Station Height Adjustability. The vehicle shall be visually inspected to verify conformance to 3.1.12.3. Weapon station should provide adjustable height gunner platform.

4.1.12.4 Weapon Station Angle Adjustability. The vehicle shall be visually inspected to verify conformance to 3.1.12.4. Weapon station should be able to fire at 45 degree elevation above horizon and 8 degrees below horizon. In addition, PKM ring mount design shall prevent potential shooting of the vehicle.

4.1.12.5 Weapon Station Accessibility. The vehicle shall be visually inspected to verify conformance to 3.1.12.5. Weapon station shall be accessible by any personnel within the vehicle without having to exit vehicle.

82

4.1.12.6 Weapon Station Field of Fire. The vehicle shall be visually inspected to verify conformance to 3.1.12.6. Weapon station combined field of fire to provide 360 degrees of coverage.

4.1.12.7 Stowage Squad AK-47 Ammunition. The vehicle shall be visually inspected to verify conformance to 3.1.12.7. Vehicle shall have stowage for 1 box of 7.62 × 39 rifle ammo per squad member (located in squad area).

4.1.12.8 Stowage Crew AK-47 Ammunition. The vehicle shall be visually inspected to verify conformance to 3.1.12.8. Vehicle shall have stowage for 1 box of 7.62 × 39 rifle ammo shared by driver and gunner (located in crew area).

4.1.12.9 Stowage Crew and Squad AK-47's. The vehicle shall be visually inspected to verify conformance to 3.1.12.9. Vehicle shall have appropriate brackets to securely hold crew and squad AK-47 rifles during operations.

4.1.13 Vehicle Survivability. The vehicle shall have survivability as proposed and meet the performance requirements.

4.1.13.1 Vehicle Armor Protection. The vehicle shall be visually inspected to verify that the vehicle's armor protection features proposed are provided. In addition, the contractor shall provide certification of armor material.

4.1.13.2 Gunner's Weapon Station Armor. The vehicle shall be visually inspected to verify conformance to 3.1.13.2. In addition, the contractor shall provide certification of armor material. The Gunners weapon station shall have the same ballistic protection as the vehicle. In addition, the contractor shall provide certification of armor material.

4.1.13.3 Vehicle Mine Protection. The vehicle shall be visually inspected to verify that the vehicle's mine protection features proposed are provided. In addition, the contractor shall provide certification of mine protection design.

4.1.13.4 Additional Armor Protection. The vehicle shall be visually inspected to verify that the additional armor protection features proposed are provided. In addition, the contractor shall provide certification of armor material to verify level of protection proposed in regards to the objective requirement.

4.1.14 Brakes. The vehicle shall have brakes as proposed and meet performance requirements.

4.1.14.1 Service Brakes. The vehicle shall be tested to verify compliance to 3.1.14.1. Vehicle service brakes shall bring vehicle to a stop from 20 mph within 35 feet while at GVW. The vehicle shall not drift more than 1 foot left or right while stopping.

4.1.14.2 Parking Brakes. The vehicle shall be tested to verify compliance to 3.1.14.2. Vehicle parking brakes shall hold the vehicle on a 45% longitudinal slope at GVW.

4.1.14.3 Emergency Brakes. The vehicle shall be tested to verify compliance to 3.1.14.3. Vehicle emergency brakes shall bring the vehicle to a complete stop safely.

83

SUBCONTRACT ATTACHMENT 10.6
W56HZV-06-D-VB01
ILAV SHAKEDOWN TEST PLAN
ATTACHMENT 003
24 May 06
Appendix 1

Iraqi Light Armored Vehicle (ILAV)
3,000 mile Shake Down Test

The ILAV vehicle is an armored vehicle that will be mainly used in an urban setting. The procurement is based on a compressed schedule with the vehicle being a Non-Development Item that will require a minimal amount of integration of new components. The shake down test is not an extensive vehicle qualification test but a check-out to verify vehicle conformance to the user's minimum requirements.

A 3,000 mile Shakedown Test will be run at APG. The vehicle will run 80% (2400 miles) on relatively flat hard roads to a test plan that will simulate an urban environment and 20% (600 miles) of off road conditions simulating missions in the field. In addition to the above 3,000 mile shakedown test, a visual inspection and vehicle tests will be required per Table 1 of the ILAV Shakedown Test Plan. Vehicle will be properly baselined with all tests being run to APG standards to ensure personnel safety during testing. Driveability of the vehicle at combat weight is essential and will require a detailed assessment.

All testing to include visual inspections may be modified, upon mutual agreement, depending on the final configuration of the vehicle delivered.

The following missions are set up to address the off and on road testing with the vehicle at full operational weight to include personnel (full complement of crew and squad):

2,400 Mile on Hard Road Mission to Simulate Urban Operations:

100 Mile Mission (run approximately 24 times):

a.

10 miles driven with stopping at every ¹/4 mile point.



b.

20 miles driven with stopping at every mile point.



c.

Run the following scenario 4 times back-to-back



1.

From a dead stop rapid/full acceleration to 50 mph or rated top speed.



2.

Once at top speed apply full braking to quickly stop.



3.

Once stopped rapid acceleration in the reverse direction 50 yards.



4.

After 50 yards of reverse driving apply full braking to quickly stop.



d.

30 miles driven at a speed of 40 mph.



e.

40 miles driven at a speed of 50 mph.

600 Mile of Off Road Testing to Simulate Off Road Operations:

60 Mile Mission (run approximately 10 times).

a.

15 miles driven on gravel or equivalent road with minimal stopping.



b.

10 miles driven on gravel or equivalent road with stopping at every 1/4 mile point.



c.

10 miles driven on off road/cross-country with minimal stopping.



d.

20 miles driven on off road/cross country with stopping at every 1 mile point.



e.

5 miles of driving up and down small to moderate hills.

84

SUBCONTRACT ATTACHMENT 10.7

CONTRACT W56HZV-06-D-VB01—ATTACHMENT 004—DIDs FOR EXHIBIT A—24 MAY 06

DATA ITEM DESCRIPTION Form Approved
OMB No. 0784-0188
Exp. Date: Jun. 30, 1986

1. TITLE		2. IDENTIFICATION NUMBER
	Contractor's Progress, Status and Management Report	DI-MGMT-80227

3.

DESCRIPTION/PURPOSE

3.1

The Contractor's Progress, status and Management Report indicates the progress of work and the status of the program and of the assigned tasks, reports and informs of existing or potential problem areas.

4. APPROVAL DATE
(YY/MM/DD)
860905 5. OFFICE OF PRIMARY RESPONSIBILITY (OPR)
N/SPAWAR 6a. DTIC REQUIRED 6b. GIDEP REQUIRED

7.

APPLICATION/INTERRELATIONSHIP

7.1

This Date Item Description (DID) contains the format and content preparation instructions for the data product generated by the specific and discrete task requirement for this date included in the contract.

7.2

This DID may be applied in any contract and during any program phase.

7.3

This DID supersedes DI-A-2090A, DI-A-3025A, UDI-A-22050B, UDI-A-22052A, UDI-A-23960, DI-A-30024, and DI-A-30606. (cont. on page 2)

8. APPROVAL LIMITATION 9a. APPLICABLE FORMS 9b. AMSC NUMBER
N3947

10.

PREPARATION INSTRUCTIONS

10.1

Contract—This date item is generated by the contract which contains a specific and discrete work task to develop this data product.

10.2

Format—All attachments shall be identified and referenced in the text of the report. The report shall be prepared in the contractor's format and shall be legible and suitable for reproduction.

10.3

Content—The report shall include:

a.

A front cover sheet which includes the contractor's name and address, the contract number, the nomenclature of the system or program, the date of the report, the period covered by the report, the title of the report, the Contract Date Requirements List (CDRL) sequence number, the security classification,

b.

Description of the progress made during the reporting period;

c.

Results, positive or negative, obtained related to previously-identified problem areas, with conclusions and recommendations;

d.

Any significant changes to the contractor's organization or method of operations, to the project management network;

e.

Problem areas affecting technical or scheduling elements, with background and any recommendations for solutions;

i.

Person-hours expended for the reporting period and cumulatively for the contract;

j.

Any trips and significant results; (cont. on page 2)

DD Form 1664, FEB 85                        Previous editions are obsolete                        Page 1 of 2 Pages

85

CONTRACT W56HZV-06-D-VB01—ATTACHMENT 004—DIDs FOR EXHIBIT A—24 MAY 06

DI-MGMT- 80227

7.

APPLICATION/INTERRELATIONSHIP (Cont'd)

7.4

Paragraphs 10.3.f, 10.3.g, and 10.3.h herein should be tailored on DD Form 1423 when such cost data is already submitted through a sophisticated cost reporting system under the contract.

10.

PREPARATION INSTRUCTIONS (Cont'd)

k.

Record of all significant telephone calls;

m.

Contract schedule status;

n.

Plans for activities during the following reporting period;

o.

Name and telephone number of preparer of the report;

p.

Appendixes for any necessary tables, references, photographs, illustrations, and charts.

Page 2 of 2 Pages

86

DATA ITEM DESCRIPTION Form Approved
OMB NO. 0704-0188

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 this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503.

1. TITLE		2. IDENTIFICATION NUMBER
	Proposed Spare Parts List	DI-S-80873A

3.

DESCRIPTION/PURPOSE

3.1

The Proposed Spare Parts List identifies the contractor's recommended spare parts required to maintain a system under a given set of circumstances and duration.

3.2

The Proposed Spare Parts List is used to determine spare parts stocking levels.

4. APPROVAL DATE (YYMMDD)
901106 5. OFFICE OF PRIMARY RESPONSIBILITY (OPR)
F/APCC-75FMO 6a. DTIC APPLICABLE 6b. GIDEP APPLICABLE

7.

APPLICATION/INTERRELATIONSHIP

7.1

This Data Item Description contains the format and content preparation instructions for the data product generated by the specific and discrete task requirement for this data included in the contract.

7.2

The content shall identify the time period (e.g. 180 days) and the conditions of operation (e.g., Extensive road tests in accordance with Vehicle Test Plan A2345 at two different sites with five vehicles located at each site) for which the proposed spare parts are required (reference 10.3 h. below).

7.3

This DID supersedes DI-ILSS-80134.

8. APPROVAL LIMITATION 9a. APPLICABLE FORMS 9b. AMSC NUMBER
F5035

10.

PREPARATION INSTRUCTIONS

10.1

General. The Proposed Spare Parts List shall contain the contractor's recommended quantities of every type of spare part required for the system, to include all consumable and expendable items. This list shall explain any assumptions, formulas, or models used by the contractor in the creation of the list.

10.2

Format. The Proposed Spare Parts List format shall be arranged in a comprehensive presentation of components, subassemblies, and assemblies as selected by the contractor.

10.3

Content. The Proposed Spare Parts List content shall include the following:

a.

Complete item name.

b.

Prime manufacturer's or vendor's part number.

e.

Quantity per end item.

f.

Unit of issue (e.g., each , feet, lot).

g.

Estimated unit price.

h.

Recommended quantity to sustain operation for the time period and under the conditions stated in the contract.

i.

Alpha numeric numbering of items on list.

j.

Shelf life (if not indefinite).

11.

DISTRIBUTION STATEMENT

Distribution Statement A: Approval for public release; distribution is unlimited.

DD Form 1664, APR 89                        Previous editions are obsolete                        Page 1 of 2 Pages

87

DI-ILSS-80134A

Block 10, Preparation Instruction (Continued)

1.

Production lead time for each item.

a.

Explanatory narrative which describes the recommended quantity to take into account multiple end items at a single location.

Page 2 of 2 Pages

88

DATA ITEM DESCRIPTION Form Approved
OMB NO. 0704-0188

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 this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503.

1. TITLE		2. IDENTIFICATION NUMBER
	Training Materials	DI-ILSS-80873

3.

DESCRIPTION/PURPOSE

3.1

Provides the minimum materials required to support a military services training program on the end item equipment.

4. APPROVAL DATE (YYMMDD)
890529 5. OFFICE OF PRIMARY RESPONSIBILITY (OPR)
S/DPSC-EST 6a. DTIC APPLICABLE 6b. GIDEP APPLICABLE

7.

APPLICATION/INTERRELATIONSHIP

7.1

This DID contains the format and content preparation instructions for the data product generated by the specific and discrete task requirement as delineated in the contract.

8. APPROVAL LIMITATION 9a. APPLICABLE FORMS 9b. AMSC NUMBER
S4775

10.

PREPARATION INSTRUCTIONS

10.1

General. The materials shall contain sufficient written or audio-visual instructions to guide students through all specified didactic and hands-on training with instruction lectures and instructor interface with students. Existing manufacturer's training and service manuals can be used in so far as they meet specified requirements. The role of the instructor will be to observe and evaluate student programs, to answer questions, provide supplemental training when necessary. The training materials should be for students with a basic knowledge of hand tools.

10.1.1.

Format. The materials provided shall be in the contractor's own format. However, each text shall include a table of contents. This shall include a listing of all major subjects and the page number on which they appear.

10.2

Contents. The training materials shall consist of a programmed text, instructor guidance and supplemental written and audio-visual material used to support a training program. All instruction, information, and schematics shall use standard symbology.

Continued on Page 2

11.

DISTRIBUTION STATEMENT

DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited.

DD Form 1664, MAR 87                        Page 1 of 3 Pages

89

DI-ILSS-80872

Block 10, Preparation Instructions (Continued)

10.2.1

Programmed Text. The programmed text shall be designed to guide the student through the application, operation, inspection, adjustment, troubleshooting, and repair of the equipment. The programmed text shall be divided into the sections listed below. Each section may refer the student to other supplemental written or audio-visual material (transparencies, slides, charts, or video), which shall be included in the package. The following lists the requirements for each section. Additional sections and material can be added.



10.2.1.1

Requires Material. This section shall list all equipment and material required by the student to complete the programmed text, including test equipment, audio-visual material, tools, supplies, and simulators.



10.2.1.3

Operating Procedures. This section shall guide the student step-by-step through the hands-on operation of the equipment from start-up the shut-down. The instructions will be sufficiently detailed to allow the student to operate and evaluate performance of all operator assessable controls and functions, as applicable. Before the student is instructed to operate the equipment, all safety precautions to prevent injury or equipment damage shall be clearly explained. The purpose of this section is to give the student sufficient information to operate the unit and conduct in-service user training classes.



10.2.1.4

Routine Inspection. This section shall guide the student step-by-step through routine inspection of the unit to assure proper and safe operation. Inspection shall be listed in a checklist format, followed with detailed information if needed. This section should include:



(1)

Daily user maintenance or performance checks.



(2)

Monthly or annual preventive maintenance inspection to include inspection of components subject to wear, routine servicing requirements such as lubrication or filter changes, safety inspection, tolerance, and frequency of inspection.



10.2.1.5

Calibration. This section shall list all adjustment and calibrations required to assure accurate and safe operation of this equipment, including frequency and tolerances. This shall include user daily calibration, periodic calibration, and calibration/adjustments required to bring the unit back into specifications. All test equipment and simulators required to perform these calibrations or adjustments shall be listed.



10.2.1.6

Troubleshooting. This section will explain in detail how all functions of the system operate. A troubleshooting guideline shall be given to help the students locate common problems. Warnings shall clearly be listed when improper test equipment hookup might cause personal injury or damage to equipment.



10.2.1.7

Repair. This section shall show the student how to repair high failure parts, remove equipment covers/access panels, and reassemble. Warnings shall clearly be stated if injury or equipment damage can be caused by improper disassembly (e.g.: counter balances). Specialized tools required shall be listed.



10.2.3

Instructor Guidance. Guidance for instructors to use in applying the programmed text shall be provided under separate cover. The guidance shall include:



(1)

Answers to all student exercises,



(2)

Descriptions of points in the programmed text where instructor involvement, observation, or action is necessary or recommended to insure safety or verify student performance.

Page 2 of 3 Pages

90

DATA ITEM DESCRIPTION Form Approved
OMB NO. 0704-0188

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 this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503.

1. TITLE		2. IDENTIFICATION NUMBER
	Failure Analysis and Corrective Action Report	DI-RELI -81315

3.

DESCRIPTION/PURPOSE

3.1

Provides immediate reporting of failure and subsequent details failure analysis results and correction action recommendation.

4. APPROVAL DATE (YYMMDD)
930125 5. OFFICE OF PRIMARY RESPONSIBILITY (OPR)
G/Y224 6a. DTIC APPLICABLE 6b. GIDEP APPLICABLE

7.

APPLICATION/INTERRELATIONSHIP

7.1

This Data Item Description (DID) contains the format and content preparation instructions for the data resulting from the work task as described by MIL-STD-781D and MIL-STD-785B.

7.2

This DID supersedes DI-R-5299C.

8. APPROVAL LIMITATION 9a. APPLICABLE FORMS 9b. AMSC NUMBER
G6891

10.

PREPARATION INSTRUCTIONS

10.1

Reference documents. The applicable issue of the documents cited herein, including their approval dates and dates of any applicable amendments, notices, and revisions, shall be as specified in the contract.

10.2

Content. The report shall contain the following:

a.

Failure Analysis Report Number. (See 10.5)

b.

Contract number.

c.

Equipment title.

d.

Equipment serial number.

e.

Date of failure.

f.

Test failed.

g.

Effect on equipment.

(Continued on Page 2)

11.

DISTRIBUTION STATEMENT

DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited.

DD Form 1664, APR 89 Previous editions are obsolete.                        Page 1 of 4

91

DI-RELI-81315

10.

PREPARATION INSTRUCTIONS (Continued)

b.

Total test time at failure.

10.3

Preliminary Report. Content and format shall be as follows:

10.3.1

Content.

a.

Originator of the report.

b.

Date of the failure.

c.

Date of the report.

d.

Contractor's name.

e.

Failure Analysis Report Number. (See 10.5)

f.

Contract number.

g.

Equipment, title part number, and serial number.

h.

Assembly title, part number, and serial number.

i.

Subassembly title, element or module title, part number, and serial number.

j.

Part name, part number, serial number, date code, and manufacturer.

k.

Name and specification of test failed.

l.

Elapsed time and phase of test failed.

m.

Total operation time of unit at time of failure.

n.

Failure symptoms.

o.

Failure mode.

p.

Classification failure (independent or dependent).

q.

Type of failure from Failure Keyword List. (See 10.7)

r.

Disposition of failed item.

s.

Any supplemental information relating to the failure (i.e., any internal contractor assessments, records, reports, correspondence, etc.).

Page 2 of 4 Pages

92

DI-RELI-81315

10.

PREPARATION INSTRUCTIONS (Continued)

10.4

Final Report.

10.4.1

Content. The final report shall contain the items required in the Preliminary Report and the following additional items shall be included:

a.

Reference-Failure Analysis Report Number (see 10.5).

b.

Failure Analysis methods.

c.

Failure Analysis results.

d.

Statement as to whether this is a pattern failure. If it is, the reports of the other failure(s) will be referenced.

e.

Corrective action:

(1)

Action on individual equipment failure.

(2)

Measures to prevent other failures.

10.4.2

Format. The same format may be used for both Preliminary report and Final report.

10.5

Failure Analysis Number

a.

Format. In accordance with the format code: X - N - T - F1 - F2

(1)

X is the equipment type number.

(2)

N is the sequential failure number.

(3)

T is the test phase in which the failure occurred.

(a)

T-A for acceptance test.

(b)

T-B for subassembly test.

(c)

T-C for receiving inspection.

(d)

T-D for reliability test.

(e)

T-E for qualification test.

(f)

T-F for system/equipment burn-in.

(g)

T-C for system integration.

(4)

F1 is the total number of failures of the same part number (i.e., resistor, capacitor, inductor, transistor, etc.) manufactured by the same vendor.

Page 3 of 4 Pages

93

DI-RELI-81315

10.

PREPARATION INSTRUCTIONS (Continued)

(5)

F2 is the total number of occurrences of a specified failure mechanism of the same part number manufactured by the same vendor.

10.6

Nonrelevant and Unverified Failures. Nonrelevant and unverified failures shall not have the F1 and F2 numbers assigned because these types of failures do not relate to a part type failure. Instead, these failures shall be coded as "NR" for a nonrelevant failure and "UV" for a unverified failure.

10.7

Failure Keyword List.

10.7.1

Content. The content shall include:

(1)

Workmanship.

(2)

Handling.

(3)

Process.

(4)

Design.

(5)

Marking.

(6)

Test Equipment.

(7)

Contamination.

(8)

Open Bond Wire.

(9)

Electrical Short.

(10)

Electrical Open.

(11)

Software.

(12)

Mechanical.

(13)

Nonrelevant.

(14)

Under Investigation.

(15)

Unknown.

(16)

Unverified.

(17)

Glitch.

(18)

Testing Error.

(19)

Tolerance.

Page 4 of 4 Pages

94

SUBCONTRACT ATTACHMENT 10.8
W56HZV-06-D-VB01
ILAV PRODUCTION VEHICLE ACCEPTANCE TEST
ATTACHMENT 005
24 MAY 06

ILAV Production Vehicle Acceptance Test

Production Vehicle Acceptance Test (PVAT).    This acceptance test has been designed to record the results on a completed production vehicle to verify conformance to the vehicle specification. The final inspection of a completed vehicle will consist of a 10 Mile Vehicle Road Test in addition to a Vehicle Inspection/Conformance Test as described below. A complete PVAT will be performed on every production vehicle.

All deficiencies found during the PVAT shall be formally recorded/reported and corrected prior to government acceptance. All testing to include visual inspections may be modified depending on the final configuration of the vehicle delivered upon mutual agreement.

10 Mile Vehicle Road Test:

a.

5 miles driven at 50mph or rated top speed.



b.

5 miles driven at various speeds with stop and go every ¹/2 mile.

Vehicle Inspection/Conformance Test:

1.  Vehicle light package. A physical test shall be performed to verify operation of (not limited to) the headlights, turn signals, tail lights, dome lights, and brake lights.

2.  External Rear View Mirrors. A visual inspection will be performed to verify mirrors are installed and in working condition.

3.  Windshield Wipers and Washer Fluid Applicator. A physical test shall be performed to verify wipers and fluid applicator are installed and in working condition.

4.  Portable Fire Extinguishers. The vehicle will be visually inspected to verify the three extinguishers, type ABC, are installed.

5.  Engine Fire Extinguisher. The vehicle shall be visually inspected for a manually activated fire extinguisher system.

6.  Vehicle Jack. Vehicle will be inspected for a vehicle Jack.

7.  Spare Tire Mechanical Assist. The vehicle shall be visually inspected for a mechanical assist mechanism.

8.  Standard Operator Tools. The vehicle shall be visually inspected for a standard tool set.

9.  Tire Changing Tools. The vehicle shall be visually inspected for a set of tire changing tools.

10.  Pioneer Tools. The vehicle shall be visually inspected for a set of pioneer tools.

11.  Tool Stowage. The vehicle shall be visually inspected for storage of all supplied tools.

12.  Jumper Cables. The vehicle shall be visually inspected for one NATO slave to NATO slave cable not less than 12 feet.

13.  Ammeter, Charging Indicator or Volt Meter. Gages shall be visually inspected to verify operation during 10 mile vehicle road test.

95

14.  Oil Pressure Gage or Indicator. Gage or indicator shall be visually inspected to verify operation during 10 mile vehicle road test.

15.  Engine Coolant Temperature Gage. Gage shall be visually inspected to verify operation during 10 mile vehicle road test.

16.  Speedometer/Odometer. Gage shall be visually inspected to verify operation during 10 mile vehicle test.

17.  Tachometer. Gage shall be visually inspected to verify operation during 10 mile vehicle road test.

18.  Low Oil Pressure Gage. Gage shall be visually inspected to verify operation during 10 mile vehicle road test.

19.  Air Conditioning System. A physical test shall be performed to verify basic operation of air conditioning system.

20.  Heating Systems. A physical test shall be performed to verify basic operation of cooling capability.

21.  Potable Water. Vehicle shall be visually inspected for potable water container(s).

22.  Radio Provisions. Vehicle shall be visually inspected to verify all necessary connections are provided.

23.  Driver & Gunner Intra-Vehicle Intercom Access. A physical test shall be performed to verify operation of intercom.

24.  Universal Symbols. The vehicle shall be visually inspected to confirm required labeling is provided.

25.  Vehicle Color. Vehicle shall be visually inspected to verify proper color.

26.  Towing and Recovery Provisions. Vehicle shall be visually inspected to verify tow bar and recovery cable are provided.

27.  Tow Eyes. The vehicle shall be visually inspected to verify 2 tow eyes in the front and 2 tow eyes in the rear of the vehicle are provided.

28.  Shackles. The Vehicle shall be visually inspected to verify 4 shackles are provided.

29.  Air Brake Connections. If the vehicle is equipped with air brakes, the vehicle shall be visually inspected for front and rear air brake connections.

30.  Tow Bar and Recovery Cable Storage. The vehicle shall be visually inspected to verify storage provisions for the tow bar and recovery cable is provided.

31.  Vehicle Pintle. The vehicle shall be visually inspected to verify pintle is provided.

32.  Power Steering. A physical test shall be performed to verify the operation of the power steering during the 10 mile vehicle road test.

33.  Tires. All tires shall be physically tested for proper air pressure and visually inspected for conformance to size and type proposed.

34.  Spare Assembly. The vehicle shall be visually inspected to verify that an inflated spare wheel and tire assembly are provided and properly stowed.

35.  Batteries. The vehicle shall be visually inspected to verify heavy duty batteries are provided.

36.  NATO Slave. The vehicle shall be visually inspected to verify a NATO slave receptacle is provided.

37.  Doors/Hatches. The vehicle shall be physically tested to verify operation and locking of all doors and hatches.

96

38.  Seats/Seat Belts. The vehicle shall be visually inspected to verify that all personnel are provided with a seat and four-point seat belt assembly.

39.  Firing Ports/Vision Blocks. The vehicle shall be physically tested to verify operation of firing port doors and visually inspect vision block condition.

40.  Vehicle Top Speed. The vehicle shall be physically tested to verify vehicle's rated top speed during 10 mile vehicle road test.

41.  Vehicle Acceleration. The vehicle shall be physically tested to verify vehicle's rated acceleration (0 to 20mph) during 10 mile vehicle road test.

42.  Service Brakes. The vehicle shall be physically tested to verify service brakes are capable of bringing vehicle to a stop from 20 mph within 35 feet during 10 mile vehicle road test. The vehicle shall not drift more than 1 foot left or right while stopping.

43.  Parking Brakes. The vehicle shall be physically tested to verify parking brake operation.

44.  Emergency Brakes. The vehicle shall be physically tested to verify emergency brake operation during 10 mile vehicle road test.

97

SUBCONTRACT ATTACHMENT 10.9
FOR OFFICIAL USE ONLY
Contract W56HZV-06-D-VB01
ATTACHMENT 006
25 MAY 06

IRAQI LIGHT ARMORED VEHICLE (ILAV)

The location to be determined in hag is Taji National Depot

TECHNICAL INFORMATION

18.   VEHICLE SURVIVABILITY:

(a)

Ballistic Protection:



(1)

What level of ballistic protection does the vehicle provide? Threshold If increased vehicle protection is offered, describe:



(2)

What level of ballistic protection does the weapon station provide? Threshold

(3)

Describe the approach for the opaque armor solution, to include at a minimum: material(s), thicknesses, and spacing: 8mm thick 99.5% AL2O3 4"x4" tile over 6mm Armox 500 UHH steel (16.3 psf)

(4)

Describe the approach for the transparent armor solution, to include at a minimum: material(s) and thicknesses: TAGS AP glass-plastic laminate

(b)

Blast Mine Protection:



(1)

Does the vehicle have protection against the required blast mine under any wheel? Yes What size blast mine can the vehicle survive under any wheel? Threshold lbs TNT or equivalent lbs. TNT



(2)

Does the vehicle underbody have a V-type or rounded design? V-type

3**) A performance objective of acquiring additional vehicle blast mine protection is desired.

(4)

Describe any proposed additional capability beyond the threshold vehicle blast mine requirement: Per Offeror Response to IFD, 01-T-010

Comments:

FOR OFFICIAL USE ONLY

98

SUBCONTRACT ATTACHMENT 10.10

PRODUCTION LICENSE AGREEMENT
IRAQI LIGHT ARMORED VEHICLES

        This License Agreement (the "License Agreement") is made the 13th day of June 2006:

Between:

Force Protection Industries, Inc., a Nevada corporation, whose address is 9801 Hwy 78, Bldg #1, Ladson SC 29456, jointly with its corporate parent Force Protection, Inc. (hereinafter referred to as "FPI")

– and –

BAE Systems Land & Armaments L.P., a Delaware limited partnership, acting through its Ground Systems Division, with its principle office at 1100 Bairs Road, York, PA 17404 (hereinafter referred to as "BAE").

RECITALS

Whereas, FPI owns, possesses or has the right to use certain patents, patent applications, licensed technology, know-how, trade secrets, designs, copyrighted material, systems and other proprietary intellectual property (the "IP") associated with the Cougar variant 4x4 armored vehicle known as the Iraqi Light Armored Vehicle (the "ILAV Vehicle"); and

Whereas, FPI owns and possesses engineering specifications, drawings, technical data, bills of material, part numbers and other technical information relating to the ILAV Vehicle, including all revisions, changes and additions thereto (the "Technical Data Pack" or the "TDP") and has created or will create technical manuals, tooling, systems diagrams, process flow diagrams, vendor lists, and other documents and information relating to the design, performance, testing, manufacture, operation and repair of the ILAV Vehicle (collectively with the TDP, the "Confidential Information"); and

Whereas, FPI and BAE have agreed to team together to secure a U.S. Government contract (ref W56HZV-06-D-VB01) for the manufacture and sale of Cougar ILAV Vehicles to the US Army Tank Armament & Automotive Command ("TACOM") it being currently contemplated by the parties that such contract could include up to 1050 ILAV Vehicles with all options (hereinafter referred to as the "ILAV Contract"); and

Whereas, As part of such teaming arrangement the parties have agreed that (i) BAE shall act as the prime contractor under the ILAV contract and FPI shall act as its subcontractor under a subcontract agreement (the "Subcontract") pursuant to which FPI shall manufacture fifty percent (50%) of the vehicles required under the ILAV Contract (the "Subcontract Vehicles") except as otherwise agreed to by the parties, and (ii) that FPI shall grant to BAE a production license to manufacture up to 1050 ILAV Vehicles under the ILAV Contract on such terms and conditions as may be acceptable to FPI.

Grant of Production License:

For and in consideration of the payment of the License Agreement Fee hereunder, FPI hereby grants to BAE a non-exclusive, revocable, "build to print" production license to use the IP, TDP, Improvements, as defined hereunder, and the Confidential Information, which license shall not be

99

terminated except as provided herein, for the duration of contract W56HZV-06-D-VB01, referenced in the recitations, above:

•

For the purpose of manufacturing up to 1050 of the ILAV Vehicles required under the ILAV Contract, such permitted use to include without limitation developing tooling and manufacturing processes, contacting vendors, procuring materials, fabricating parts, assembling components and undertaking such other customary manufacturing activities as necessary to produce the ILAV Vehicles;



•

To make additions or revisions to the TDP or Confidential Information or otherwise to adapt, correct and otherwise conform the TDP or Confidential Information to BAE's processes, which shall be deemed an Improvement as defined hereunder, for FPI's unrestricted use and BAE's use solely for the manufacture of those ILAV vehicles reserved for BAE pursuant to this License Agreement;



•

To sell and deliver the ILAV Vehicles to TACOM as required under the ILAV Contract; and



•

On the express condition that the parties mutually agree on the terms of the Subcontract and that the Subcontract includes a requirement that FPI be awarded production of not less than 50% of all ILAV Vehicles except as otherwise agreed to by the parties on terms acceptable to FPI.

The grant of the Production License Agreement by FPI shall in no event be construed as a grant of any other right, title or interest in and to the ILAV Vehicle, the IP, TDP or the Confidential Information, and BAE shall not use any IP, TDP or Confidential Information for any purpose other than as provided herein. BAE may attach limited drawings and specifications to purchase orders it issues to vendors and suppliers, subject to BAE's compliance with the protection of FPI's information as provided herein, solely for production of the ILAV Vehicles pursuant to this License Agreement, but BAE shall not otherwise transfer IP, TDP or Confidential Information or sub-license any of its rights under this License Agreement (whether to subcontractors or otherwise) without the express prior written consent of FPI, and shall not assert any right, title or claim to the IP or the Confidential Information, BAE shall have the right to provide TACOM with manuals for operation and for maintenance and repair of ILAV Vehicles and any other deliverable currently required under the ILAV Contract.

Ownership of Rights—Improvements:

FPI will provide to BAE for use under this agreement the TDP and Confidential Information for the ILAV Vehicle and FPI shall cooperate and assist BAE in making such additions or revisions to the TDP and Confidential Information as necessary to ensure the ILAV conforms to all performance and contractual requirements of the ILAV Contract, provided however that FPI shall at all times retain the exclusive legal right, title and interest in and to the TDP and the Confidential Information. BAE may propose changes to the TDP or Confidential Information, provided however that FPI shall have the exclusive right to make final changes to the TDP or to any of the Confidential Information.

BAE shall promptly disclose to FPI any new or improved designs, specifications, developments, enhancements or derivatives developed by BAE specifically for the ILAV Vehicles, relating to or capable of being used in the TDP, the Confidential Information or the ILAV Vehicles, whether patentable or not, which would make the vehicles cheaper, more effective, more easily produced, more useful or more valuable, or would in any other way enhance the TDP, the Confidential Information or the ILAV Vehicles (the "Improvements"). BAE hereby assigns to FPI all its right, title and interest in and to all Improvements upon their creation by BAE, and upon such creation the Improvements shall be deemed to be part of the IP and the use by BAE of such Improvements shall be deemed to be included in and covered by this License Agreement.

100

License Agreement Fee & Reports:

Except as otherwise provided herein, in consideration of the License granted pursuant to this License Agreement by FPI to BAE, BAE shall pay to FPI a fully earned, non-refundable license fee of $8,027 per vehicle for each ILAV Vehicle manufactured by BAE under the ILAV Contract (the "License Agreement Fee"). All payments made hereunder shall be free and clear of all taxes, fees, deductions or set-offs of whatever kind.

In the event that TACOM exercises any of the options on the ILAV Contract ("Option Vehicles") and the Parties agree that BAE will manufacture more than 50% of any Option Vehicles, then BAE shall pay FPI a fully earned, nonrefundable license fee of $16,500 for each of the Subcontract Vehicles that would have been produced by FPI under the Subcontract but manufactured by BAE under the ILAV Contract ("Additional License Fee").

The License Agreement fees shall become due on the last day of each calendar month in respect of all ILAV Vehicles accepted by the U.S. Government customer during such month. Acceptance shall be evidenced by a DD Form 250, executed by the authorized agent or employee of the U.S. Government. BAE shall provide to FPI no later than the 5^th business day following the end of each calendar month a report setting out the number of ILAV Vehicles manufactured during the preceding month and the number of ILAV Vehicles accepted during the preceding month, including their hull numbers or other identifying mark and a calculation of the amount of the License Agreement Fees payable in respect of such deliveries. BAE shall include payment of the License Agreement Fees in respect of such deliveries together with such report.

Without limiting in any way FPI's remedies elsewhere contained in this License Agreement, BAE shall pay FPI interest on all overdue payments due to FPI under this License Agreement at the rate of two percent (2%) per month. The payment of such interest shall not replace any of FPI's other rights under this License Agreement or at law resulting from BAE's default by failure to pay any amount due.

BAE will maintain accurate records of all ILAV Vehicle production and deliveries with respect to which License Agreement Fees are payable under this section, and will make such records available to FPI for examination and copying, on reasonable notice, during normal business hours. BAE will also furnish copies of such records to FPI upon request. FPI will treat as confidential all and any information obtained by FPI or its representatives from BAE under this clause and will not disclose any such information to any third party except as required by law.

In the event that FPI's Subcontract is terminated for default after FPI materially fails to perform any of its obligations under the Subcontract which is capable of being cured and such failure continues for a period of 10 calendar days after FPI receives written notice of default, BAE shall pay FPI a fully earned, nonrefundable license fee of $16,500 for each of the Subcontract Vehicles that would have been produced by FPI under the Subcontract but manufactured by BAE under the ILAV Contract ("Additional License Fee"). The License Agreement Fee and any Additional License Fee shall be payable in respect of all ILAV Vehicles delivered by BAE under the ILAV Contract whether or not the Subcontract is in effect.

Effective Date & Duration

This License Agreement shall be effective as from the date of signing by both parties (and provided that the Subcontract has been signed by both parties) and shall remain in effect until the earliest of (i) completion of all the work under the ILAV Contract (contract W56HZV-06-DVB01) (ii) termination of this agreement by FPI in the event of default by BAE as provided hereunder, or (iii) termination of the Subcontract for convenience.

101

Representations & Warranties:

FPI shall use its best efforts to provide BAE with accurate TDP and Confidential Information relating to the ILAV Vehicles but makes no warranty regarding the accuracy of such TDP or Confidential Information or the ability of BAE to manufacture the ILAV Vehicles based on such information, and FPI shall have no liability to BAE with respect to the TDP or Confidential Information or the ILAV Vehicles or the use thereof.

FPI warrants to BAE (i) that FPI owns or has the right to use the IP, TDP and the Confidential Information and has paid or will pay any royalty or other fee as required for such ownership or right of use (ii) that FPI may grant this License Agreement to BAE and it may do so without the approval or consent of any third party, (iii) that the grant of such license to BAE does not violate any agreement binding upon or any obligation of FPI, and (iv) that none of the IP, TDP or the Confidential Information violates or infringes any patent, copyright, trademark, service mark or other right.

FPI will indemnify BAE against any liability and hold BAE harmless from and pay any loss, damage, cost and expense (including, without limitation, legal fees) which BAE incurs in connection with any breach of any of the warranties hereunder or any claim by a third party alleging facts that would constitute a breach of any of such warranties; provided, however, that this indemnity is limited solely to liability, loss, damage, cost and expense arising out of claims by third parties against the BAE, and FPI may, at its expense, defend any claim against BAE covered by the foregoing indemnity of FPI. If FPI elects to defend any such claim, FPI will not be liable to BAE for any cost or expense incurred by BAE after FPI notifies BAE of its election. In any event, FPI will not be liable for loss of profits or incidental or consequential damages.

BAE will promptly notify FPI of any claim against BAE covered by FPI's warranty hereunder with full details of the claim. BAE will cooperate in the defense of any such claim and will not settle the same without FPI's written consent unless BAE releases FPI from all of FPI's obligations under this section with respect to the claim.

EXCEPT AS PROVIDED HEREIN, THE LICENSE IS PROVIDED WITHOUT ANY WARRANTY OF ANY KIND, IN NO EVENT WILL FPI BE LIABLE FOR ANY DAMAGES, INCLUDING ANY LOST PROFITS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF THE IP, TDP AND/OR THE CONFIDENTIAL INFORMATION, OR ARISING OUT OF THE PRODUCTION OF THE ILAV VEHICLES, EVEN IF BAE HAS ADVISED FPI OF THE POSSIBILITY OF SUCH DAMAGES.

Protection of FPI's Information:

In connection with the performance of the ILAV Contract, BAE may directly or indirectly become aware of or obtain technical or commercial information and/or documents of a confidential nature relating to FPI's armored vehicles (including by way of illustration and not limitation the Buffalo, the Cougar and the MUV-R) FPI's business operations and/or its business relationships (collectively all such information and documents that are marked as confidential shall be referred to as "FPI's Company Information"). The parties agree to jointly mark any information that has already been provided if FPI indicates to BAE that such information is proprietary.

BAE shall protect and keep secret any and all Confidential Information and FPI's Company Information which it acquires, and shall not at any time whether during the currency of this License Agreement or after its expiration or termination without the prior written consent of FPI disclose, divulge, make known, or in any way communicate, to any person in any part of the world, or permit or allow any of its employees or agents to disclose, divulge, make known or in any way communicate to any person in any part of the world, the Confidential Information or FPI's Company Information, other than to BAE's own employees, suppliers, subcontractors or consultants who need to know or use such

102

information for the limited purpose of enabling BAE to exercise its rights or perform its obligations under this License Agreement.

The forgoing shall not apply in the event that the Confidential Information or FPI's Company Information (1) was in the public domain at the time of disclosure or thereafter enters the public domain through no breach of this or any other Agreement by BAE; (ii) was, at the time of receipt, otherwise known to BAE without restrictions as to use or disclosure; (iii) becomes known to BAE from a source other than FPI without breach of this or any other Agreement by BAE; (iv) is developed independently by BAE and without the reliance upon Confidential Information or FPI's Company Information disclosed hereunder, or (v) is disclosed with the written approval of FPI.

BAE acknowledges that the Confidential Information and FPI's Company Information is and will be disclosed to it on the express condition that it be used only for the limited and specific purpose of BAE exercising its rights and performing its obligations under this License Agreement and BAE will not otherwise use or attempt to use any of the Confidential Information or FPI's Company Information for its own advantage or gain directly or indirectly. BAE shall not use or attempt to use any of the Confidential Information or FPI's Company Information in any manner which may cause or be calculated to cause injury or loss (including injury or loss of or to, goodwill, customer confidence, commercial relationships or intellectual property rights) to FPI or any company related to FPI. BAE shall not copy the Confidential Information or FPI's Company Information or allow it to be copied in whole or in part except as required under this agreement, without the prior written consent of FPI.

BAE shall take or cause to be taken such reasonable precautions as may be necessary to maintain the secrecy and confidentiality of the Confidential Information and FPI's Company Information and to prevent its disclosure, including ensuring that each employee, sub-contractor or consultant of BAE who comes into possession of the Confidential Information or FPI's Company Information or any part of it enters into a confidentiality agreement in favor of FPI binding the employee, sub-contractor or consultant to keep the Confidential Information secret and confidential, in terms substantially the same as the provisions hereof.

Subject only to the provisions hereof, BAE will immediately upon demand, either deliver up to FPI or destroy (and certify to FPI the proper destruction of) all material (whether documents, microfilm, magnetic tape, cassette or disk, computer software, laser disk, or any other medium of storing or recording information) comprising or containing any of the Confidential Information and FPI's Company Information, including any and all copies in whole or in part thereof and any material on which BAE has itself recorded or stored in any form the Confidential Information or FPI's Company Information or any part of it.

Nothing herein will prevent the disclosure of information that is required to be disclosed in order to comply with any applicable law or legally binding order of any court, government, semi-government authority or administrative or judicial body, provided that BAE:

•

Informs FPI in writing, with as much advance notice as possible, of the proposed disclosure, giving full details of the circumstances of the proposed disclosure and of the relevant information to be disclosed;



•

Gives FPI a reasonable opportunity to challenge the proposed disclosure in a court of law or other appropriate body;



•

furnishes only that portion of the Confidential Information or FPI's Company Information which it is advised by written opinion of its legal counsel is legally required to be disclosed; and



•

exercises its best efforts to obtain reliable assurances that confidential treatment will be accorded to the Confidential Information.

103

The obligations hereunder relating to the treatment of the Confidential Information and FPI's Company Information shall survive the termination of this agreement for a period of three years.

Protection of BAE's Information:

In connection with the performance of the ILAV Contract, FPI may directly or indirectly become aware of or obtain technical or commercial information and/or documents of a confidential nature relating to BAE's armored vehicles (including by way of illustration and not limitation the Bradley, the M109 Self-Propelled Howitzer, the M88 Recovery Vehicle and the Amphibious Assault Vehicle). BAE's business operations and/or its business relationships (collectively all such information and documents that are marked as confidential shall be referred to as "BAE's Company Information").

FPI shall protect and keep secret any and all BAE's proprietary and/or confidential information and BAE's Company Information which it acquires, and shall not at any time whether during the currency of this License Agreement or after its expiration or termination without the prior written consent of BAE disclose, divulge, make known, or in any way communicate, to any person in any part of the world, or permit or allow any of its employees or agents to disclose, divulge, make known or in any way communicate to any person in any part of the world, the BAE's proprietary and/or confidential information or BAE's Company Information, other than to FPI's own employees, suppliers, subcontractors or consultants who need to know or use such information for the limited purpose of enabling FPI to exercise its rights or perform its obligations under this License Agreement.

The forgoing shall not apply in the event that the Confidential Information or BAE's Company Information (i) was in the public domain at the time of disclosure or thereafter enters the public domain through no breach of this or any other Agreement by FPI; (ii) was, at the time of receipt, otherwise known to FPI without restrictions as to use or disclosure; (iii) becomes known to FPI from a source other than BAE without breach of this or any other Agreement by FPI; (iv) is developed independently by FPI and without the reliance upon BAE's proprietary and/or confidential information or BAE's Company Information disclosed hereunder, or (v) is disclosed with the written approval of BAE.

FPI acknowledges that the BAE's proprietary and/or confidential information and BAE's Company Information is and will be disclosed to it on the express condition that it be used only for the limited and specific purpose of FPI exercising its rights and performing its obligations under this License Agreement and FPI will not otherwise use or attempt to use any of the BAE's proprietary and/or confidential information or BAE's Company Information for its own advantage or gain directly or indirectly. FPI shall not use or attempt to use any of the BAE's proprietary and/or confidential information or BAE's Company Information in any manner which may cause or be calculated to cause injury or loss (including injury or loss of or to, goodwill, customer confidence, commercial relationships or intellectual property rights) to BAE or any company related to BAE. FPI shall not copy the BAE's proprietary and/or confidential information or BAE's Company Information or allow it to be copied in whole or in part except as required under this agreement, without the prior written consent of BAE.

FPI shall take or cause to be taken such reasonable precautions as may be necessary to maintain the secrecy and confidentiality of the BAE's proprietary and/or confidential information and BAE's Company Information and to prevent its disclosure, including ensuring that each employee, sub-contractor or consultant of FPI who comes into possession of the BAE's proprietary and/or confidential information or BAE's Company Information or any part of it enters into a confidentiality agreement in favor of BAE binding the employee, sub-contractor or consultant to keep the BAE's proprietary and/or confidential information secret and confidential, in terms substantially the same as the provisions hereof.

Subject only to the provisions hereof, FPI will immediately upon demand, either deliver up to BAE or destroy (and certify to BAE the proper destruction of) all material (whether documents, microfilm,

104

magnetic tape, cassette or disk, computer software, laser disk, or any other medium of storing or recording information) comprising or containing any of the BAE's proprietary and/or confidential information and BAE's Company Information, including any and all copies in whole or in part thereof and any material on which FPI has itself recorded or stored in any form the BAE's proprietary and/or confidential information or BAE's Company Information or any part of it.

Nothing herein will prevent the disclosure of information that is required to be disclosed in order to comply with any applicable law or legally binding order of any court, government, semi-government authority or administrative or judicial body, provided that FPI:

•

Informs BAE in writing, with as much advance notice as possible, of the proposed disclosure, giving full details of the circumstances of the proposed disclosure and of the relevant information to be disclosed;



•

Gives BAE a reasonable opportunity to challenge the proposed disclosure in a court of law or other appropriate body;



•

Furnishes only that portion of the BAE's proprietary and/or confidential information or BAE's Company Information which it is advised by written opinion of its legal counsel is legally required to be disclosed; and



•

Exercises its best efforts to obtain reliable assurances that confidential treatment will be accorded to the BAE's proprietary and/or confidential information.

The obligations hereunder relating to the treatment of the BAE's proprietary and/or confidential information and BAE's Company Information shall survive the termination of this agreement for a period of three years.

Infringements & Exclusions:

Each party shall notify the other immediately of any actual, suspected or anticipated infringement of the IP or any misuse of the Confidential Information of which it becomes aware. The notification shall contain suggestions as to the damage or potential damage which either or both parties are then suffering or are likely to suffer from such an infringement or misuse.

FPI may in its absolute discretion determine whether or not to take legal or other action against any third party for an actual or threatened or suspected infringement of the IP or any misuse of the Confidential Information, and if FPI elects to take legal or other action FPI:

•

shall bear all costs of the action;



•

shall have sole control over the form and conduct of such action;



•

may settle, compromise or discontinue the action as it thinks fit;



•

shall be entitled to any award of costs and/or damages made in relation to such action; and



•

shall indemnify BAE against any costs or damages for which BAE may become liable as a result of the proceedings provided that BAE has not authorized or contributed to the acts giving rise to the liability.

BAE will give FPI all authority, information and assistance requested by FPI to assist it to initiate, litigate, settle or compromise any proceedings by FPI in respect of any such infringement or misuse.

Default by BAE:

If BAE breaches any of the restrictions on use of the License Agreement or the obligations relating to the protection of IP, TDP, Improvements, Confidential Information or FPI's Company Information, or

105

if BAE fails to pay when due any amount owing under this License Agreement and such failure continues for a period of ten (10) calendar days, or if BAE fails to perform any of its other obligations under this License Agreement or materially fails to perform any of its obligations under the Subcontract which is capable of being cured and such failure continues for a period of ten (10) calendar days after BAE receives written notice of the default, FPI may terminate this License Agreement upon written notice to BAE of the termination. FPI's rights under this Section are in addition to, and are not a limitation on or in substitution for, any other rights which FPI has by reason of any default, including, without limitation, any claim for damages.

Post Termination-Expiration:

Expiration or termination of this License Agreement shall not relieve BAE of any obligation to pay to FPI any license fees or other amount that had accrued prior to such expiration or termination, and shall not relieve FPI from the obligation to protect BAE's Company Information or BAE's obligation to protect IP, TOP, Confidential Information, Improvements and FPI's Company Information as provided herein.

On the termination of this License Agreement for any reason, BAE shall:

•

immediately cease to use any of the IP, TDP, Improvements Confidential Information and/or FPI Company Information;



•

immediately stop manufacturing the ILAV Vehicles;



•

immediately deliver to FPI an inventory listing all ILAV Vehicles manufactured pursuant to the terms of this License Agreement by BAE but as yet undelivered; and



•

immediately deliver to FPI all material (whether drawings, prototypes, or any other medium of storing or recording or embodying information) comprising or containing any of the IP, TDP, Improvements, Confidential Information and FPI Company Information, including any and all copies in whole or in part thereof and any material on which BAE has recorded or stored in any form the Confidential Information or any part of it.

Restriction on Disclosure:

BAE acknowledges that the ILAV Vehicle is a defense article subject to applicable Federal export and import regulations, including but not limited to, the U.S. Arms Export Control Act, as amended (22 U.S.C. §§ 2751-2799), the International Traffic in Arms Regulations, as amended (22 C.F.R. Part 120 et seq.), the Export Administration Act, as amended, (50 U.S.C. §§ 24012420), the U.S. Export Administration Regulations, as amended (15 C.F.R. § 730 et seq.) and the requirements of the National Industrial Security Program Operating Manual ("NISPOM"). BAE (and its subcontractors, vendors and suppliers) shall not export, disclose, furnish or otherwise provide any technical information or services relating to the ILAV to any foreign person or entity, whether within the U.S. or abroad, without obtaining in advance FPI's prior approval and (if required) appropriate U.S. Government export authorization.

Miscellaneous:

Notices.    All communications and notices under or in connection with this License Agreement shall be in writing and shall be mailed by certified mail, return receipt requested, postage prepaid, or personally delivered or telefaxed. All such communications shall be mailed or delivered to the appropriate address or telefax number set forth on the signature page hereof. Any notice so mailed shall be deemed to be given two (2) business days after when so mailed, and any notice so delivered shall be deemed to be given when receipted for by, or actually received by, an authorized officer of BAE or FPI, as the case may be.

106

Other License Agreements.    This License Agreement replaces and supersedes all prior agreements and understandings between the parties in respect of the subject matter set forth herein, including the interim letter of authority issued by FPI to BAE dated June 21, 2006. This License Agreement is intended to enable BAE to perform the work required under the ILAV Contract and is executed in conjunction with and as a condition precedent to the Subcontract. In the event of any conflict between this License Agreement and the Subcontract, this License Agreement shall prevail.

Assignment.    Either party may transfer and assign its rights and obligations under this License Agreement to any entity which succeeds to its business and assets by acquisition, merger or consolidation or which purchases the business and all or substantially all of the assets of the transferor. Except as so provided, neither party may transfer or assign any of its rights and obligations under this License Agreement without the written consent of the other party.

Indemnity.    BAE agrees to indemnify FPI and its officers, directors, employees, representatives, assigns, successors and affiliates (each an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all, claims, damages, liabilities and related costs and expenses to third parties asserting or alleging personal injury arising from the operation or use of the ILAV Vehicles licensed hereunder, including reasonable attorneys' fees, incurred by or asserted against any Indemnitee.

GOVERNING LAW AND FORUM; WAIVER OF JURY TRIAL.    THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND GOVERNED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD FOR ANY PROVISIONS THEREOF RELATING TO CONFLICT OF LAWS. THE PARTIES HERETO HEREBY IRREVOCABLY (A) SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS; (B) AGREE THAT ALL CLAIMS IN RESPECT OF SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT; AND (C) WAIVE ANY OBJECTION ANY OF THEM MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL PROCEEDING BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER SECURITY INSTRUMENT SHALL BE BROUGHT ONLY IN A FEDERAL OR STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY AND STATE OF NEW YORK. EACH OF BAE AND FPI WAIVES THE RIGHT TO A JURY TRIAL WITH RESPECT TO ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. BAE ACKNOWLEDGES AND AGREES THAT ANY BREACH OF THIS LICENSE AGREEMENT COULD CAUSE IRREPARABLE DAMAGE OR LOSS TO FPI FOR WHICH MONTEARY DAMAGES WOULD BE INSUFFICIENT, THUS BAE AGREES THAT IN ADDITION TO ANY OTHER REMEDIES AVAILABLE HEREUNDER, FPI SHALL HAVE THE RIGHT TO INJUNCTIVE RELIEF, IN THE EVENT OF ANY ACTUAL OR THREATENED BREACH HEREOF.

Invalidity.    If one or more of the provisions of this License Agreement shall be held invalid, illegal, or unenforceable, such holding shall not affect any other provision of this document.

Survival of License Agreement.    All representations, warranties, covenants, and agreements contained herein shall bind BAE and its successors and assigns, and shall inure to the benefit of FPI and its successors and assigns.

Waivers.    Rights and remedies of FPI hereunder are cumulative, and the exercise or partial exercise of any right or remedy shall not preclude the exercise of any other right or remedy. No failure to exercise and no delay in exercising any power or right under this License Agreement shall operate as a waiver thereof.

107

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the date first above written, The parties agree that this License Agreement may be signed in counter-part copies and that facsimile copies of such counterparts shall be binding upon the parties to the same extent as the originals.

FORCE PROTECTION INDUSTRIES, INC.
By:	/s/ RAYMOND POLLARD
Name	Raymond Pollard
Title	Chief Operating Officer
Date:	8 Aug 2006
BAE SYSTEMS LAND & ARMAMENTS L.P. Ground Systems Division
By:	/s/ S. RAJOGOPAL
Name	S. Rajogopal
Title	V.P. and General Manager
Date:	24 July, 2006

108

SUBCONTRACT ATTACHMENT 10.11

Logistic Support Agreement

This Agreement ("Agreement") dated as of the 13 day of June , 2006, between Force Protection Industries, Inc, ("FPI"), and _BAE Systems Land & Armaments, L.P. acting through its Ground Systems Division ("GSD")

WHEREAS, GSD has entered into contract with the Government for Iraqi Light Armoured Vehicles ("ILAV") identified as W56HZV-06-D-VB01 ("Prime Contract"); and

WHEREAS, GSD has entered into a subcontract with FPI for services, including the furnishing of all Contractor logistic support under the Prime Contract ("Subcontract"); and

WHEREAS, the parties desire to further define their relationship for the provision of contractor logistic support under the Subcontract and for future contractor logistic support for the ILAV's since FPI is the owner of the ILAV design and is experienced in providing these services.

NOW, THEREFORE, in accordance with the premises and mutual covenants contained herein, the parties agree as follows:

1.    Definition

(a)

Contractor logistics support shall mean vehicle maintenance to cover routine and non routine maintenance through depot level support; train the trainee "operator/driver and maintenance training to an intermediate" or direct support level; provision of spare and repair parts; and manuals ("CLS").



(b)

Future contracts shall mean any arrangement that GSD or its affiliates enters into during the five (5) year period immediately after Prime Contract completion for the provision of any CLS for the ILAV (Future Contracts)

2.    Obligation of the Parties

(a)

GSD shall award to FPI under the subcontract all CLS orders it receives under the Prime Contract for the current ILAV's and any ILAVS ordered under any options. GSD shall provide FPI with all information on, and access to, the BAE vehicles at its facility or the facilities of others to enable FPI to complete its CLS work under the Subcontract.



(b)

GSD shall forward to FPI any requests it receives for Future Contracts for CLS, in order for FPI to act as the prime if allowed by the potential customer. In the event that the potential customer does not allow FPI to be the prime by virtue of GSD's role as prime contractor under Contract W56HZV-06-D-VB01, then the parties shall proceed as provided herein and GSD shall award the CLS to FPI under a new contract, which terms will be consistent the any orders it receives for CLS under any Future Contracts and the Subcontract at prices mutually agreed to by the parties.

3.    Proposal and Marketing Activity

During the term of this Agreement, the parties will work together to jointly prepare proposals for Future Contracts whenever the customer does not allow FPI to be the prime by virtue of GSD's role as the prime contractor under Contract W56HZV-06-D-VB01, per paragraph 2(b), above, and will cooperate as required in marketing efforts during and after submission of said proposals. All proposals will be prepared in the English language and, whenever necessary, translated into a foreign language by GSD before being submitted to potential customers. GSD shall keep FPI informed of all of its marketing activities regarding any proposal submitted or intended to be submitted.

109

Subject to prior mutual consent, which consent shall not be unreasonably withheld, the parties may make public to customers and other third parties the nature of their relationship under this Agreement.

4.    Termination

Except for the obligations of Section 6, 8, 9 and 10 of this Agreement, which shall survive the expiration or early termination hereof, this Agreement will terminate five (5) years after the completion of the Prime Contract.

5.    Expenses

Except for compensation which may be paid to the parties by customers pursuant to the Prime Contract, Subcontract or any Future Contract, each party shall bear all of its own expenses incurred in connection with this Agreement.

6.    Negation of the Formation of a Business Organization

This Agreement shall not constitute, create, or in any way be interpreted to create a joint venture, partnership, or formal business organization of any kind between the parties.

7.    Assignment

Neither party may assign nor transfer its interest herein without the prior consent of the other party, provided, however, that either party may assign this agreement without the consent of the other party to any successor by way of merger, consolidation or the acquisition of substantially all of its business assets.

8.    Disclosure and Protection of Information

The parties shall comply with the confidentiality provisions of the subcontract.

9.    Export Controls

Whensoever, under paragraph 2(b), GSD is the prime contractor for CLS, GSD shall be responsible for securing all export licenses and other authoritizations required in order for FPI to perform it obligations under the subcontract.

10.    Special U.S. Law

The parties agree to comply fully with the U.S. Foreign Corrupt Practices Act and warrant that they are, and will remain, in full compliance with all applicable laws and regulations of any and all countries related to the performance of services for the project hereunder. Furthermore, the parties warrant, covenant and agree that, in the performance of this Agreement and in connection with the sale of products and services covered by this Agreement the parties have not and will not in the future, directly or indirectly, offer, pay, promise to pay or authorize the payment of any money or offer, give, promise to give, or authorize the giving of anything of value to:

any government official or any political party or official thereof, or any candidate for political office; or

any other person while knowing or having reason to know that all or a portion of such money or thing of value will be offered, given or promised directly or indirectly, to any such official, to any such political party or, official thereof, or to any candidate for political office;

for the purpose of:

influencing any action or decision of such official, party or official thereof, or candidate in his or its official capacity, including a decision to fail to perform his or its official functions, or inducing such official, party or official thereof, or candidate to use his or its influence with any government or instrumentality thereof to effect or influence any act or decision of such government or instrumentality, in order to assist the parties in obtaining or retaining business for or with or directing business to any person.

110

11.    Agreement

This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, and may not be modified, altered or amended, nor may any provision hereof or right hereunder be waived, except by an instrument in writing signed by the party against which such modification, alteration, amendment or waiver is sought to be enforced. This Agreement shall be governed by, and construed in accordance with, the laws of New York. All notices, demands and other communications hereunder shall be in writing in the English language and delivered to the parties at their respective principal executive offices.

12.    Disputes—The parties shall follow the disputes provisions of the Subcontract.    

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

Force Protection Industries, Inc.
By:	/s/ RAYMOND POLLARD
Date:	8 Aug 2006
BAE Systems Land & Armament L.P. Ground Systems Division
By:	/s/ KENNETH METTLER
Date:	07/13/2006

111

SUBCONTRACT ATTACHEMENT 10.12
CERTIFICATE OF COMPLETION
ILAV

                                    does hereby certify that the following performance measurements for Subcontract (SCLIN) have been successfully completed:

Milestone	Description	Total
#	has reached $in material commitments, as such will submit the following billings per the contract schedule for CLIN #

	Billing #	Completion Date	Milestone Billing	Final 10% Liquidation
#	will also submit the following billings per contract schedule for CLIN #
	Billing #	Completion Date	Milestone Billing	Final 10% Liquidation
	Total Value of Completed Milestones this month
	Signature of Authorized Representative

112

MINIMUM GUARANTEED QUANTITY—CLIN 0011AB
Iraq ILAV W56HZV-06-R-V001
Attachment 10.13

EVENT CATEGORIES		PER INVOICE		% TOTAL		PER INVOICE		% TOTAL		PER INVOICE		% TOTAL		PER INVOICE		% TOTAL		PER INVOICE		% TOTAL		PER INVOICE		% Tracks		Total order for 756 FPI Build 378
					8				1				8				48				39				75		179
																									Fab & Inter.
TOTAL COST OF VEHICLE				$	158,495			$	30,459			$	302,496			$	202,556			$	237, 541			$	77,992
[Illegible]		$	47,548.50	$	380,388.00
																										$	380,388
				$	—			$	—			$	—			$	—			$	—			$	—	$	—
																										$	11,109,767
[Illegible]		$	47,438.50	$	380,388.00	$	10,051.47	$	10,051.47	$	66,823.68	$	534,589.44	$	66,843.48	$	3,308,487.04	$	78,388.53	$	3,057,152.67	$	52,254.64	$	3,919,098.00
[Illegible]		$	47,438.50	$	380,388.00	$	10,051.47	$	10,051.47	$	66,823.68	$	534,589.44	$	66,843.48	$	3,308,487.04	$	78,388.53	$	3,057,152.67					$	7,190,669
[Illegible]		$	15,849.50	$	136,796.00	$	10,356.06	$	10,356.06	$	68,848.64	$	550,789.12	$	68,869.04	$	3,305,713.92	$	80,763.94	$	3,149,793.66	$	25,737.36	$	1,930,302.00	$	9,073,751
	SUBTOTAL	$	158,495	$	1,267,960	$	30,459	$	30,459	$	202,496	$	1,619,968	$	202,556	$	9,722,688	$	237,541	$	9,364,999	$	77,992	$	5,849,400	$	27,754,574
				$	1,267,960			$	30,459			$	1,619,968			$	9,722,688			$	9,364,999			$	5,849,480	$	27,754,574
																											0	%

113

SUBCONTRACT ATTACHMENT 10.14

Logistic Support Payment Plan                             Attachment: 10.14
Date: 24 July 2006

Maintenance , Support and Test Maintenance and Support
Jul-06	$	2,622,120
Aug-06	$	1,059,118
Sep-06	$	427,455
Oct-06	$	427,455
Nov-06	$	427,455
Dec-06	$	522,774
Jan-07	$	1,850,325
Feb-07	$	522,774
Mar-07	$	819,320
Apr-07	$	819,320
May-07	$	819,320
Jun-07	$	1,031,139
Jul-07	$	720,185
Aug-07	$	2,609,382
Sep-07	$	720,185
Oct-07	$	720,185
Nov-07	$	720,185
Dec-07	$	720,185
Jan-08	$	2,165,027
Feb-08	$	409,230
Mar-08	$	345,684
Apr-08	$	345,684
May-08	$	345,684
Jun-08	$	451,594
Jul-08	$	451,594
Aug-08	$	190,637
M/S Total	$	22,264,017
Test Support
Aug-06	$	68,692
Oct-06	$	68,692
Nov-06	$	68,692
Test Total	$	206,076
TOTAL SUPPORT EFFORT	$	22,470,093

114

SUBCONTRACT ATTACHMENT 10.15

CONTRACTOR LOGISTICS SUPPORT EQUIPMENT LIST
Date: 02 August 2006

NOMENCLATURE	MINIMUM QUANTITY
Combat Helmet (Level IIIA)		70
RHINO Spec Ops Ballistic Vest—Silver Level IIIA		70
Desk		20
Table, Folding		20
Chair, Office		20
Metal Folding Chair		4  pack 15
Easel, Presentation		10
File Cabinet		25
Safe, Office		1
Whiteboard		12
Fan, Industrial Floor		15
Projector, Light Pro or Similar		3
Workstation, Computer		20
Printer, Laser		5
Satellite Phone, Iridium		3
Satellite Set w/VOIP/Internet Capability		1
Photocopier		1
Computer, Laptop		5
Computer, Toughbook		10
Vehicle, Pickup, 3/4 Ton		1
Vehicle, Pickup, Lightweight		2
Vehicle, Van		2
Tool Kit, Mechanic		25
Shop Set, Cougar Maintenance		3
Shop Set, Supplemental		2
Coats 5000 Tire Changer		1
Storage Racks		1
Parts Bins		1
Forklift, Gasoline or Diesel		1
Pallet Jacks		5
Hoist, Electric 15 Tom 105S-15		2
Lift, A-Frame 15T18-20		2

115

QuickLinks

Exhibit 10.18

BAE SYSTEMS LAND & ARMAMENTS L.P., GROUND SYSTEMS DIVISION MODIFICATION NO: 01 SUBCONTRACT NO: SCT004135 SECTION 3—DESCRIPTION / SPECIFICATIONS / STATEMENT OF WORK 03 AUGUST 2006
BAE SYSTEMS LAND & ARMAMENTS LP, GROUND SYSTEMS DIVISION MODIFICATION NO: 01—SUBCONTRACT NO: SCT004135 SECTION 9—SUBCONTRACT CLAUSES 03 AUGUST 2006
SUBCONTRACT ATTACHMENT 10.2 FPII DESCRIPTION/SPECIFICATIONS/WORK STATEMENT Doc# ILV00033 Revision 001
TABLE OF CONTENTS
SUBCONTRACT ATTACHMENT 10.2 FPII DESCRIPTION/SPECIFICATIONS/WORK STATEMENT Doc# ILV00033 Revision 001
END OF NARRATIVE C 001
SUBCONTRACT ATTACHMENT 10.3 FPI SDRL Requirements
TABLE 1 CLASSIFICATION OF INSPECTION AND TESTS
SUBCONTRACT ATTACHEMENT 10.12 CERTIFICATE OF COMPLETION ILAV

EX-10.40

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Exhibit 10.40

May 24, 2007

Denise Speaks
1240 Pennsylvania Ave.
Pittsburgh, PA 15233

Dear Denise,

        The aim of this letter is to communicate to you our terms of employment for the position of Co-General Counsel with Force Protection Industries, Inc. which is located in Ladson, South Carolina.

        Your job title will be Co-General Counsel and your position is classified salaried exempt under the regulations and in compliance with the Fair Labor Standards Act (FLSA) as amended in August of 2004. You will report directly to Gordon McGilton. You are expected to begin work no later than June 18, 2007 and your bi-weekly pay will be $9615.38 (subject to withholding).

        Our offer and your start date are predicated upon the results of a post-offer substance abuse screening test, background investigation, and the presentation of proper documents verifying your authorization to work in the United States. Your position may require you to receive a U.S. Defense Service security clearance if required by the Company in connection with your duties.

        A fully taxable relocation benefit allowance of $30,000.00 will be paid to you within 7 working days after your start date providing we receive your signed accepted offer letter and signed relocation reimbursement acceptance form. It may be used at your discretion to assist in your relocation efforts. However the benefit must be repaid according to the relocation reimbursement agreement if you voluntarily leave the company within one (1) year of your start date. You will be eligible to participate in our benefit program, which includes health, dental, vision, and life insurance, paid-time off, paid holidays, as well as our 401K retirement income plan. Eligibility for our benefit programs will begin on the first day of employment. You will be eligible for 84 hours of paid time off for the remainder of 2007.

        We are extremely pleased to extend this offer to you and look forward to your contribution to our Company. If the foregoing is acceptable to you, I would ask that you kindly sign below and return a copy of this letter to me. By signing this letter, you confirm (i) there is no agreement between you and any third party (including any current or prior employer) that would restrict your ability to be employed by Force Protection Industries, Inc., (ii) that you will abide by the terms of any third party confidentiality agreement to which you may be subject, (iii) that you will comply with the processes comprising the Company's Business Operating System, (iv) that your work for the Company is "work for hire" and the Company will own all rights in and to any inventions, ideas or other works of authorship you develop as part of your job, and (v) that you will execute such additional documents as the Company may require from time to time as part of its standard practices relating to all employees (including for example our Non-Disclosure Agreement).

        Please note, South Carolina is an "Employment-at-Will" state, and the agreement between us is intended to be "at-will," notwithstanding any statements by any person to the contrary. This means that both you and the Company have the right to terminate the relationship between us at any time, for any reason and without payment of any termination damages or severance pay of any kind. Please contact the Company if you have any questions about the meaning of "employment at will," otherwise we will conclude that you understand and accept that this principle is binding on you.

        This letter when signed by both parties will constitute the terms between us, and supersedes any prior communications or other agreement you may have or may have had with the Company prior to the date hereof. The terms of this offer letter will expire at the close of business 48 hours after this letter has been presented to you.

Sincerely,
/s/ GORDON MCGILTON
Gordon McGilton Chief Executive Officer Force Protection Industries, Inc. Tel (843) 740-7015 Fax (843) 266-0848 gordon.mcgilton@forceprotection.net
I agree to the foregoing terms:		I decline the foregoing terms:
/s/ DENISE SPEAKS
Name:	Denise Speaks	Name:	Denise Speaks
Date:	5/25/07	Date:

Cc: EC

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Exhibit 10.40

EX-10.52

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Exhibit 10.52

SUBCONTRACT AGREEMENT

SUBCONTRACTOR:	SUBCONTRACT NUMBER: MRAP- GDLS-5031
General Dynamics Land Systems, Inc.
ADDRESS: 38500 Mound Road	CONTRACT TYPE: FFP
Sterling Heights, MI 48310-3200

INTRODUCTION

        This Firm Fixed Price (FFP) Subcontract Agreement, effective as of September 6, 2007 is made between Force Protection Industries, Inc. (hereinafter known as FPII), and General Dynamics Land Systems, Inc. (hereinafter known as the "Subcontractor"). The effort to be performed by the Subcontractor under this Agreement will be in support of FPII's Prime Contract Number (Prime # M67854-07-D-5031), with the U.S. Government. The Subcontract Agreement shall cover goods and/or services including, delivery of vehicles and services called up under individual delivery orders and in addition but not limited to Contract Administration and Revenue Management as defined in Attachment #1, Statement of Work.

        The Subcontract Agreement consists of the signature page and the following sections:

Section A:	Definitions
Section B:	Supplies or Services and Prices
Section C:	Description/Specifications/Work Statement
Section D:	Deliveries or Performance
Section E:	Subcontract Administration Data
Section F:	Special Provisions
Section G:	General Provisions
Attachment 1:	Statement of Work
Attachment 2:	Confidentiality/Proprietary Data Agreement

        Each Party acknowledges having read this entire Subcontract Agreement and with the full power and authority to execute this subcontract, agrees to perform in accordance with the terms and conditions contained herein.

Force Protection Industries, Inc.		Subcontractor: General Dynamics Land Systems, Inc.
Name:	Otis Byrd	Name:	Jeremy Pohlman
Signature:	/s/ OTIS BYRD	Signature:	/s/ JEREMY POHLMAN
Title:	Director of Contracts	Title:	Sr. Contract Representative
Date:	September 10, 2007	Date:	September 10, 2007

SECTION A—DEFINITIONS

        The term "Prime Contract" means the government Prime Contract between FPI and the United States of America (herein called the "Government").

        For the purposes of the "Changes" provision hereof the term "specifications" shall include the Statement of Work.

        The terms "Subcontract", "Agreement" or "subcontract" are interchangeable and mean "Subcontract Agreement".

SECTION B—SUPPLIES OR SERVICES AND PRICES/COSTS

B.1. SCOPE OF SUBCONTRACT

        FPII will issue and GDLS will accept Purchase Orders for GDLS' Workshare in accordance with Workshare Agreement(s) issued by the Force Dynamics Board of Directors in support of Prime Contract M67854-07-D-5031. In addition, Subcontractor will provide services as outlined in Attachment 1, Statement of Work. Other products and or services will be issued in accordance with clause H.1.

B.2. LETTER AGREEMENTS

        This Subcontract Agreement incorporates by reference the following Letter Agreements regarding Subcontractor's Workshare in support of the Prime Contract:

M678540-7-D-5031 DO 0001	Reference FPII Letter FP07-033 dated February 5, 2007
M678540-7-D-5031 DO 0002	Reference FPII Letter FP07-220 dated July 12, 2007
M678540-7-D-5031 DO 0003	Reference FPII Letters FP07-145 and FP07-293 dated May 10, 2007 and August 29, 2007 respectively
M678540-7-D-5031 DO 0004	Reference FPII Letters FP07-213 and FP07-294 dated June 9, 2007 and August 29, 2007 respectively
M678540-7-D-5031 DO 0005	Reference FPII Letter FP07-275 dated August 20, 2007

SECTION C—DESCRIPTIONS/SPECIFICATIONS/WORK STATEMENT

C.1. Description

        The Subcontractor, as an independent contractor, and not as an agent, servant or employee of FPII having special knowledge and techniques possessed by and available to the Subcontractor, shall furnish all management personnel, materials, equipment and data to provide the products and services outlined in clause B.1 in accordance with the provisions of this subcontract.

SECTION D—PRESERVATION PACKAGING AND PACKING AND SHIPPING INFORMATION

D.1. Packaging and Marking Instructions

        Packaging and marking shall be in accordance with standard commercial practice for domestic shipment, as set forth in the Uniform Freight Classification for commercial practice, or as stated in Purchase Orders issued pursuant to this Subcontract Agreement to assure arrival at destination in serviceable condition.

        The Subcontractor shall comply with FPII's part numbering, labeling, and special packing requirements for all goods delivered under individual Purchase Orders. Exterior of the containers(s) shall bear the Subcontractor's name and address (as consignor), Purchase Order number, FPII designated part number, and FPII's name and address (as consignee).

D.2. Delivery of Product

        The Subcontractor shall deliver the goods and perform the services at the location specified by FPII and according to the delivery schedule made a part of the Purchase Order. Unless otherwise specified in the Purchase Order the goods are sold FOB destination.

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SECTION E—INSPECTION AND ACCEPTANCE

        This Subcontract Agreement incorporates the following clauses by reference, either in the text or as provided in the attachments, with the same force and effect as if they were given in full text.

FAR 52.246-2	Inspection of Supplies-Fixed Price (Aug 1996)
FAR 52.246-4	Inspection of Services- Fixed Price (Aug 1996)

        In the event Government source inspection is required by any Purchase Order issued under this Subcontract Agreement the following clause is applicable:

        Government Source Inspection is required prior to shipment of the product from your facility. Upon receipt of the Purchase Order, promptly notify and furnish a copy to the Government Representative who normally services your plant, or if none, to the nearest defense Contract management Agency office. In the event the Representative or Office can not be located, FPII's Contract representative should be notified immediately.

E.1. Responsibility for Inspection

        Unless otherwise specified in the Purchase Order, the Subcontractor is responsible for the performance of all inspection requirements specified herein. The Subcontractor may use his own or any other facility suitable for the performance of the inspection requirements, unless disapproved by FPII. FPII reserves the right to perform or witness any of the inspections or tests identified in the Purchase Order, Statement of Work or specification.

E.2. Responsibility for Compliance

        The Subcontractor shall provide and maintain an effective inspection and quality assurance system for the goods or services delivered under this Subcontract Agreement in accordance with ISO 9000-2000 or equivalent Quality System.

E.3. FPII Verification

        All quality assurance operations performed by the Subcontractor may be subject to FPII verification at scheduled intervals. Verifications shall consist of (a) surveillance of the operation to determine that practices, methods, and procedures of the Subcontractor's written quality assurance system plan are being properly applied, (ISO 9000-2000) or equivalent and (b) FPII product inspection to measure the quality of the product offered to FPII for acceptance. Deviation from the prescribed or agreed upon procedures or instances of poor practices which might have adverse effect on the product shall immediately be called to the attention of the Subcontractor.

E.4. Inspection Equipment

        Unless otherwise specified in the Purchase Order, the Subcontractor is responsible for the provision and maintenance of all inspection equipment necessary to assure that the product offered for FPII acceptance conforms to the Purchase Order requirements. If no other calibration specification or requirement is identified in the Purchase Order, then the inspection equipment shall be calibrated per the suggested manufacturer's guidelines.

E.5. Material Certification

        The Subcontractor shall provide all required material certification applicable to the goods provided hereunder. Lack of such certification shall be deemed to be a substantial nonconformity permitting FPII to reject the goods.

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E.6. Reserved

E.7. Inspection

        FPII and its customer may inspect and test material, work in process and supplies at all times and places, during manufacture and otherwise. FPII inspection may, in its sole discretion, include physical, visual and/or mechanical review, as well as any documentation necessary to substantiate the meeting of quality requirements or specific requirements set forth in the Subcontract Agreement or applicable purchase order. If inspection and test are made on Subcontractor's premises, Subcontractor, without additional charge, shall provide reasonable facilities and assistance for the safety and convenience of the inspectors in performing their duties. Inspections and test by FPII shall be performed in such manner as not to delay the work unduly.

        The inspection, review or approval by FPII of any work, or of any drawing, design, or other document, will not be deemed to relieve Subcontractor of any of its obligations under any purchase order, or to constitute a waiver of any defects or nonconformities. The acceptance by FPII of any goods or services under any purchase order will not be deemed to limit or affect any warranty or right of indemnity granted by Subcontractor under such purchase order, these terms and conditions or otherwise.

        Except as otherwise agreed in writing, all shipments and supplies furnished under this Subcontract Agreement shall be subject to final inspection and acceptance by the United States Government (USG) as set forth in the Purchase Order notwithstanding any previous source inspection or acceptance, or any prior payment by FPII, or any prior inspection of any type.

E.8. Responsibility For Supplies

        Except as specifically otherwise provided in this Subcontract Agreement, Subcontractor shall be responsible for supplies meeting the requirements of this Subcontract Agreement until final inspection and acceptance thereof by the USG, and shall bear all risks as to rejected supplies or supplies requiring correction after notice of rejection notwithstanding any prior acceptance.

E.9. Acceptance

        Final inspection and acceptance of the Subcontractor's product shall be conducted by the USG as specified in the Purchase Order. The USG at its option, may reject or require prompt correction (in place or elsewhere), of any supplies or services which are, defective in material or workmanship or otherwise fail to meet the drawings, designs, statement of work, specifications or other technical documents, or other requirements of this Subcontract. If Subcontractor fails promptly to remove such supplies and to proceed promptly to replace or correct them, FPII may replace or correct such supplies at the expense of Subcontractor including any excess cost. Subcontractor shall not again tender rejected or corrected supplies unless Subcontractor discloses the former tender and rejection or requirement of correction.

SECTION F—PERFORMANCE

        This Subcontract Agreement incorporates the following clause by reference:

FAR 52-242-17	Government Delay of Work (APR 1984)
FAR 52-246-16	Responsibility for Services (APR 1984)

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F.1. Period of Performance

        All work under this Subcontract is to be performed in accordance with the requirements of subcontract or modifications issued pursuant to this Subcontract Agreement. The term of this Subcontract Agreement shall be from the effective date of this Subcontract Agreement through the completion of Prime Contract M67854-07-D-5031.

F.2. Place of Performance

        The principal places of performance of this Subcontract are: Lima, Ohio; Sterling Heights Michigan; Shellby, Michigan; and Anniston, Alabama.

SECTION G—SUBCONTRACT ADMINISTRATION DATA

G.1. Technical and Contractual Representatives

        The following authorized representatives are hereby designated for this Subcontract:

        Contractor:

Technical: Kelly Campbell, 843-740 -7015 ext. 313; Kelly.Campbell@ forceprotection.net
Contractual: Otis Byrd, 843-740-7015 ext. 283; otis.byrd@forceprotection.net

        Subcontractor:

Technical: Don Kotchman, 586-825-7901 kotchman@gdls.com
Contractual: Jeremy Pohlman, 586-825-5852 pohlmanj@gdls.com

G.2. Contacts

        Correspondence with FPII or Subcontractor which affects the Subcontract ceilings, labor rates, schedule, statement of work or other subcontract terms and conditions shall be made with the authorized contractual representative. No changes to this Subcontract will be binding upon FPII or the subcontractor unless incorporated in a written modification to the Subcontract and signed by FPII's and Subcontractor's contractual representative.

        All effort authorized shall be performed under the direction of FPII's authorized representative. When, in Subcontractor's opinion, such direction constitutes a change to the Subcontract Agreement, FPII's contractual representative shall be notified immediately for authorization of such change. Until FPII's contractual representative grants such authorization, Subcontractor shall perform in accordance with the Subcontract Agreement, as written.

        FPII's authorized representative is responsible for day-to-day clarifications and guidance, as may be required within the scope of the Subcontract Agreement. All written communications, however, shall be transmitted through FPII's and the Subcontractor's designated Contract Representatives.

        All commitments hereunder (subsequent to execution of this Subcontract) shall be made through the respective parties' Contract Representatives. No verbal or written request, notice, authorization, direction or order received by the Subcontractor shall be binding upon either Party, or serve as the basis for a change in the Subcontract value or any other provision of this Subcontract, unless issued and receipt is confirmed by both parties' Contract Representatives.

        Subcontractor shall immediately notify FPII's Contract Representative whenever a verbal or written change notification has been received from FPII which would affect any of the terms, conditions, cost, schedules, and/or any other provision in this Subcontract. The Subcontractor is not authorized to perform work pursuant to change or modification unless both parties' Contract Representatives executes a modification to the subcontract.

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G.3. Payment Terms

        Payment for the performance of Subcontractor's workshare in support of the Prime Contract will be made to Subcontractor as defined in the Attachment 1 Statement of Work. All other payments will be net 30 days or as mutually agreed to by the parties.

G.4. Submission of Vouchers

        Notwithstanding any other provision, the Subcontractor invoice shall be mailed monthly to:

Force Protection Industries Inc.
9801 HWY 78
Ladson, SC 29456
Attn: Gary Papp

        Each invoice shall contain the Purchase Order number, quantity of items delivered and accepted by FPII, and the agreed upon purchase price per unit. The purchase price shall not be increased without prior written consent by the FPII Contract Representative.

SECTION H—SPECIAL PROVISIONS

H.1. Ordering Additional Products and/or Services

(a)

Any products and/or services other than Purchase Orders for Subcontractor's Workshare in support of the Prime Contract shall be ordered by issuance of subcontract modifications as mutually agreed upon by the Parties.



(b)

All subcontract modifications are subject to the terms and conditions of this Agreement. In the event of conflict between a subcontract modification and the Subcontract Agreement, this Agreement shall control.

H.2. Subcontract Modification Requirements

(a)

Subcontractor must acknowledge receipt of proposed subcontract modification within five (5) working days. FPII will accept written notification of acknowledgement. Email is sufficient for written notification.



(b)

Each subcontract change modification will require a proposal from the Subcontractor. The Subcontractor's proposal will constitute a firm offer to do the work requested and will include the following:



1)

Labor Costs, (Cost and Pricing Data will be provided to the appropriate USG agency).



2)

Other Direct Costs (ODCs)



3)

Travel Cost, including destination, number of people, number of days, airfare, per diem, car rental and other charges



4)

Priced Bill of Materials.



5)

Miscellaneous Other Direct Charges.



6)

Consultants—not applicable unless without previous written approval.



7)

Profit/Fee.



8)

Cost of preparing the proposal.

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H.3. Subcontract modification preparation

        An FPII subcontract modification will include, at a minimum, the following:

(a)

Reference to this Agreement



(b)

Type of Delivery (i.e., completion or term)



(c)

Statement of Work



(d)

Performance Schedule



(e)

Reference to Subcontractor's Proposal



(f)

Place of Delivery or Performance



(g)

FPII Technical Monitor for the order



(h)

Any special provisions that may apply (e.g., Government Furnished Property, safety requirements, security requirements, metrics for the measurement of performance, a quality assurance surveillance plan (QASP), etc.)



(i)

A separate unique subcontract modification number



(j)

FPII project number reference for invoicing and reporting purposes

H.4. Unpriced Orders

        FPII reserves the right to issue "unpriced orders" with a mutually agreed to Not-to-Exceed amount, pending negotiation. Subcontractor shall begin work on receipt of such an unpriced order and submit any proposal required in accordance with the schedule therein. The Subcontractor shall have no obligation to continue performance beyond the Not-to-Exceed amount. Should both parties agree to the acceptance of unpriced orders, the following FAR clauses are incorporated herein by reference:

52.216-23	Execution and Commencement of Work (Apr 1984)—Full text to be provided in the Not-To-Exceed Purchase Order
52.216-24	Limitation of Government Liability (Apr 1984)—Full text to be provided in the Not To-Exceed Purchase Order
52.216-25	Contract Definitization (Oct 1997)—Full text to be provided in the Not-To-Exceed Purchase Order
52.216-26	Payments of Allowable Costs Before Definitization (Dec 2002)
52.232-16	Progress Payments, Alternate II (Apr 2003)
52.244-2	Subcontract (Cost-Reimbursement and Letter Contracts (Apr 1998)

        Special invoicing requirements for these types of orders will be provided for on the individual subcontract modification.

        Each subcontract modification shall be considered to have been separately funded. Subcontractor shall not use unexpended funds from one order for performance of any other order, unless each such order shall have been modified by FPII in writing. Subcontractor shall not be reimbursed, nor is the Subcontractor obligated to incur, expenditures in excess of any individual subcontract modification's stated Not-to-Exceed amount or, if not fully funded, the subcontract modification's funded amount.

        Each subcontract modification issued hereunder shall be invoiced separately and shall comply with the invoicing requirements of this Agreement.

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H.5. Subcontractor Liability

        The Subcontractor hereby agrees and acknowledges that it shall be liable to FPII for all costs not reimbursed by the Government which FPII incurs as the result of the Subcontractor's negligence in performing this Subcontract Agreement in accordance with its terms

        FPII shall have the right to terminate the Subcontract Agreement on the same terms as set forth in the Government Termination clauses of the Prime Contract.

H.6. Notice to FPII of Delays

        If the Subcontractor encounters difficulties in meeting performance requirements, anticipates difficulty in complying with this Subcontract's schedule or dates, or has knowledge that any actual or potential situation is delaying or threatens to delay the timely performance of this Subcontract, the Subcontractor shall immediately notify FPII in writing, giving pertinent details.

H.7. FURNISHED PROPERTY/FACILITIES AND/OR SERVICES

        Any property and/or facilities furnished by the Government or FPII will be specified in the individual subcontract modification. Property administration shall be conducted in accordance with FAR 45.5 requirements. When engaged in performance on Government premises, Subcontractor shall be liable for the loss or destruction of, or damage to, the Government property and facilities provided in accordance with FAR 45.5.

H.8. Status Reviews

        FPII's Representative may conduct informal reviews with the Subcontractor to monitor progress. The objective of these reviews is to provide FPII visibility of Subcontractor's performance and progress and to identify potential problems and allow institution of corrective action in a timely manner to preclude schedule delays or cost impacts.

H.9. Customer Meetings

        Meetings may be held between FPII and its customer, at which time Subcontractor's attendance may be required. In addition, preparatory meetings may be held between FPII and Subcontractor prior to the scheduled customer meeting. Subcontractor agrees to attend and participate in such meetings and preparatory meetings, as necessary, when so requested by FPII.

H.10. Security Requirements

        It is contemplated that some work to be performed under this subcontract may involve access to and handling of classified material up to and including SECRET. Accordingly, the Subcontractor will be required to have or obtain a Facility Security Clearance, provide storage capability, and obtain Security Clearances on Subcontractor personnel required to have such clearance to perform their job under this Subcontract Agreement.

        No costs to obtain security clearances have been included in the Subcontract Agreement. In the event the Government charges Subcontract to obtain security clearance, Subcontractor shall be entitled to an equitable adjustment.

H.11. Disclosure

        FPII or the Subcontractor shall not disclose information concerning work under this Subcontract to any third party, unless such disclosure is necessary for the performance of the Subcontract effort. No news release, public announcement, denial or confirmation of any part of the subject matter of this

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Subcontract or any phase of any program hereunder shall be made without prior mutual written consent of FPII and the subcontractor. The restrictions of this paragraph shall continue in effect upon completion or termination of this Subcontract for such period of time as may be mutually agreed upon in writing by the parties. In the absence of a written established period, no disclosure is authorized.

H.12. Insurance

A.

The Subcontractor certifies to FPII, by signing this Subcontract Agreement that he has and will maintain the types of insurance and the minimum amount of coverage listed below:

	Type of Insurance	Minimum Amount
(i)	Workmen's Compensation and all occupational disease as required by State Law
(ii)	Employer's Liability including all occupational disease when not so covered in Workmen's Compensation above	$	1,000,000 per accident
(iii)	General Liability (Comprehensive) Bodily Injury per occurrence	$	2,000,000
(iv)	Automobile Liability (Comprehensive)
	Bodily Injury per person	$	1,000,000
	Bodily Injury per occurrence	$	2,000,000
	Property damage per accident	$	1,000,000

        Upon request by FPII, Subcontractor shall furnish a certificate of insurance reasonably satisfactory to FPII to evidence these coverage's naming FPII as an additional insured and providing 30 days written notice of cancellation or material change. Additionally, Subcontractor waives any and all subrogation rights against FPII on behalf of it and its insurers.

B.

All persons assigned duties or performing work for the Subcontractor under this Subcontract Agreement shall at all times and for all purposes in performance of said work be considered employees or agents of the Subcontractor. Payment of Federal and State Social Security or any other form of payroll taxes or deductions with respect to such employees shall be the responsibility of the Subcontractor. The Subcontractor, in all matters relating to this Subcontract Agreement, shall be acting as an independent contractor.



C.

The Parties, at their own expense, shall comply with such laws and assume all obligations implied by any one or more of such laws with respect to this Subcontract Agreement. Further the Parties agree to hold each other harmless for any injury or liability incurred by the Subcontractor or its employees caused by negligence or wrongful acts of it or its employees.

H.13. Incorporation of Specifications and Publications by Reference

        All specifications and publications listed or otherwise cited in this subcontract, whether or not they are attached thereto, are incorporated by reference and have the same force and effect as if set forth in full text.

H.14. Subcontractor Certification

        The certifications and representations made by the Subcontractor which are contained in the documents entitled, "Representations, Certifications, and ,Other Statements of Offeror's," and the "Small, Small Disadvantaged, and Women Owned Small Business Subcontracting Plan," if applicable, are hereby incorporated by reference. FPII has relied upon the above identified certifications and representations made by the Subcontractor in issuing this Subcontract. The Subcontractor agrees to

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promptly advise FPII should there be any change in status with respect to the matters covered by such certifications and representations.

H.15. Subcontract Quick Close

        If appropriate, and circumstances permit the Subcontractor agrees to a "Quick Close" of this subcontract agreement and/or individual subcontract modification.

H.16. Conformity to Laws and Regulations

        Subcontractor agrees in the performance of this Subcontract to comply with all federal, state and local regulations, rules and orders applicable to this Subcontract including but not limited to the provisions of the Fair Labor Standards Act of 1938, as amended and any applicable Executive Orders.

        Each Party represents that it will comply with all applicable export and import laws and regulations during performance of this Subcontract Agreement, including but not limited to, the U.S. Arms Export Control Act, as amended (22 U.S.C §§ 2751-2799), the International Traffic in Arms Regulations, as amended (22 C.F.R Part 120 ct seq,), the Export Administration Regulations, as amended (50 U.S.C §§ 2401-2420), and the U.S. Export Administration Regulations, as amended (15 C.F.R § 730 et seq.). The Parties shall not export, disclose, furnish or otherwise provide any article, technical data, technology, defense service, or technical assistance of the other Party to any foreign person or entity, whether within the U.S. or abroad, without obtaining, in advance, (a) appropriate U.S. government export authorization, and (b) written approval from the disclosing Party.

H.17. Assignment of Agreement

        This Subcontract shall be binding upon each of the parties hereto and their respective successors. It may not be assigned in whole or in part by either Party without the prior written consent of the other Party, except upon the merger, consolidation, sale or other transfer of all or substantially all of the assets of either Party.

H.18. Indemnification

(a)

The Parties will defend, indemnify and hold each other harmless and their affiliates, and their officers, agents, employees, successors and assigns, against any claims, loss, damage or expense, including, without limitation, payment of direct damages and expenses of defending claims, including attorneys' fees. This duty to defend, indemnify and hold harmless extends to any suit, claim, judgment or demand that may arise out of or in connection with either Party's performance or nonperformance of the Subcontract Agreement, out of either Party's breach of warranty, out of any defect in the supplies or materials, out of any patent infringement or misappropriation of trade secrets, or failure of either Party to pay royalties, or any other breach of either Party's obligations hereunder, whether such claim or suit is based upon contract, warranty, strict liability in tort, negligence, or other legal theory, and also extends not only to "third party claims" but also to any direct loss suffered by either Party. Either Party will inform the other Party of any claim demand or suit asserted or instituted against it and, to the extent of that Party's ability to do so, permit the other Party to defend the same or make settlement in respect thereof.

Except as provided for in Paragraph H.32 below, in the event of breach of this Subcontract Agreement by either Party, it is agreed that the remedy of the non-breaching Party whether based upon contract, warranty, tort, negligence, indemnity, strict liability or otherwise, shall be limited to the recovery of direct costs demonstrably expended in performing its or their obligations under this Subcontract Agreement. Neither Party shall have any liability to the other for any special, incidental, indirect, punitive, exemplary or consequential damages arising out of its performance or nonperformance of any obligation hereunder, whether such liability is based upon contract, warranty, delay, tort, negligence, indemnity, strict liability or otherwise

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(b)

Subcontractor shall comply with the provisions of FAR 52.215-10, 52.215-11, 52.215-12, and 52.215-13 which are incorporated herein by reference to the extent that such clauses are or become applicable to this Subcontract Agreement. Subcontractor shall indemnify and hold harmless FPII from any amount, loss, and expense, including interest assessed by the Government under 10 U.S.C. § 2306a, by which this Subcontractor is determined by the Government to have been defectively priced because of Seller's or Subcontractor's failure to comply with such provisions. The rights of the parties hereunder shall survive completion or termination of this Subcontract Agreement.

H.19. Infringement Indemnity

        In lieu of any other warranty by FPII or Subcontractor against infringement, statutory or otherwise, it is agreed that the Subcontractor shall defend at its expense any suit against FPII or its customers, based on a claim that any supply item or service the Subcontractor furnished under this Subcontract Agreement (With the exception of materials provided to Subcontractor by FPII) or the normal use or sale thereof infringes any U.S. Letters patent or copyright, and shall pay cost and damages finally awarded in any such suit, provided that Subcontractor is notified in writing of the suit and given authority, information, and assistance at Subcontractor's expense for the defense of same. If the use or sale of said item is enjoined as a result of such suit, Subcontractor, at no expense to FPII, shall obtain for FPII and its customers the right to use and sell said item or shall substitute an equivalent item acceptable to FPII and extend this patent indemnity thereto.

        Notwithstanding the foregoing paragraph, when this Subcontract Agreement is performed under the Authorization and Consent of the U.S. Government to infringe U.S. Patents, the Subcontractor's liability for infringement of such patents in such performance shall be limited to the extent of the obligation of FPII to indemnify the U.S. Government.

H.20. Proprietary Information

        The Parties agree that the Confidentiality/Proprietary Data Agreement entered into between FPII and GDLS dated 15 March 2007 (Attachment 2) shall also govern the protection of the information exchanged between the parties in performance of this Subcontract.

H.21. Proprietary Rights

        Ownership of Intellectual Property including, but not limited to, copyrights, patents, inventions resulting in work under this Subcontract Agreement shall be governed in accordance with the provisions of the JV Agreement dated 15 December 2007.

H.22. Equal Opportunity

        The Equal Opportunity clauses required by 41CFR 60-1.4(a)(7), 41CFR 60-250.5(a), and 41 CFR 60-741.5(a) are included for reference in this Subcontract Agreement.

H.23. Disputes

        It shall be the obligation of the Subcontractor to exercise due diligence to discover and to bring to the attention of FPII, at the earliest possible time, any ambiguities, discrepancies, inconsistencies, or conflicts in or between any of the technical or contractual provisions hereof.

        Any dispute arising under this Subcontract, which is not settled by agreement of the parties shall be settled pursuant to the disputes clause of the Joint Venture Agreement that established Force Dynamics LLC. Pending any decision the Subcontractor shall proceed diligently with the performance of this Subcontract as directed by FPII.

11

        In cases where Purchase Orders under this Subcontract Agreement are awarded in furtherance of the Government Prime Contract, if a decision relating to the Prime Contract is made by the Contracting Officer and such decision is also related to the Purchase Orders, said decision, if binding upon FPII under the Prime Contract shall in turn be binding upon FPII and Subcontractor with respect to such matter; provided, however, that if Subcontractor disagrees with any such decision made by the Contracting Officer and FPII elects not to appeal such decision, Subcontractor shall have the right reserved to FPII under the Prime Contract with the Government to prosecute a timely appeal in the name of FPII, as permitted by the contract or by law. Subcontractor shall bear its own legal and related costs. If FPII elects not to appeal such decision, FPII agrees to notify Subcontractor in a timely fashion after receipt of such decision and to assist Subcontractor in its prosecution of any such appeal in every reasonable manner. If FPII elects to appeal any such decision of the Contracting Officer, FPII agrees to furnish Subcontractor promptly with a copy of such appeal. Any decision upon appeal, if binding upon FPII, shall in turn be binding upon Subcontractor pending any decision either by the Contracting Officer or on appeal, Subcontractor shall proceed diligently with performance of the Purchase Order.

        If, as a result of any decision or judgment which is binding upon Subcontractor and FPII, as provided above, FPII is unable to obtain payment or reimbursement from the Government under the Prime Contract for, or is required to refund or credit to the Government, any amount with respect to any item or matter for which FPII has reimbursed or paid Subcontractor, Subcontractor shall, on demand, promptly repay such amount to FPII. Additionally, pending the final conclusion of any appeal hereunder, Subcontractor shall, on demand, promptly repay any such amount to FPII. FPII's maximum liability for any matter connected with or related to this Subcontract Agreement which was properly the subject of a claim against the Government under the Prime Contract shall not exceed the amount of FPII's recovery from the Government.

        Subcontractor agrees to provide certification that data supporting any claim made by Subcontractor hereunder is made in good faith and that the supporting data is accurate and complete to the best of Subcontractor's knowledge or belief, all in accordance with the requirements of the Contract Disputes Act of 1978 (41 U.S.C. 601-613) and implementing regulations. If any claim of Subcontractor is determined to be based on fraud or misrepresentation, Subcontractor agrees to defend, indemnify and hold buyer harmless for any and all liability, loss and cost or expense resulting there from.

H.24. General Relationship

        Subcontractor agrees that in all matters relating to this Subcontract it shall be acting as an independent contractor and shall assume and pay all undisputed liabilities and perform all obligations imposed with respect to the performance of this Subcontract. Subcontractor shall have no right, power or authority to create any obligation, expressed or implied, on behalf of FPII and/or the Government and shall have no authority to represent FPII as an agent unless whenever designated by this Agreement or any subcontract modification

H.25. Organizational Conflict of Interest

        It is understood by both Parties that neither Party is knowingly adversely affected by organizational conflict of interest related to this procurement as of the date of this Subcontract Agreement. The Parties agree that should either Party determine, in its sole discretion, that an organizational conflict of interest exists as a result of its further pursuit of the procurement effort contemplated by this Agreement, this Subcontract Agreement may be terminated at the request of either Party.

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H.26. RESERVED

H.27. Effect of Any Invalidity of Any Provision(s)

        The invalidity in whole or in part of any provision of this Subcontract Agreement shall not affect the validity of any other provision(s) of this Subcontract.

H.28. Taxes

        Unless otherwise provided herein, the price of the supplies/services includes all applicable federal, state, and local taxes

H.29. FPII's Review and Approval

A.

When review and approval of Subcontractor's work is necessary or required under this Subcontract, the Subcontractor shall allow sufficient time for such review and/or approval as may reasonably be required by FPII and/or the Government. FPII shall advise Subcontractor of specific reasons for rejection of any of Subcontractor's submissions for review/approval. FPII's notice of approval, acceptability, concurrence, or release to proceed with the work shall be construed only as acknowledgement that the course of action proposed by Subcontractor appears reasonable and that Subcontractor may proceed to fulfill its responsibility to perform services in full conformance with the requirements of this Agreement

H.30. Rights in Data and Computer Software

        Unless otherwise set forth herein, all technical data and computer software developed for the performance of this Subcontract shall be delivered to FPII on the basis that the Government's rights thereto will be unlimited and unrestricted respectively as defined in FAR/DFARS of the Prime Contract

H.31. Order of precedence

        In the event of an inconsistency in this Agreement, unless otherwise provided herein, the inconsistency shall be resolved by giving precedence in the following order as each section noted may have been modified:

(a)

Purchase Orders (inclusive of the Letter Agreement(s) and FAR/DFARS referenced therein)



(b)

This Subcontract Agreement



(c)

Attachments to this Subcontract Agreement

H.32. Liability

        Excepting any claims based on any infringement of proprietary rights, in no event will either Party be liable for consequential damages of any kind, including without limitation loss of profits or other incidental or special damages whether due to or based upon delay, breach of contract, warranty, tort, negligence or strict liability.

H.33. Invention Disclosures and Reports

        Prior to final payment and as a condition thereof, Subcontractor shall submit to FPII all invention disclosures and reports if required by the U.S. Government FPII is responsible for transmitting to the Government all such information supplied by Subcontractor.

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H.34. Acceptance of Agreement

        This Agreement becomes a binding subcontract, subject to the terms and conditions hereof, when executed by both Parties.

H.35. Entire Agreement

        Upon execution of this Subcontract, the Parties agree that the provisions under this Subcontract including all documents incorporated herein by reference, shall constitute the entire Agreement between the parties hereto and supersede all prior agreements, relating to the subject matter hereof. This Subcontract may not be modified or terminated orally, and neither modification nor any claimed waiver of any of the provisions hereof shall be binding unless in writing and signed by the Party against whom such modification or waiver is sought to be enforced.

SECTION I—GENERAL PROVISIONS

GOVERNMENT FLOW DOWN PROVISIONS

        The following Federal Acquisition Regulations (FARs) and agency FAR Supplement clauses are incorporated herein by reference and made a part hereof. The FAR and FAR Supplement clauses are the versions in effect as noted in the prime contract. Except as may be expressly otherwise provided below in each of such clauses, "Contractor" shall mean "Subcontractor "; "Subcontractor" shall mean "Subcontractor's subcontractor"; and "Contract" shall mean "this Agreement." "Contracting Officer", "Government" and "Prime Contractor" shall mean FPII". Except for those clauses having to do with Audits and Audit rights and disclosure of financial and accounting data; the terms "Contracting Officer" and "Government" shall remain Government entities.

        The Subcontractor, by accepting this Subcontract Agreement, hereby represents, warrants and certifies that it is in compliance with the following clauses and is, therefore, eligible for award.

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FAR Clauses Incorporated by Reference

Clause	Title
52.202-1	Definitions (July 2004)
52.203-3	Gratuities (Apr 1984)
52.203-5	Covenant Against Contingent Fees (Apr 1984)
52.203-6	Restrictions on Subcontractor Sales to the Government (July 1995)
52.203-7	Anti-Kickback Procedures (July 1995)
52.203-8	Cancellation, Rescission, and Recovery of Funds for Illegal Activity (Jan 1997)
52.203-10	Price or Fee Adjustment for illegal or Improper Activity (Jan 1997)
52.203-12	Limitation on Payments to Influence Certain Federal Transactions (Sept 2005)
52.204-4	Printed or Copied Double-Sided on Recycled Paper (Aug 2000)
52.204-7	Central Contractor Registration (Jul 2006)
52.209-6	Protecting the Government's Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment (Jan 2005)
52.211-5	Material Requirements (Aug 2000)
52.211-15	Defense Priority and Allocation Requirements (Sept 1990)
52.215-2	Audit and Records -Negotiation (June 1999)
52.215-8	Order of Precedence- Uniform Contract Format (Oct 1997)
52.215-14	Integrity of Unit Prices (Oct 1997)
52.215-15	Pension Adjustments and Asset Reversions (Oct 2004)
52.215-18	Reversion or Adjustment of Plans for Postretirement Benefits (July 2005)
52.219-8	Utilization of Small Business Concerns (May 2000)
52.219-9	Small Business Subcontracting Plan (Sep 2006)
52.219-9 AltII	Small Business Subcontracting Plan (Sep 2006) Alternate II
52.219-16	Liquidated Damages—Subcontracting Plan (Jan 1999)
52.222-1	Notice to the Government of Labor Disputes (Feb 1997)
52.222-3	Convict Labor (June 2003)
52.222-4	Contract Work Hours and Safety Standards Act—Overtime Compensation (Jul 2005)
52.222-19	Child Labor—Cooperation with Authorities and Remedies (Jan 2006)
52.222-20	Walsh-Healey Public Contracts Act (Dec 1996)
52.222-26	Equal Opportunity (Apr 2002)
52.222-35	Affirmative Action for Special Disabled and Vietnam Era Veterans (Dec 2001)
52.222-36	Affirmative Action for Handicapped Workers (June 1998)
52.222-37	Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Sept 2006)
52.223-3	Hazardous Material Identification and Material Safety Data (Jan 1997)
52.223-5	Pollution Prevention and Right-to-Know Information (Aug 2003)
52.223-6	Drug-Free Workplace (May 2001)
52.223-12	Refrigeration Equipment and Air Conditioners (May 1995)
52.223-14	Toxic Chemical Release Reporting (Aug 2003)
52.224-1	Privacy Act Notification (Apr 1984)
52.224-2	Privacy Act (Apr 1984)
52.225-13	Restrictions on Certain Foreign Purchases (Feb 2006)
52.227-1	Authorization and Consent (July 1995)
52.227-2	Notice and Assistance Regarding Patent and Copyright Infringement (Aug 1996)
52.227-21	Technical Data Declaration, Revision and Withholding of Payment—Major Systems (Jan 1997)
52.227-22	Major System-Minimum Rights (June 1987)
52.229-3	Federal, State, and Local Taxes (Apr 2003)
52.232-1	Payments (1984)

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Clause	Title
52.232-8	Discounts For Prompt Payment (Feb 2002)
52.232-9	Limitation on Withholding of Payments (Apr 1984)
52.232-11	Extras (Apr 1984)
52.232-17	Interest (Jun 1996)
52.232-18	Availability of Funds (Apr 1984)
52.232-23	Assignment of Claims (Jan 1986)
52.232-23 AltI	Assignment of Claims (Jan 1986)—Alternate I
52.232-25	Prompt Payment (Oct 2003)
52.232-32	Performance-Based Payments (Feb 2002)
52.232-33	Payment by Electronic Funds Transfer—Central Contractor Registration (Oct 2003)
52.233-1	Disputes (July 2002)
52.233-1 AltI	Disputes (Jul 2002)—Alternate I
52.233-3	Protest After Award (Aug 1996)
52.242-13	Bankruptcy (July 1995)
52.242-15	Stop-Work Order (Aug 1989)
52.242-17	Government Delay of Work (Apr 1984)
52.243-1	Changes-Fixed Price ((Aug 1987)
52.243-7	Notification of Changes (Apr 1984)
52.244-2	Subcontracts (Aug 1998)
52.244-5	Competition in Subcontracting (Dec 1996)
52.244-6	Subcontracts for Commercial Items and Commercial Components (Feb 2006)
52.245-2	Government Property (Fixed Price Contracts) (May 2004)
52.246-15	Certificate of Conformance (Apr 1984)
52.246-16	Responsibility for Supplies (Apr 1984)
52.246-24	Limitation of Liability—High Value Items (Feb 1997)
52.247-48	F.O.B. Destination—Evidence of Shipment (Feb 1999)
52.247-55	F.O.B. Point for Delivery of Government-Furnished Property (Jun 2003)
52.247-58	Loading, Blocking, and Bracing of Freight Car Shipment (Apr 1984)
52.249-2	Termination for Convenience of the Government (Fixed Price) (May 2004)
52.249-8	Default (Fixed-Price Supply and Service) (Apr 1984)
52.251-1	Government Supply Sources (Apr 1984)
52.253-1	Computer Generated Forms (Jan 1991)
52.252-2	Clauses Incorporated by Reference (Feb 1998)

DOD FAR Supplement Clauses Incorporated by Reference

16

Clause	Title
252.203-7001	Prohibition on Persons Convicted of Fraud or Other Defense-Contract-Related Felonies (Dec 2004)
252.203-7002	Display of DoD Hotline Poster (Dec 1991)—Required for contracts over $5M
252.204-7000	Disclosure of Information (Dec 1991)
252.204-7003	Control of Government Personnel Work Product (Apr 1992) 252-204-7004 AltA Central Contractor Registration (52.204-7) Alternate A (Nov 2003)
252.205-7000	Provision of Information to Cooperative Agreement Holders (Dec 1991)
252.209-7004	Subcontracting with Firms that are Owned or Controlled by the Government Of a Terrorist Country (Mar 1998)
252.211-7000	Acquisition Streamlining (Dec 1991)
252.219-7003	Small, Small Disadvantaged and Women-Owned Small Business Subcontracting Plan (DOD Contracts) (Apr 1996)
252.219-7011	Notification to Delay Performance (Jun 1998)
252.223-7004	Drug-Free Workforce (SEP 1988)
252.225-7001	Buy America Act and Balance of Payments Programs (Jun 2005)
252.225-7002	Qualifying Country Sources As Subcontractors (Apr 2003)
252.225-7013	Duty Free Entry (June 2005)
252.225-7040	Contractor Personnel Authorized to Accompany U.S. Armed Forces Deployed Outside the United States (Jun 2006)
252.227-7013	Rights in Technical Data—Noncommercial Items (Nov 1995)
252.227-7014	Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation (Jun 1995)
252.227-7015	Technical Data—Commercial Items (Nov 1995)
252.227-7016	Rights in Bid or Proposal Information (Jun 1995)
252.227-7019	Validation of Asserted Restrictions—Computer Software (Jun 1995)
252.227-7025	Limitation on Use or Disclosure of Government-Furnished Information Marked With Restrictive Legends (June 1995)
252.227-7027	Deferred Ordering of Technical Data or Computer Software (Apr 1988)
252.227-7030	Technical Data-Withholding of Payment (Mar 2000)
252.227-7037	Validation of Restrictive Markings on Technical Data (Sept 1999)
252.243-7002	Requests for Equitable Adjustments (Mar 1998)
252.244-7000	Subcontracts for Commercial Items and Commercial Components (Dod Contracts) (Nov 2005)
252.245-7001	Reports of Government Property (May 1994)
252.246-7000	Material Inspection and Receiving Report (Mar 2003)
252.247-7023	Transportation of Supplies by Sea (May 2002)
252.249-7002	Notification of Anticipated Program Termination or Reduction (Dec 1996)

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Attachment 1
Statement of Work

Contract Administration and Revenue Management/Invoicing Services
Statement of Work (SOW)

        The parties agree that the functions of Contract Administration and Revenue Management/Invoicing Services for Prime Contract M67854-07-D-5031 which are currently being provided by Force Protection Industries, Inc. (FPII) shall be transferred to General Dynamics Land Systems, Inc. (GDLS) at no additional cost to the subcontract between GDLS and FPII in support of the prime contract. The transfer of these duties does not in any way transfer or assign contract performance or responsibility from FPII to GDLS. Nor does this transfer increase or decrease the contractual liabilities of FPII or GDLS. Either party may terminate this SOW, in whole or in part, with 60 days prior written notice to the other party.

A.

GDLS will provide timely Contract Administration in support of Prime Contract M67854-07-D-5031 and all resulting Delivery Orders and modifications. In this capacity, and acting on behalf of FPII, GDLS will provide the lead in the following areas:



1.

Receipt and transmission of all formal contract communications with the PCO and/or the ACO and any other customer agencies. GDLS will coordinate correspondence with all associated parties, act as the customer interface, and coordinate approvals and notifications pursuant to contract actions/requirements. GDLS will electronically record distribute and track all formal communications.



2.

Receipt, coordination and response to all Government Requests for Quotes (RFQ's) or Requests for Proposal (RFP's) and coordination and submittal of all Proposals. GDLS will incorporate FPII inputs and GDLS inputs into all Estimates/Proposal Submissions to the customer. FPII is responsible for timely submittals of all required inputs.



3.

Receipt and review of all delivery orders and contract modifications. FPII will execute contractual documents which are binding on FPII. However, with FPII's prior written approval, GDLS may execute contract actions on behalf of FPII. The parties agree to develop a formal approval document to use for such authorization purposes. However, for routine contract actions that do not impact cost schedule or party liabilities an informal coordination via e-mail can be provided by FPII to GDLS in lieu of a formal authorization. All such approvals shall be provided to the GDLS contract representative via an FPII contract representative.



4.

Lead negotiations, subject to FPII's prior written approval, with all matters involving the PCO or ACO. FPII will provide timely support as required.



5.

FPII will provide contract support to GDLS as requested in the same manner that GDLS currently provides such support to FPII. It is anticipated that FPII will be providing a minimum of one full time head in support of prime contract administration activities including by way of example drafting of letters and/or correspondence, providing proposal inputs and CDRL input, supporting negotiations, etc.



6.

Tracking and submission of all Contract Deliverables. GDLS will incorporate FPII inputs and GDLS inputs into all formal Contract Deliverables as required under Attachment 3 of Prime Contract M67854-07-D-5031. FPII will be responsible for forwarding all necessary inputs to GDLS 72 hours prior to the CDRL due date to the customer. GDLS will provide advance notification to FPII Contracts representative of all CDRL due dates.

Attachment 1-1

        GDLS conduct of the above tasks is conditioned upon FPII securing a modification from the USG recognizing GDLS as an additional authorized contract interface on the prime contract.

B.

GDLS will provide Revenue Management/Invoicing Services in support of Prime Contract M67854-07-D-5031 and all resulting Delivery Orders and modifications. In this capacity, and acting on behalf of FPII, GDLS will provide the lead in the following areas:



1.

Tracking invoices processed for all CLINS submitted on DD250s including vehicle shipments, spares shipments, Field Service Representatives, etc.



2.

Consolidating partner input, submitting invoices and tracking invoices for any other non-DD250 billings such as performance based payments.



3.

Correction, coordination, and follow-up of rejected invoices with the Customer.



4.

Providing cash disbursement allocations for receipts in to the FPII bank account to allow payment to GDLS for their scope of work.



5.

Coordination of billing processes and procedures between FPII, GDLS and the subcontractors.



6.

GDLS Revenue Management and Invoicing Services will not include the following:



a.

Loading DD250's into MILPAC for vehicles delivered or services performed by FPII or any of their subcontractors (excluding GDLS and their subcontractors).



b.

Obtaining DCMA approval of the milestones achieved by FPII or their subcontractors (excluding GDLS and their subcontractors).



7.

The following information is required of FPII prior to GDLS' start of Revenue Management and Invoicing Services:



a.

FPII Federal Tax Identification Number (allows access to My Invoice).



b.

Agreement with ACO allowing GDLS representative to act on behalf of FPII with both DFAS and the ACO as required.



c.

The purchase and support of MILPAC software to facilitate data interchange between GDLS and FPII. Submission of a MILPAC generated FTP file and accompanying attachments uniquely identified to the FTP file will be required daily for upload into WAWF.



d.

FPII shall disburse to GDLS, by end of the next business day of receipt, the cash received for the GDLS billed Scope of Work.

Attachment 1-2

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Exhibit 10.52

EX-10.56

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Exhibit 10.56

FOURTH AMENDMENT TO LEASE

        THIS FOURTH AMENDMENT TO LEASE ("Amendment") effective as of November 1, 2007 by and between Aerospace/Defense, Inc., a South Carolina corporation (hereinafter call the "Landlord") and Force Protection Industries, Inc. and Force Protection, Inc., Nevada corporations (collectively, the "Tenant").

RECITALS

        A.    By Industrial Lease effective as of July 13, 2004, the Landlord leased unto Tenant certain premises within Building No. 2 situated in an industrial project (the "Project") located in Ladson (Charleston County), South Carolina which instrument was amended by Letter executed on July 18, 2006 and by Second Amendment to Lease effective as of February 1, 2007 (the "Second Amendment") and by Third Amendment to Lease effective as of July 1, 2007 (the "Third Amendment"). The Industrial Lease as amended by the July 18, 2006 Letter, the Second Amendment and the Third Amendment shall hereinafter be referenced as the "Lease." By the execution of this Amendment, the parties intend to amend the Lease. Each capitalized term used and not otherwise defined or modified herein shall have the meaning ascribed thereto in the Lease.

        B.    At the request of the Tenant, the Landlord has agreed to modify the term "Premises" as follows:

        1.     Adding the area marked "Tank Farm Area" shown and cross-hatched on Exhibit A to this Amendment (an area of approximately 80' × 100' situated to the south and adjacent to Building No. 2) to Paragraph 1(a) of the Lease, which Tank Farm Area is hereby added to the definition of "Premises" which area is comprised of the following:

(a)

The "Tank Farm Area"; and



(b)

The existing tank farm consisting of the following:



(i)

Two (2) tanks of approximately 50,000 gallons each;



(ii)

One (1) tank of approximately 10,000 gallons (together with the two tanks referenced in subsection (i) above the "Existing Tanks");



(iii)

Containment area surrounding the Existing Tanks (the "Containment Area");



(iv)

Pump House shown on Exhibit A as "Pump House";



(v)

Truck dock shown on Exhibit A as "Truck Dock" with sump pump located therein (the sump pump together with the truck dock are hereinafter collectively referred to as the "Truck Dock"; and



(vi)

Pump and existing piping and other equipment located within the Pump House, and piping, gauges and the like directly associated with the Existing Tanks (the pump, associated piping, equipment, gauges, etc. are hereinafter referred to as the "Existing Tank Farm Equipment," together with the Containment Area, the Truck Dock and the Existing Tanks, the "Existing Tank Farm").

The Tenant intends to construct (at its sole cost and expense and without contribution from the Landlord) a containment area (described on the plans marked Exhibit A-1), install several tanks, pumps, piping and associated equipment with the new tanks within the Tank Farm Area (adjacent the Existing Tank Farm) in an area shown as "New Tank Farm" on Exhibit A-2 (collectively, the "New Tank Farm").

        2.     Adding to the definition of Premises a building containing approximately 2,040 square feet measuring approximately 51' × 40' located to the south of Building No. 2 and to the east of

the Tank Farm Area and shown and delineated on Exhibit B as the "Dyno Building" upon which the Tenant intends to install machinery to test vehicles constructed/assembled in Building No. 2. (For clarification, the electric oven which was situated in the Dyno Building has been removed therefrom by the Tenant and is being temporarily stored in Building No. 1 of the Project until it is sold by the Landlord.)

        C.    In consideration for amending the Lease as referenced in Recital B above, the Tenant agrees to amend Paragraph 3(a) by increasing the Base Rent for the Premises and by further amending the Lease as hereinafter provided.

        D.    The Landlord and Tenant now wish to enter into this Amendment to amend the Lease according to the terms, provisions and conditions hereinafter set forth.

        NOW THEREFORE, in consideration of the mutual promises given one to the other, the parties do hereby covenant and agree to amend and modify the Lease as follows:

        1.    All the recitals set forth above in the "Recitals" clauses are hereby made an integral part of this Agreement.

        2.    Paragraph 1 (The Premises), Section (a) of the Lease is modified by adding thereto the Tank Farm Area and Existing Tank Farm referenced in Recital B 1 and the Dyno Building referenced in Recital B2.

        3.    The parties acknowledge and reaffirm Paragraph 1(b) of the Lease (as well as the other terms and provisions thereof not inconsistent with the terms and provisions of this Amendment). The Landlord makes no representations or warranties whatsoever as to the condition of the Tank Farm Area, the Existing Tank Farm and the Dyno Building and the Tenant represents to the Landlord that Tenant and its contractors and engineers have thoroughly examined the physical conditions of the Tank Farm Area, the Existing Tank Farm and the Dyno Building and have found them all satisfactory for all purposes and uses intended by the Tenant, and the Tenant accepts the Tank Farm Area, the Existing Tank Farm and the Dyno Building in their present condition "as–is" and with all faults.

        4.    Paragraph 8(a) is amended to read as follows:

"(a) Tenant shall at all times during the Term be in full compliance with any and all federal, state and local governmental rules and regulations, ordinances and similar provisions having the force and effect of law (collectively, "Laws") which are or would be applicable to the business being conducted on or within the Premises. In particular, it shall be the sole responsibility of the Tenant to ensure that the Existing Tank Farm and the New Tank Farm are fully permitted at all times and that the Existing Tank Farm and the New Tank Farm and all other areas comprising the Premises are used, maintained and operated by the Tenant in full compliance with all permits, laws, rules and regulations of the State of South Carolina and the United States Federal Government and their respective agencies; the Tenant shall defend, hold harmless and indemnify the Landlord under Section 11 (Indemnification) from any violation hereof. In addition, the Existing Tank Farm and the New Tank Farm shall not be used or operated until and unless all necessary permits and licenses have been obtained therefor from appropriate governmental agencies."

        5.    Paragraph 9 (Maintenance and Repair) is amended by adding the following subsections (c), (d) and (e):

"(c)    Care and Maintenance of the Existing Tank Farm and the New Tank Farm.    The Tenant, at its sole cost and expense, shall keep the Existing Tank Farm and the New Tank Farm (following its construction) in good repair, condition and working order, and shall furnish any and all parts and labor required for that purpose. The Tenant shall implement preventive maintenance thereon in a good, workmanlike manner consistent with Law and with best

2

industrial practices and shall take extra precaution to avoid the spillage of any liquid or other substance from the Existing Tank Farm and the New Tank Farm. The Tenant shall not make any material alterations to or replacements of the Existing Tank Farm without the prior written consent of the Landlord. All equipment, accessories, parts and replacements that are added to or become attached to the Existing Tank Farm and the New Tank Farm shall at the termination or expiration of this Lease become the property of the Landlord and shall be deemed incorporated in the Premises and subject to the terms of this Lease as if originally leased hereunder. The Existing Tank Farm and the New Tank Farm shall be used, maintained and operated by Tenant in full compliance with all required permits, authorizations and licenses (all of which shall be the sole responsibility of the Tenant to obtain and maintain) and all laws, rules and regulations of the State of South Carolina and the United States Federal Government and their respective agencies. At the termination or expiration of this Lease, the Tenant, at its sole cost and expense, shall remove all liquids and other substances from the Existing Tank Farm and the New Tank Farm and shall leave both tank farms in environmentally clean and operating condition.

(d)    Transformer.    The Tenant acknowledges that a transformer containing PCBs (the "Transformer") is located on a platform above a portion of the floor area of the Dyno Building. The Landlord retains responsibility for the storage and maintenance of the Transformer and shall have access to such platform and the Transformer through the Dyno Building for purposes of (i) periodically inspecting the Transformer or having the Transformer inspected by Landlord's contractors and by government officials having jurisdiction over the Transformer, (ii) performing any necessary or required maintenance or repairs to the Transformer, and (iii) removing the Transformer from the Dyno Building (should the Landlord, in its sole discretion, desire to remove the Transformer therefrom). The Tenant shall take extra precaution not to (i) enter the platform area upon which the Transformer is being stored and (ii) damage in any way the platform or the Transformer. The Tenant shall be solely responsible for all damages, liabilities and obligations should the Tenant fail to provide by the provisions of the immediately preceding sentence."

(e)    Concrete Ramps to Dyno Building.    The Tenant intends to construct/install two (2) concrete ramps leading into the Dyno Building—one such ramp as a vehicular entrance into the Dyno Building and the other such ramp as a vehicular therefrom. At the expiration or termination of this Lease and at the option of the Landlord, the Tenant, at its sole cost and expense, agrees to remove the two ramps in good, workmanlike manner—leaving the ground upon which the ramps are constructed level with the surrounding area.

        6.    Paragraph 3(a) (Base Rent) is amended by adding the following sentence:

"Commencing December 1, 2007, the Base Rent currently payable under this Lease shall increase by $5,050.00 per month representing additional monthly Base Rent (i) in the amount of $4,500.00 per month for the lease of the Tank Farm Area and the Existing Tank Farm and (ii) $550.00 per month for the lease of the Dyno Building."

        7.    This Amendment may be executed in several counterparts, each of which shall be deemed an original and such counterparts shall constitute but one and the same instrument. If this Amendment or the signature page, as executed, is transmitted by one party to the other by facsimile transmission or electronically "pdf" transmission, such transmission shall be deemed an executed original of this Amendment and of such signature

        8.    Except as modified by this Amendment, the Lease remains unchanged.

3

        IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment under seal as of the day and year first above written.

LANDLORD:
AEROSPACE/DEFENSE, INC.
By:	/s/ M. JERRY GARFINKLE
Its:	Assistant Secretary
TENANT:
FORCE PROTECTION INDUSTRIES, INC.
By:	/s/ RAYMOND POLLARD
Its:	COO
FORCE PROTECTION, INC.
By:	/s/ MICHAEL DURSKI
Its:	CFO

4

Exhibit A

[FLOOR PLAN]

MAIN FLOOR LEVEL

Building No. 2

5

Exhibit A-1

[FLOOR PLAN]

6

Exhibit A-2

[FLOOR PLAN]

7

Exhibit B

[FLOOR PLAN]

8

QuickLinks

Exhibit 10.56

FOURTH AMENDMENT TO LEASE
RECITALS
Exhibit A
Exhibit A-1
Exhibit A-2
Exhibit B

EX-10.57

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EXHIBIT 10.57

ORDER FOR SUPPLIES OR SERVICES

1. CONTRACT/PURCH. ORDER/ AGREEMENT NO.	2. DELIVERY ORDER/ CALL NO.		3. DATE OF ORDER/CALL (YYYYMMMDD)	4. REQ./PURCH. REQUEST NO.		5. PRIORITY
M67854-07-D-5031	0007		2007 Dec 18	See Schedule		DX-A4
6. ISSUED BY	CODE	M67854	7. ADMINISTERED BY (if other than 6)	CODE	S1103A
MARCORSYSCOM			DCMA ATLANTA			8. DELIVERY FOB
2200 LESTER STREET QUANTICO VA 22134-6050			ATTN: KAREN BENNER, 2300 LAKE PARK DRIVE SUITE 300 SMYNRA GA 30080			ý DESTINATION o OTHER
						(See Schedule if other)
9. CONTRACTOR	CODE	1EFH8	FACILITY	10. DELIVER TO FOB POINT BY (Date)		11. MARK IF BUSINESS IS
	FORCE PROTECTION INDUSTRIES, INC.			(YYYYMMMDD) SEE SCHEDULE		ý SMALL o SMALL DISADVANTAGED o WOMEN-OWNED
NAME	DAMON WALSH			12. DISCOUNT TERMS
AND	9801 HIGHWAY 78, #1			Net 30 days
ADDRESS	LADSON SC 29456
				13. MAIL INVOICES TO THE ADDRESS IN BLOCK
				See Item 15
14. SHIP TO	CODE	N65236	15. PAYMENT WILL BE MADE BY		CODE	HQ0338
RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON			DFAS COLUMBUS SOUTH ENTITLEMENT OPS P.O. BOX 182264			MARK ALL PACKAGES
PETE WARD CODE 616PW			COLUMBUS OH 43218-2264			AND PAPERS WITH
09C11 BLDG 3112						IDENTIFICATION
M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-1639						NUMBERS IN BLOCKS 1 AND 2
16. TYPE OF ORDER	DELIVERY/CALL	ý This delivery order/call is issued on another Government agency or in accordance with and subject to terms and conditions of above numbered contract.
	PURCHASE	Reference your quote dated
		Furnish the following on terms specified herein. REF:
		ACCEPTANCE. THE CONTRACTOR HEREBY ACCEPTS THE OFFER REPRESENTED BY THE NUMBERED PURCHASE ORDER AS IT MAY PREVIOUSLY HAVE BEEN OR IS NOW MODIFIED, SUBJECT TO ALL OF THE TERMS AND CONDITIONS SET FORTH, AND AGREES TO PERFORM THE SAME.

Force Protection Industries, Inc.
NAME OF CONTRACTOR	SIGNATURE	TYPED NAME AND TITLE	DATE SIGNED
			(YYYYMMMDD)

ý If this box is marked, supplier must sign Acceptance and return the following number of copies: 1

17. ACCOUNTING AND APPROPRIATION DATA/LOCAL USE

See Schedule

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

18. ITEM NO.	19. SCHEDULE OF SUPPLIES/SERVICES		20. QUANTITY ORDERED/ ACCEPTED*	21. UNIT	22. UNIT PRICE	23. AMOUNT
	SEE SCHEDULE
*If quantity accepted by the		24. UNITED STATES OF AMERICA			25. TOTAL	$377,775,613.00
government is same as quantity		TEL: 540-658-8413	/s/ Lynn Frazier		26. DIFFERENCES
ordered, indicate by X. If different,		EMAIL: lynn.frazier@usmc.mil
enter actual quantity accepted below quantity ordered and encircle.		BY: LYNN FRAZIER		CONTRACTING/ORDERING OFFICER
27a. QUANTITY IN COLUMN 20 HAS BEEN
o INSPECTED	o RECEIVED	o ACCEPTED, AND CONFORMS TO THE CONTRACT EXCEPT AS NOTED
b. SIGNATURE OF AUTHORIZED GOVERNMENT REPRESENTATIVE
			c. DATE                 d. PRINTED NAME AND TITLE OF AUTHORIZED
			(YYYYMMMDD)	GOVERNMENT REPRESENTATIVE
e. MAILING ADDRESS OF AUTHORIZED GOVERNMENT REPRESENTATIVE			28. SHIP NO.	29. DO VOUCHER NO.	30. INITIALS
f. TELEPHONE NUMBER	g. E-MAIL ADDRESS		o PARTIAL	32. PAID BY	33. AMOUNT VERIFIED CORRECT FOR
			o FINAL
36. I certify this account is correct and proper for payment				31. PAYMENT		34. CHECK NUMBER
a. DATE	b. SIGNATURE AND TITLE OF CERTIFYING OFFICER			o COMPLETE		35. BILL OF
(YYYYMMMDD)				o PARTIAL		LADING NO.
				o FINAL
37. RECEIVED AT	38. RECEIVED BY	39. DATE RECEIVED	40. TOTAL CONTAINERS	41. S/R ACCOUNT NO.	42. S/R VOUCHER NO.
		(YYYYMMMDD)
DD Form 1155, DEC 2001		PREVIOUS EDITION IS OBSOLETE.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

2

        Section B—Supplies or Services and Prices

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0001	CATEGORY I MRAP Vehicles	178	Each	$[***]	$[***]
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN:
			NET AMT		$[***]
	STEPLADDER PRICING
	STEPLADDER NAME	ITEM NO	FROM QUANTITY	TO QUANTITY	UNIT PRICE
	CLIN 0001 CAT I MRAP	001	1.00	200.00	[***]
			201.00	400.00	[***]
			401.00	1,000.00	[***]
			1,001.00	1,500.00	[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0001AA
	CATEGORY I MRAP Vehicles Air Force. Quantity of 31 × $[***]=$[***].
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0001AB
	CATEGORY I MRAP Vehicles Navy. Quantity of 147 × [***] =$[***].
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0002		180	Each	$[***]	$[***]
	CATEGORY II MRAP Vehicles
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN:
			NET AMT		$[***]
	STEPLADDER PRICING
	STEPLADDER NAME	ITEM NO	FROM QUANTITY	TO QUANTITY	UNIT PRICE
	CLIN 0001 CAT I MRAP	001	1.00	200.00	[***]
			201.00	400.00	[***]

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3

			401.00	1,000.00	[***]
			1,001.00	1,600.00	[***]
			1,601.00	2,600.00	[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0002AA			Each
	CATEGORY II MRAP Vehicles USMC. Quantity of 81 × $[***]=$[***].
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0002AB
	CATEGORY II MRAP Vehicles Navy. Quantity of 34 × $[***]=$[***]
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0002AC
	CATEGORY II MRAP Vehicles Air Force. Quantity of 25 × $[***]=$[***]
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0002AD			Each
	CATEGORY II MRAP Vehicles USMC. Quantity of 40 × $[***]=$[***]
	FFP
	In Accordance with SOW and PS.
	FOB: Destination ACRN: AC

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

4

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0085		8	Lot	$[***]	$[***]
	CAT I PLL, NAVY AND AIR FORCE
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table A for list and quantity of Items. A Lot consists of one total amount of Table A.
	FOB: Destination ACRN: AB
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0086		8	Lot	$[***]	$[***]
	CAT II PLL
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table B for list and quantity of items. A Lot consists of one total amount of Table B.
	FOB: Destination ACRN:
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0086AA
	CAT II PLL USMC, 3 × [***]=[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table B for list and quantity of items. A Lot consists of one total amount of Table B.
	FOB: Destination ACRN: AA
		NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0086AB
	CAT II PLL NAVY, 1 × $[***]= $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table B for list and quantity of items. A Lot consists of one total amount of Table B.
	FOB: Destination ACRN: AB
	CIN: M9545008RC001190004
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0086AC
	CAT II PLL AIR FORCE, 1 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table B for list and quantity of items. A Lot consists of one total amount of Table B.
	FOB: Destination ACRN: AB
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

5

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0086AD
	CAT II PLL NAVY, 1 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table B for list and quantity of items. A Lot consists of one total amount of Table B.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0086AE
	CAT II PLL USMC, 2 x $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table B for list and quantity of items. A Lot consists of one total amount of Table B.
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0087		8	Lot	$[***]	$[***]
	CAT I ASL, NAVY AND AIR FORCE
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table C for list and quantity of items. A Lot consists of one total amount of Table C.
	FOB: Destination ACRN: AB
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0088		8	Lot	$[***]	$[***]
	CAT II ASL
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table D for list and quantity of items. A Lot consists of one total amount of Table D.
	FOB: Destination ACRN:
			NET AMT		$[***]

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

6

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0088AA
	CAT II ASL USMC, 3 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table D for list and quantity of items. A Lot consists of one total amount of Table D.
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0088AB
	CAT II ASL NAVY, 1 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table D for list and quantity of items. A Lot consists of one total amount of Table D.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0088AC
	CAT II ASL AIR FORCE, 1 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table D for list and quantity of items. A Lot consists of one total amount of Table D.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0088AD
	CAT II ASL NAVY, 1 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table D for list and quantity of items. A Lot consists of one total amount of Table D.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0088AE
	CAT II ASL USMC, 2 × $[***] = $[***].
	FFP
	1-Yr Spare parts. 1 per 25 vehicles. See Table D for list and quantity of items. A Lot consists of one total amount of Table D.
	FOB: Destination ACRN: AA
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

7

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0093		8	Each	$[***]	$[***]NTE
	CAT I Battle Damage Repair (BDAR), NAVY AND AIR FORCE
	FFP
	See attached CAT I and CAT II BDAR parts list.
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094		8	Each	$[***]	$[***]NTE
	CAT II Battle Damage Repair (BDAR)
	FFP
	See attached CAT I and CAT II BDAR parts list.
	FOB: Destination ACRN:
			NET AMT		[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094AA
	CAT II Battle Damage Repair (BDAR) USMC, 4 × $[***] =$[***].
	FFP
	See attached CAT I and CAT II BDAR parts list.
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094AB
	CAT II Battle Damage Repair (BDAR) NAVY, 2 × $[***]= $[***].
	FFP
	See attached CAT I and CAT II BDAR parts list.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094AC
	CAT II Battle Damage Repair (BDAR) AIR FORCE, 1 × $[***]=$[***].
	FFP
	See attached CAT I and CAT II BDAR parts list.
	FOB: Destination ACRN: AB
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

8

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094AD
	CAT II Battle Damage Repair (BDAR) USMC, 1 × $[***] = $[***].
	FFP
	See attached CAT I and CAT II BDAR parts list.
	FOB: Destination ACRN: AA
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0095		2	Each	$[***]	$[***] NTE
	CAT I Deprocessing Kit, NAVY AND AIR FORCE
	FFP
	In accordance with CAT I Deprocessing Kit list.
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0096		2	Each	$[***]	$[***]NTE
	CAT II Deprocessing Kit
	FFP
	In accordance with CAT II Deprocessing Kit list.
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0096AA
	CAT II Deprocessing Kit USMC, 1 × $[***] = $[***]
	FFP
	In accordance with CAT II Deprocessing Kit list.
	FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0096AB
	CAT II Deprocessing Kit NAVY, 1 × $[***] = $[***].
	FFP
	In accordance with CAT II Depocessing Kit list.
	FOB: Destination ACRN: .AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0100		178	EA	$[***]	$[***]NTE
	ECP Lighting—CAT I, NAVY AND AIR FORCE
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***] NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

9

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0101		180	EA	$[***]	$[***] NTE
	ECP Lighting—CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***] NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0101AA
	ECP Lighting—CAT II USMC, 81 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0101AB
	ECP Lighting—CAT II NAVY, 34 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0101AC
	ECP Lighting—CAT II AIR FORCE, 25 × $[***]= $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0101AD
	ECP Lighting—CAT II USMC, 40 × $[***]= $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

10

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0102		1	LOT	$[***]	$[***]NTE
	ECP Lighting—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0103		1	LOT	$[***]	$[***]NTE
	ECP Lighting—Nonrecurring CAT II FFP FOB: Destination ACRN:
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0103AA
	ECP Lighting—Nonrecurring CAT II USMC, 1 × $[***] = $[***]. FFP FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0103AB
	ECP Lighting—Nonrecurring CAT II NAVY, 1 × $[***] = $[***].
	FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0103AC
	ECP Lighting—Nonrecurring CAT II AIR FORCE, 1 × $[***] =$[***].
	FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0103AD
	ECP Lighting—Nonrecurring CAT II USMC, 1 × $[***]= $[***]. FFP FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

11

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0104		180	EA	$[***]	$[***]NTE
	ECP CASEVAC CAT II In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0104AA
	ECP CASEVAC CAT II USMC, 81 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0104AB
	ECP CASEVAC CAT II NAVY, 34 × $[***]= $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0104AC
	ECP CASEVAC CAT II AIR FORCE, 25 × $[***]= $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0104AD
	ECP CASEVAC CAT II USMC, 40 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

12

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0105		1	LOT		$[***]NTE
	ECP CASEVAC—Nonrecurring CAT II FFP FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0105AA
	ECP CASEVAC—Nonrecurring CAT II USMC, 1 × $[***] =$[***]. FFP FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0105AB
	ECP CASEVAC—Nonrecurring CAT II NAVY, 1 × $[***] =$[***]. FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0105AC
	ECP CASEVAC—Nonrecurring CAT II AIR FORCE, 1 × $[***] =$[***]. FFP FOB: Destination ACRN: AB
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0105AD
	ECP CASEVAC—Nonrecurring CAT II USMC, 1 × $[***] =$[***]. FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0106		178	EA	$[***]	$[***]NTE
	ECP Power Receptacle & Back Up Alarm—CAT I, NAVY AND AIR FORCE In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0107		180	EA	$[***]	$[***]NTE
	ECP Power Receptacle & Back Up Alarm—CAT II In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN:
			NET AMT		$[***]NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

13

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0107AA
	ECP Power Receptacle & Back Up Alarm—CAT II USMC, 81 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0107AB
	ECP Power Receptacle & Back Up Alarm—CAT II NAVY, 34 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: .AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0107AC
	ECP Power Receptacle & Back Up Alarm—CAT II AIR FORCE, 25 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0107AD
	ECP Power Receptacle & Back Up Alarm—CAT II USMC, 40 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0108		1	LOT	$[***]	$[***]NTE
	ECP Power Receptacle & Back Up Alarm—Nonrecurring CAT I, NAVY AND AIR FORCE FFP FOB: Destination ACRN: AB
			NET AMT		$[***]NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

14

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0109		1	LOT	$[***]	$[***]NTE
	ECP Power Receptacle & Back Up Alarm—Nonrecurring CAT II FFP FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0109AA
	ECP Power Receptacle & Back Up Alarm—Nonrecurring CAT II USMC, 1 × $[***] = $[***]. FFP FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0109AB
	ECP Power Receptacle & Back Up Alarm—Nonrecurring CAT II NAVY, 1 × $[***] = $[***]. FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0109AC
	ECP Power Receptacle & Back Up Alarm—Nonrecurring CAT II AIR FORCE, 1 × $[***] = $[***]. FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0109AD
	ECP Power Receptacle & Back Up Alarm—Nonrecurring CAT II USMC, 1 × $[***] = $[***]. FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0110		178	EA	$[***]	$[***]NTE
	ECP Auto Fire Extinguisher System (AFES)—CAT I, NAVY AND AIR FORCE In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AB
			NET AMT		$[***]NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

15

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0111		180	EA	$[***]	$[***]NTE
	ECP Auto Fire Extinguisher System (AFES)—CAT II In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0111AA
	ECP Auto Fire Extinguisher System (AFES)—CAT II USMC, 81 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0111AB
	ECP Auto Fire Extinguisher System (AFES)—CAT II NAVY, 34 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0111AC
	ECP Auto Fire Extinguisher System (AFES)—CAT II AIR FORCE, 25 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0111AD
	ECP Auto Fire Extinguisher System (AFES)—CAT II USMC, 40 × $[***] = $[***]. In accordance with CDRL A006, Engineering Change Proposal FFP FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

16

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0112		1	LOT	$[***]	$[***]NTE
	ECP Auto Fire Extinguisher System (AFES)—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0113		1	LOT	$[***]	$[***]NTE
	ECP Auto Fire Extinguisher System (AFES)—Nonrecurring CAT II
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0113AA
	ECP Auto Fire Extinguisher System (AFES)—Nonrecurring CAT II USMC, 1 × $[***] = $[***] .
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0113AB
	ECP Auto Fire Extinguisher System (AFES)—Nonrecurring CAT II NAVY, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0113AC
	ECP Auto Fire Extinguisher System (AFES)—Nonrecurring CAT II AIR FORCE, 1 × $[***]= $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

17

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0113AD
	ECP Auto Fire Extinguisher System (AFES)—Nonrecurring CAT II USMC 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0114		178	EA	$[***]	$[***]NTE
	ECP Suspension CAT I, NAVY AND AIR FORCE
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0115		180	EA	$[***]	$[***]
	ECP Suspension CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0115AA
	ECP Suspension CAT II USMC, 81 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0115AB
	ECP Suspension CAT II NAVY, 34 × $[***]= $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0115AC
	ECP Suspension CAT II AIR FORCE, 25 × $[***]= $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

18

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0115AD
	ECP Suspension CAT II USMC, 40 × $[***]= $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0116		1	LOT	$[***]	$[***] NTE
	ECP Suspension—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***] NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0117		1	LOT	$[***]	$[***] NTE
	ECP Suspension—Nonrecurring CAT II
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***] NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0117AA
	ECP Suspension—Nonrecurring CAT II USMC, 1 × $[***]=$[***].
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0117AB	ECP Suspension—Nonrecurring CAT II NAVY, 1 × $[***]=$[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

19

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0117AC
	ECP Suspension—Nonrecurring CAT II AIR FORCE, 1 × $[***]=$[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0117AD
	ECP Suspension—Nonrecurring CAT II USMC, 1 × $[***]=$[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0118		178	EA	$[***]	$[***]NTE
	ECP Fuel Tanks—CAT I, NAVY AND AIR FORCE
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0119		180	EA	$[***]	$[***]NTE
	ECP Fuel Tanks—CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0119AA
	ECP Fuel Tanks—CAT II USMC, 81 × $[***] = [***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0119AB
	ECP Fuel Tanks—CAT II NAVY, 34 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

20

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0119AC
	ECP Fuel Tanks—CAT II AIR FORCE, 25 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0119AD
	ECP Fuel Tanks—CAT II USMC, 40 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0120		1	LOT	$[***]	$[***]NTE
	ECP Fuel Tanks—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0121		1	LOT	$[***]	$[***]NTE
	ECP Fuel Tanks—Nonrecurring CAT II
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0121AA
	ECP Fuel Tanks—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AA
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

21

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0121AB
	ECP Fuel Tanks—Nonrecurring CAT II NAVY, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0121AC
	ECP Fuel Tanks—Nonrecurring CAT II AIR FORCE, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0121AD
	ECP Fuel Tanks—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0122		178	EA	$[***]	$[***]NTE
	ECP Seat and Seat Belts—CAT I, NAVY AND AIR FORCE
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0123		180	EA	$[***]	$[***]NTE
	ECP Seat and Seat Belts—CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0123AA
	ECP Seat and Seat Belts—CAT II USMC, 81 × $[***] = [***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AA
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

22

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0123AB	ECP Seat and Seat Belts—CAT II NAVY, 34 × $[***] = $[***]
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0123AC
	ECP Seat and Seat Belts—CAT II AIR FORCE, 25 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0123AD
	ECP Seat and Seat Belts—CAT II USMC, 40 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0124		1	LOT	$[***]	$[***]NTE
	ECP Seat and Seat Belts—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination ACRN: AB
			NET AMT	$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0125		1	LOT	$[***]	$[***]NTE
	ECP Seat and Seat Belts—Nonrecurring CAT II
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

23

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0125AA
	ECP Seat and Seat Belts—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0125AB
	ECP Seat and Seat Belts—Nonrecurring CAT II NAVY, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0125AC
	ECP Seat and Seat Belts—Nonrecurring CAT II AIR FORCE, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0125AD
	ECP Seat and Seat Belts—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0126		178	EA	$[***]	$[***]NTE
	ECP 7 Inch Headroom Clearance CAT I, NAVY AND AIR FORCE
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0127		180	EA	$[***]	$[***]NTE
	ECP 7 Inch Headroom Clearance CAT II
	In accordance with CDRL A0006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

24

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0127AA
	ECP 7 Inch Headroom Clearance CAT II USMC, 81 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0127AB
	ECP 7 Inch Headroom Clearance CAT II NAVY, 34 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0127AC
	ECP 7 Inch Headroom Clearance CAT II AIR FORCE, 25 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0127AD
	ECP 7 Inch Headroom Clearance CAT II USMC, 40 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0128		1	LOT	$[***]	$[***]NTE
	ECP 7 Inch Headroom Clearance—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination ACRN: AB
			NET AMT		$[***]NTE

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

25

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0129		1	LOT	$[***]	$[***]NTE
	ECP 7 Inch Headroom Clearance—Nonrecurring CAT II
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0129AA
	ECP 7 Inch Headroom Clearance—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0129AB
	ECP 7 Inch Headroom Clearance—Nonrecurring CAT II NAVY, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0129AC
	ECP 7 Inch Headroom Clearance—Nonrecurring CAT II AIR FORCE, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0129AD
	ECP 7 Inch Headroom Clearance—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

26

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0130		178	EA	$[***]	$[***]NTE
	ECP Alternator Upgrade—CAT I, NAVY AND AIR FORCE
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0131		180	EA	$[***]	$[***]NTE
	ECP Alternator Upgrade—CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0131AA
	ECP Alternator Upgrade—CAT II USMC, 81 × $[***] = [***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0131AB
	ECP Alternator Upgrade—CAT II NAVY, 34 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0131AC
	ECP Alternator Upgrade—CAT II AIR FORCE, 25 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

27

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0131AD
	ECP Alternator Upgrade—CAT II USMC, 40 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0132		1	LOT	$[***]	$[***]NTE
	ECP Alternator Upgrade—Nonrecurring CAT I, NAVY AND AIR FORCE
	FFP
	FOB: Destination
	ACRN: AB
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0133		1	LT	$[***]	$[***]NTE
	ECP Alternator Upgrade—Nonrecurring CAT II
	FFP
	FOB: Destination
	ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0133AA
	ECP Alternator Upgrade—Nonrecurring CAT II USMC, 1 × $[***]= $[***].
	FFP
	FOB: Destination
	ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0133AB
	ECP Alternator Upgrade—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0133AC
	ECP Alternator Upgrade—Nonrecurring CAT II AIR FORCE, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

28

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0133AD
	ECP Alternator Upgrade—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0134		180	EA	$[***]	$[***]NTE
	ECP "A" Kit—CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0134AA
	ECP "A" Kit—CAT II USMC, 81 × $[***] = [***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0134AB
	ECP "A" Kit—CAT II USMC, 34 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0134AC
	ECP "A" Kit—CAT II AIR FORCE, 25 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

29

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0134AD
	ECP "A" Kit—CAT II USMC, 40 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0135		1	LOT	$[***]	$[***]NTE
	ECP "A" Kit—Nonrecurring CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0135AA
	ECP "A" Kit—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0135AB
	ECP "A" Kit—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0135AC
	ECP "A" Kit—Nonrecurring CAT II AIR FORCE, 1 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

30

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0135AD
	ECP "A" Kit—Nonrecurring CAT II USMC, 1 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0136		180	EA	$[***]	$[***]NTE
	ECP Survivability Exterior Ballistic EFP Kit—CAT II
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0136AA
	ECP Survivability Exterior Ballistic EFP Kit—CAT II USMC, 81 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AA
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0136AB
	ECP Survivability Exterior Ballistic EFP Kit—CAT II NAVY, 34 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0136AC
	ECP Survivability Exterior Ballistic EFP Kit—CAT II AIR FORCE, 25 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT		$[***]

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

31

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0136AD
	ECP Survivability Exterior Ballistic EFP Kit—CAT II USMC, 40 × $[***] = $[***].
	In accordance with CDRL A006, Engineering Change Proposal
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT		$[***]
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0137		1	LOT	$[***]	$[***]NTE
	ECP Survivability Exterior Ballistic EFP Kit Nonrecurring—CAT II
	FFP
	FOB: Destination
	ACRN:
			NET AMT		$[***]NTE
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0137AA
	ECP Survivability Exterior Ballistic EFP Kit Nonrecurring—CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AA
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0137AB
	ECP Survivability Exterior Ballistic EFP Kit Nonrecurring—CAT II NAVY, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0137AC
	ECP Survivability Exterior Ballistic EFP Kit Nonrecurring—CAT II AIR FORCE, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0137AD
	ECP Survivability Exterior Ballistic EFP Kit Nonrecurring—CAT II USMC, 1 × $[***] = $[***].
	FFP
	FOB: Destination
	ACRN: AC
			NET AMT

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

32

Section E—Inspection and Acceptance

INSPECTION AND ACCEPTANCE TERMS

Supplies/services will be inspected/accepted at:

CLIN	INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
0001	Origin	Government	Origin	Government
0002	Origin	Government	Origin	Government
0085	Origin	Government	Origin	Government
0086	Origin	Government	Origin	Government
0087	Origin	Government	Origin	Government
0088	Origin	Government	Origin	Government
0089	Origin	Government	Origin	Government
0090	Origin	Government	Origin	Government
0091	Origin	Government	Origin	Government
0092	Origin	Government	Origin	Government
0093	Origin	Government	Origin	Government
0094	Origin	Government	Origin	Government
0095	Origin	Government	Origin	Government
0096	Origin	Government	Origin	Government
0097	Origin	Government	Origin	Government
0098	Origin	Government	Origin	Government
0099	Origin	Government	Origin	Government
0100	Origin	Government	Origin	Government
0101	Origin	Government	Origin	Government
0102	Origin	Government	Origin	Government
0103	Origin	Government	Origin	Government
0104	Origin	Government	Origin	Government
0105	Origin	Government	Origin	Government
0106	Origin	Government	Origin	Government
0107	Origin	Government	Origin	Government
0108	Origin	Government	Origin	Government
0109	Origin	Government	Origin	Government
0110	Origin	Government	Origin	Government
0111	Origin	Government	Origin	Government
0112	Origin	Government	Origin	Government
0113	Origin	Government	Origin	Government
0114	Origin	Government	Origin	Government
0115	Origin	Government	Origin	Government
0116	Origin	Government	Origin	Government
0117	Origin	Government	Origin	Government
0118	Origin	Government	Origin	Government
0119	Origin	Government	Origin	Government
0120	Origin	Government	Origin	Government
0121	Origin	Government	Origin	Government
0122	Origin	Government	Origin	Government
0123	Origin	Government	Origin	Government
0124	Origin	Government	Origin	Government
0125	Origin	Government	Origin	Government
0126	Origin	Government	Origin	Government
0127	Origin	Government	Origin	Government
0128	Origin	Government	Origin	Government
0129	Origin	Government	Origin	Government
0130	Origin	Government	Origin	Government

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

33

0131	Origin	Government	Origin	Government
0132	Origin	Government	Origin	Government
0133	Origin	Government	Origin	Government
0134	Origin	Government	Origin	Government
0135	Origin	Government	Origin	Government
0136	Origin	Government	Origin	Government
0137	Origin	Government	Origin	Government

Section F—Deliveries or Performance

DELIVERY INFORMATION

JUNE	6 June 08	13 June 08	20 June 08	27 June 08	TOTAL
CAT I	12	18	22	28	80
CAT II	12	18	23	29	82

JULY	4 July 08	11 July 08	18 July 08	25 July 08	TOTAL
CAT I	14	22	27	35	98
CAT II	14	22	27	35	98

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

34

CLIN	DELIVERY DATE	QUANTITY		SHIP TO ADDRESS	UIC
0001	6-JUN-08		12	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 09C11 BLDG 3112 M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-1639 843-218-4876 FOB: Destination		N65236
0001	13-JUN-08		18	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0001	20-JUN-08		22	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0001	27-JUN-08		28	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0001	4-JUL-08		14	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0001	11-JUL-08		22	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0001	18-JUL-08		27	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0001	25-JUL-08		35	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0002	6-JUN-08		12	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 09C11 BLDG 3112 M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-1639 843-218-4876 FOB: Destination		N65236
0002	13-JUN-08		18	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0002	20-JUN-08		23	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0002	27-JUN-08		29	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0002	4-JUL-08		14	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

35

CLIN	DELIVERY DATE	QUANTITY		SHIP TO ADDRESS	UIC
0002	11-JUL-08		22	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0002	18-JUL-08		27	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0002	25-JUL-08		35	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
00085	15-JUL-2008		8	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 09C11 BLDG 3112 M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-1639 843-218-4876 FOB: Destination		N65236
0086	15-JUL-2008		8	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0087	15-JUL-2008		8	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0088	15-JUL-2008		8	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0093	15-JUL-2008		8	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0094	15-JUL-2008		8	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0095	15-JUL-2008		2	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 2921 AVE B NORTH BLDG 1639 NORTH CHARLESTON, SC 29405-1639
				MARK FOR: USMC TMO-EAST OIF M/F MMX160 AL TAQQADUM AB HABBANYIYAH IQ		N65236
0096	15-JUL-2008		2	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0100	INCLUDED IN VEHICLE		178	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 09C11 BLDG 3112 M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-1639 843-218-4876 FOB: Destination		N65236

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

36

CLIN	DELIVERY DATE	QUANTITY		SHIP TO ADDRESS	UIC
0101	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0102			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0103			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0104	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0105			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0106	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0107	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0108			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0109			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0110	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0111	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0112			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0113			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0114	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0115	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0116			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0117			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0118	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

37

CLIN	DELIVERY DATE	QUANTITY		SHIP TO ADDRESS	UIC
0119	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0120			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0121			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0122	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0123	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0124			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0125			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0126	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0127	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0128			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0129			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0130	INCLUDED IN VEHICLE		178	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0131	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0132			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0133			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0134	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0135			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0136	INCLUDED IN VEHICLE		180	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236
0137			1	(SAME AS PREVIOUS LOCATION) FOB: Destination		N65236

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

38

Section G—Contract Administration Data

ACCOUNTING AND APPROPRIATION DATA

AA: 17811096520 310 67854 067443 2D 6520C5
COST CODE: 08RC8609415P5
AMOUNT: $106,759,011.88
CIN M9545008RC860940001: $46,199,484.00
CIN M9545008RC860940002: $49,550,894.88
CIN M9545008RC860940003: $900,560.00
CIN M9545008RC860940004: $8,150,620.00
CIN M9545008RC860940005: $1,957,450.00

AB: 2182035 MRAP 310 67854 067443 2D 2035MR
COST CODE: 08RC0011915US
AMOUNT: $153,988,358.00
CIN M9545008RC001190001: $15,826,740.00
CIN M9545008RC001190002: $7,157,153.00
CIN M9545008RC001190003: $3,843,522.00
CIN M9545008RC001190004: $75,049,380.00
CIN M9545008RC001190005: $33,938,756.00
CIN M9545008RC001190006: $11,549,097.00
CIN M9545008RC001190007: $2,210,992.00
CIN M9545008RC001190008: $4,412,718.00

AC: 2182035 MRAP 310 67854 067443 2D 2035MR
COST CODE: 08RC0011715US
AMOUNT: $117,028,244.52
CIN M9545008RC001170001: $56,466,036.00
CIN M9545008RC001170002: $60,562,208.52

SECTION I—CONTRACT CLAUSES

The following have been added by full text:

52.216-24    LIMITATION OF GOVERNMENT LIABILITY (APR 1984)

(a)

In performing this contract, the Contractor is not authorized to make expenditures or incur obligations exceeding $77,063,934.26 dollars.

(b)

The maximum amount for which the Government shall be liable if this contract is terminated is $77,063,934.26 dollars.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

39

(End of clause)

252.217-7027 CONTRACT DEFINITIZATION (OCT 1998)

(a)

A fixed price Indefinite Delivery/Indefinite Quantity modification is contemplated. The Contractor agrees to begin promptly negotiating with the Contracting Officer the terms of a definitive contract that will include (1) all clauses required by the Federal Acquisition Regulation (FAR) on the date of execution of the undefinitized contract action, (2) all clauses required by law on the date of execution of the definitive contract action, and (3) any other mutually agreeable clauses, terms, and conditions. The Contractor agrees to submit a firm price proposal and cost or pricing data supporting its proposal.

(b)

The schedule for definitizing this contract is as follows (insert target date for definitization of the contract action and dates for submission of proposal, beginning of negotiations, and, if appropriate, submission of the make-or-buy and subcontracting plans and cost or pricing data).

EVENT	DATE
ECPs and ROMs received	29 November–3 December 2007
Technical Evaluations Received	3 December 2007
Bilateral Modification Awards	18 December 2007
Baseline Definitization Proposals Received	18 January 2008
DCAA Audits Received	4 March 2008
Pre-Negotiations Clearances Approved	11 March 2008
Negotiations Complete	18 March 2008
Post Negotiation Clearances Approved	25 March 2008
Definitize Contract Modifications Executed	1 April 2008

(c)

If agreement on a definitive contract action to supersede this undefinitized contract action is not reached by the target date in paragraph (b) of this clause, or within any extension of it granted by the Contracting Officer, the Contracting Officer may, with the approval of the head of the contracting activity, determine a reasonable price or fee in accordance with subpart 15.4 and part 31 of the FAR, subject to Contractor appeal as provided in the Disputes clause. In any event, the Contractor shall proceed with completion of the contract, subject only to the Limitation of Government Liability clause.

(1)

After the Contracting Officer's determination of price or fee, the contract shall be governed by—

(i)

All clauses required by the FAR on the date of execution of this undefinitized contract action for either fixed-price or cost-reimbursement contracts, as determined by the Contracting Officer under this paragraph (c);

(ii)

All clauses required by law as of the date of the Contracting Officer's determination; and

(iii)

Any other clauses, terms, and conditions mutually agreed upon.

(2)

To the extent consistent with paragraph (c)(1) of this clause, all clauses, terms, and conditions included in this undefinitized contract action shall continue in effect, except those that by their nature apply only to an undefinitized contract action.

(d)

The definitive contract resulting from this undefinitized contract action will include a negotiated firm-fixed-price delivery order modification in no event to exceed $154,127,868.52.

(End of clause)

(End of Summary of Changes)

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

40

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EXHIBIT 10.57

EX-10.58

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Exhibit 10.58

MODIFICATION NUMBER TWO
TO PROMISSORY NOTE

Force Protection, Inc.
9801 Highway 78
Ladsdon, South Carolina 29456

Force Protection Technologies, Inc.
9801 Highway 78
Ladson, South Carolina 29456

Force Protection Industries, Inc.
9801 Highway 78
Ladson, South Carolina 29456
(Individually and collectively, "Borrower")

Wachovia Bank, National Association
177 Meeting Street, Suite 450
Charleston, South Carolina 29401
(Hereinafter referred to as "Bank")

THIS AGREEMENT is entered into effective as of January 9, 2008 by and between Bank and Borrower.

RECITALS

Bank is the holder of a Promissory Note executed and delivered by Borrower dated July 20, 2007, as modified on September 30, 2007, in the original principal amount of $50,000,000.00 (the "Note"):

Borrower and Bank have agreed to modify the terms of the Note.

In consideration of Bank's continued extension of credit and the agreements contained herein, the parties agree as follows:

AGREEMENT

ACKNOWLEDGMENT OF BALANCE.    Borrower acknowledges that the most recent Commercial Loan Invoice sent to Borrower with respect to the Obligations under the Note is correct.

MODIFICATIONS.

The Note is hereby modified by deleting the provisions in the Note establishing the repayment terms and substituting the following in their place and stead:

REPAYMENT TERMS.    The Note shall be due and payable in consecutive monthly payments of accrued interest only, commencing on January 9, 2008, and continuing on the same day of each month thereafter until fully paid. In any event, all principal and accrued interest shall be due and payable on March 7, 2008.

ACKNOWLEDGMENTS AND REPRESENTATIONS.    Borrower acknowledges and represents that the Note and other Loan Documents, as amended hereby, are in full force and effect without any defense, counterclaim, right or claim of set-off; that, after giving effect to this Agreement, no default or event that with the passage of time or giving of notice would constitute a default under the Loan Documents has occurred, all representations and warranties contained in the Loan Documents are true and correct as of this date, all necessary action to authorize the execution and delivery of this Agreement has been taken; and this Agreement is a modification of an existing obligation and is not a novation.

COLLATERAL.    Borrower acknowledges and confirms that there have been no changes in the ownership of any collateral pledged to secure the Obligations (the "Collateral") since the Collateral was originally pledged; Borrower acknowledges and confirms that the Bank has existing, valid first priority security interests and liens in the Collateral and that such security interests and liens shall secure Borrower's Obligations, including any modification of the Note or Loan Agreement, if any, and all future modifications, extensions, renewals and/or replacements of the Loan Documents.

MISCELLANEOUS.    This Agreement shall be construed in accordance with and governed by the laws of the applicable state as originally provided in the Loan Documents, without reference to that state's conflicts of law principles. This Agreement and the other Loan Documents constitute the sole agreement of the parties with respect to the subject matter thereof and supersede all oral negotiations and prior writings with respect to the subject matter thereof. No amendment of this Agreement, and no waiver of any one or more of the provisions hereof shall be effective unless set forth in writing and signed by the parties hereto. The illegality, unenforceability or inconsistency of any provision of this Agreement shall not in any way affect or impair the legality, enforceability or consistency of the remaining provisions of this Agreement or the other Loan Documents. This Agreement and the other Loan Documents are intended to be consistent. However, in the event of any inconsistencies among this Agreement and any of the Loan Documents, the terms of this Agreement, and then the Note, shall control. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts. Each such counterpart shall be deemed an original, but all such counterparts shall together constitute one and the same agreement. Terms used in this Agreement which are capitalized and not otherwise defined herein shall have the meanings ascribed to such terms in the Note. LIMITATION ON LIABILITY, WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO, INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. Final Agreement. This Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent agreements of the parties. There are no unwritten agreements between the parties.

WAIVER OF JURY TRIAL.    TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF BORROWER BY EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO, THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS AGREEMENT, EACH OF THE PARTIES AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS AGREEMENT.

IN WITNESS WHEREOF, the undersigned have duly signed and sealed this Agreement the day and year first above written.

Force Protection, Inc.
By:	/s/ MICHAEL MOODY	(SEAL)
	Michael Moody, President
Force Protection Technologies, Inc.
By:	/s/ MICHAEL MOODY	(SEAL)
	Michael Moody, President
Force Protection Industries, Inc,
By:	/s/ MICHAEL MOODY	(SEAL)
	Michael Moody, President
Wachovia Bank, National Association
By:	/s/ GUY M. MEARES, III	(SEAL)
	Guy M. Meares, III, Senior Vice President

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Exhibit 10.58

EX-10.59

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Exhibit 10.59

FIRST AMENDMENT TO LOAN AGREEMENT

        This First Amendment to Loan Agreement ("First Amendment") is executed effective this 9th day of January 2008 among Force Protection, Inc., Force Protection Industries, Inc., and Force Protection Technologies, Inc. (collectively, the "Borrower") and Wachovia Bank, National Association ("Bank") and amends that Loan Agreement among Borrower and Bank dated July 20, 2007 (the "Loan Agreement").

Factual Background

        Bank currently has a $50,000,000 revolving line of credit loan (the "Loan") outstanding to Borrower pursuant to the Loan Agreement. Borrower has requested and Bank has agreed to amend certain financial covenants and affirmative covenants contained in the Loan Agreement provided the Borrower continues to comply with the terms and conditions set forth in the Loan Agreement, as modified hereby.

        NOW THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and intending to be legally bound, the parties hereto agree as follows:

        1.     Any capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Loan Agreement.

        2.     The Financial Covenants paragraph is amended by deleting the Deposit Relationship requirement and replacing it with the following:

        "Deposit Relationship.    Borrower shall maintain a non-interest bearing demand deposit account with a minimum daily balance of at least $15,000,000.00 and all of its other depository and treasury services with Bank."

        3.     The Affirmative Covenants paragraph is amended by adding the following requirement:

        "Loan Commitment.    Borrower shall provide satisfactory evidence to Bank, by February 15, 2008, of Borrower's asset based lending commitment from a financial institution, which may include Bank."

        4.     From the effective date hereof, any reference to the "Loan Agreement" in any Loan Document shall mean the Loan Agreement as amended by this First Amendment.

        5.     Prior to or at Closing of the First Amendment, Borrower shall meet the pre-closing requirements set forth in this Paragraph 5. and Bank shall not be required to make any further advances on the Loan until such pre-closing requirements are met.

a.

Borrower will provide Bank with resolutions authorizing the transactions contemplated herein and designating an officer to sign the Loan Documents on its behalf.



b.

Borrower will provide Bank with a Secretary's Certificate certifying that there have been no changes in its Articles of Incorporation or Bylaws since September 30, 2007.



c.

Borrower shall provide Bank with such other documents, instruments or agreements as Bank shall deem necessary for increasing the Loan in its reasonable discretion.

        6.     Each Borrower hereby represents and warrants that at the time of the execution and delivery of this First Amendment it is in compliance with all of its covenants set forth in the Loan

1

Agreement and any other Loan Documents, and that the representations and warranties set forth therein pertaining to it continue to be true and accurate.

        7.     Each Borrower agrees to hold Bank harmless and indemnify Bank and its successors and assigns from any and all claims or causes of action arising in connection with this First Amendment or otherwise related to the Loan.

        8.     Borrower agrees to pay at closing all costs and expenses arising from this First Amendment, including, without limitation, all Bank fees and expenses, including a $125,000 Bank fee, and fees and expenses of Bank's legal counsel.

        9.     Borrower agrees to execute and deliver to Bank, promptly upon request from Bank, such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein.

        10.   This First Amendment may be executed in two (2) or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

        11.   This First Amendment is not a novation and, except as otherwise modified hereby, the terms and provisions of the Loan Agreement and all Loan Documents shall remain in full force and effect.

        12.   This First Amendment shall be governed by South Carolina law. Provided however, to the extent that the creation, validity, perfection, enforceability or priority of any lien or security interest, or the rights and remedies with respect to any lien or security interest, in the Collateral (defined in the Loan Agreement) are governed by the laws of a jurisdiction other than the State of South Carolina, then the laws of such jurisdiction shall govern, except as superseded by applicable United States Federal Law.

        13.   This First Amendment reflects the complete agreement of the parties hereto as to the matters set forth herein and supersedes all prior negotiations and oral understandings and is hereby incorporated into the Loan Agreement as if set forth herein.

2

        IN WITNESS WHEREOF, the parties have executed this Agreement under seal to be effective as of the date first written above.

BORROWER:
Force Protection, Inc.
By:	/s/ MICHAEL MOODY Michael Moody, President	(SEAL)
Force Protection Technologies, Inc.
By:	/s/ MICHAEL MOODY Michael Moody, President	(SEAL)
Force Protection Technologies, Inc.
By:	/s/ MICHAEL MOODY Michael Moody, President	(SEAL)
BANK:
Wachovia Bank, National Association
By:	/s/ GUY M. MEARES, III Guy M. Meares, III, Senior Vice President	(SEAL)

3

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Exhibit 10.59

FIRST AMENDMENT TO LOAN AGREEMENT

EX-10.60

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Exhibit 10.60

MODIFICATION NUMBER THREE
TO PROMISSORY NOTE

Force Protection, Inc.
9801 Highway 78
Ladsdon, South Carolina 29456

Force Protection Technologies, Inc.
9801 Highway 78
Ladson, South Carolina 29456

Force Protection Industries, Inc.
9801 Highway 78
Ladson, South Carolina 29456
(Individually and collectively, "Borrower")

Wachovia Bank, National Association
177 Meeting Street, Suite 450
Charleston, South Carolina 29401
(Hereinafter referred to as "Bank")

        THIS AGREEMENT is entered into effective as of February 15, 2008 by and between Bank and Borrower.

RECITALS

        Bank is the holder of a Promissory Note executed and delivered by Borrower dated July 20, 2007, as modified on September 30, 2007 and on January 9, 2008, in the original principal amount of $50,000,000.00 (the "Note");

        Borrower and Bank have agreed to modify the terms of the Note.

        In consideration of Bank's continued extension of credit and the agreements contained herein, the parties agree as follows:

AGREEMENT

         ACKNOWLEDGMENT OF BALANCE.    Borrower acknowledges that the most recent Commercial Loan Invoice sent to Borrower with respect to the Obligations under the Note is correct.

         MODIFICATIONS.    The Note is hereby modified by deleting the provisions in the Note establishing the repayment terms and substituting the following in their place and stead:

         REPAYMENT TERMS.    The Note shall be due and payable in consecutive monthly payments of accrued interest only, commencing on March 9, 2008, and continuing on the same day of each month thereafter until fully paid. In any event, all principal and accrued interest shall be due and payable on May 9, 2008.

         ACKNOWLEDGMENTS AND REPRESENTATIONS.    Borrower acknowledges and represents that the Note and other Loan Documents, as amended hereby, are in full force and effect without any defense, counterclaim, right or claim of set-off; that, after giving effect to this Agreement, no default or event that with the passage of time or giving of notice would constitute a default under the Loan Documents has occurred, all representations and warranties contained in the Loan Documents are true and correct as of this date, all necessary action to authorize the execution and delivery of this Agreement has been taken; and this Agreement is a modification of an existing obligation and is not a novation.

         COLLATERAL.    Borrower acknowledges and confirms that there have been no changes in the ownership of any collateral pledged to secure the Obligations (the "Collateral") since the Collateral was originally pledged; Borrower acknowledges and confirms that the Bank has existing, valid first priority security interests and liens in the Collateral; and that such security interests and liens shall secure Borrower's Obligations, including any modification of the Note or Loan Agreement, if any, and all future modifications, extensions, renewals and/or replacements of the Loan Documents.

         MISCELLANEOUS.    This Agreement shall be construed in accordance with and governed by the laws of the applicable state as originally provided in the Loan Documents, without reference to that state's conflicts of law principles. This Agreement and the other Loan Documents constitute the sole agreement of the parties with respect to the subject matter thereof and supersede all oral negotiations and prior writings with respect to the subject matter thereof. No amendment of this Agreement, and no waiver of any one or more of the provisions hereof shall be effective unless set forth in writing and signed by the parties hereto. The illegality, unenforceability or inconsistency of any provision of this Agreement shall not in any way affect or impair the legality, enforceability or consistency of the remaining provisions of this Agreement or the other Loan Documents. This Agreement and the other Loan Documents are intended to be consistent. However, in the event of any inconsistencies among this Agreement and any of the Loan Documents, the terms of this Agreement, and then the Note, shall control. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts. Each such counterpart shall be deemed an original, but all such counterparts shall together constitute one and the same agreement. Terms used in this Agreement which are capitalized and not otherwise defined herein shall have the meanings ascribed to such terms in the Note. LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO, INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. Final Agreement. This Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent agreements of the parties. There are no unwritten agreements between the parties.

         WAIVER OF JURY TRIAL.    TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF BORROWER BY EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS AGREEMENT. EACH OF THE PARTIES AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION

2

WITH, RELATED TO OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS AGREEMENT.

IN WITNESS WHEREOF, the undersigned have duly signed and sealed this Agreement the day and year first above written.

Force Protection, Inc.
By:	/s/ MICHAEL DURSKI Michael Durski, CFO	(SEAL)
Force Protection Technologies, Inc.
By:	/s/ MICHAEL DURSKI Michael Durski, CFO	(SEAL)
Force Protection Industries, Inc.
By:	/s/ MICHAEL DURSKI Michael Durski, CFO	(SEAL)
Wachovia Bank, National Association
By:	/s/ GUY M. MEARES, III Guy M. Meares, III, Senior Vice President	(SEAL)

3

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Exhibit 10.60

EX-10.61

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Exhibit 10.61

Aerospace/Defense, Inc.
4838 Jenkins Avenue
North Charleston, SC 29405
Telephone: (843) 744-5174
Facsimile: (843) 747-4092
E-mail: garfinklej@intertechsc.com

January 10, 2008

John F. Wall, III, Esquire
Vice President, Legal Affairs
Force Protection Industries, Inc.
9601 Highway 78
Ladson, SC 29456

Re:

Amendment to each of the following Leases between Aerospace/Defense, Inc. (the "Landlord") and Force Protection Industries, Inc. and Force Protection, Inc. (collectively, the "Tenant") (covering various buildings/sites located at the Landlord's industrial development situated in Ladson (Charleston County) South Carolina—extending the Initial Term from July 14, 2008 to January 14, 2009:



1.

Fourth Amended and Restated Industrial Lease (covering certain premises within Building No. 1) effective as of July 1, 2007;



2.

Office Lease dated June 1, 2005 (covering a portion of the Office Area in Building No. 1) last amended by First Amendment to Office Lease effective as of July 1, 2007;



3.

Industrial Lease dated July 13, 2004 (covering a portion of Building No. 2) last amended by Fourth Amendment to Lease effective as of November 1, 2007;



4.

Industrial Lease dated September 2, 2003 (covering Building No. 3) last amended by Second Amendment to Lease effective as of July 1, 2007; and



5.

Ground Lease dated February 1, 2007 (covering the Ground Lease on which Building No. 6 has been built) last amended by First Amendment to Ground Lease effective as of July 1, 2007.

(collectively, the "Leases" and individually a "Lease").

Dear Mr. Wall:

        Pursuant to Section 27K of the Leases (referencing amending each Lease), this letter, when signed by an authorized representative of each Tenant, shall serve as an amendment (the "Extension Amendment") to each of the Leases referenced above.

        The Initial Term (as that term is defined in each such Lease) is hereby extended to and will expire on January 14, 2009.

        For clarification and avoidance of doubt, Section 2 of each Lease (with respect to extending the terms of each Lease) provides in part that the Tenant may extend its option to renew by notice in writing to the Landlord served at least six (6) months and not more than twelve (12) months prior to the end of the Initial Term or the then-current Option Period, as the case may be. Therefore, in order for the Tenant to exercise its option to extend the Initial Term of each Lease (should the Tenant so desire to exercise such right(s)) due to expire on January 14, 2009, as provided for in this Extension Amendment, the Tenant must serve a notice in writing upon the Landlord no later than July 14, 2008.

        If this Extension Amendment or the signature page, as executed, is transmitted by one party to the other by facsimile transmission or electronic "pdf" transmission, such transmission shall be deemed an executed original of this Extension Amendment and of such signature.

        Except as modified by this Extension Amendment, the Leases remain unchanged.

        If the Tenants agree to the terms and provisions of this Extension Amendment, please have an authorized representative of each Tenant sign below and thereafter either fax or pdf to me the original hereof.

Aerospace/Defense, Inc.

By:	/s/ M. JERRY GARFINKLE M. Jerry Garfinkle
Its:	Assistant Secretary

We agree to the above Extension Amendment

Force Protection Industries, Inc.		Force Protection, Inc.
By:	/s/ MICHAEL MOODY	By:	/s/ MICHAEL MOODY
Its:	President	Its:	President

2

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Exhibit 10.61

EX-10.63

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Exhibit 10.63

SECOND AMENDMENT TO LOAN AGREEMENT

        This Second Amendment to Loan Agreement ("Second Amendment") is executed effective this 15th day of February 2008 among Force Protection, Inc., Force Protection Industries, Inc., and Force Protection Technologies, Inc. (collectively, the "Borrower") and Wachovia Bank, National Association ("Bank") and amends that Loan Agreement among Borrower and Bank dated July 20, 2007, as amended on January 9, 2008 (together, the "Loan Agreement").

Factual Background

        Bank currently has a $50,000,000 revolving line of credit loan (the "Loan") outstanding to Borrower pursuant to the Loan Agreement. Borrower has requested and Bank has agreed to amend certain affirmative covenants contained in the Loan Agreement, provided the Borrower continues to comply with the terms and conditions set forth in the Loan Agreement, as modified hereby.

        NOW THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and intending to be legally bound, the parties hereto agree as follows:

        1.     Any capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Loan Agreement.

        2.     The Affirmative Covenants paragraph is amended by amending the following requirement:

"Loan Commitment.    Borrower shall provide satisfactory evidence to Bank, by April 18, 2008, of Borrower's asset based lending commitment from a financial institution, which may include Bank."

        3.     From the effective date hereof, any reference to the "Loan Agreement" in any Loan Document shall mean the Loan Agreement as amended by this Second Amendment.

        4.     Prior to or at Closing of the Second Amendment, Borrower shall meet the pre-closing requirements set forth in this Paragraph 4 and Bank shall not be required to make any further advances on the Loan until such pre-closing requirements are met.

a.

Borrower will provide Bank with resolutions authorizing the transactions contemplated herein and designating an officer to sign the Loan Documents on its behalf.



b.

Borrower will provide Bank with a Secretary's Certificate certifying that there have been no changes in its Articles of Incorporation or Bylaws since January 9, 2008.



c.

Borrower shall provide Bank with such other documents, instruments or agreements as Bank shall deem necessary for increasing the Loan in its reasonable discretion.

        5.     Each Borrower hereby represents and warrants that at the time of the execution and delivery of this Second Amendment it is in compliance with all of its covenants set forth in the Loan Agreement and any other Loan Documents, and that the representations and warranties set forth therein pertaining to it continue to be true and accurate.

        6.     Each Borrower agrees to hold Bank harmless and indemnify Bank and its successors and assigns from any and all claims or causes of action arising in connection with this Second Amendment or otherwise related to the Loan.

        7.     Borrower agrees to pay at closing all costs and expenses arising from this Second Amendment, including, without limitation, all Bank fees and expenses and fees and expenses of Bank's legal counsel.

        8.     Borrower agrees to execute and deliver to Bank, promptly upon request from Bank, such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein.

        9.     This Second Amendment may be executed in two (2) or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

        10.   This Second Amendment is not a novation and, except as otherwise modified hereby, the terms and provisions of the Loan Agreement and all Loan Documents shall remain in full force and effect.

        11.   This Second Amendment shall be governed by South Carolina law. Provided however, to the extent that the creation, validity, perfection, enforceability or priority of any lien or security interest, or the rights and remedies with respect to any lien or security interest, in the Collateral (defined in the Loan Agreement) are governed by the laws of a jurisdiction other than the State of South Carolina, then the laws of such jurisdiction shall govern, except as superseded by applicable United States Federal Law.

        12.   This Second Amendment reflects the complete agreement of the parties hereto as to the matters set forth herein and supercedes all prior negotiations and oral understandings and is hereby incorporated into the Loan Agreement as if set forth herein.

        IN WITNESS WHEREOF, the parties have executed this Agreement under seal to be effective as of the date first written above.

BORROWER:
Force Protection, Inc.
By:	/s/ MICHAEL DURSKI Michael Durski, CFO	(SEAL)
Force Protection Technologies, Inc.
By:	/s/ MICHAEL DURSKI Michael Durski, CFO	(SEAL)
Force Protection Industries, Inc.
By:	/s/ MICHAEL DURSKI Michael Durski, CFO	(SEAL)
BANK:
Wachovia Bank, National Association
By:	/s/ GUY M. MEARES, III Guy M. Meares, III, Senior Vice President	(SEAL)

2

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Exhibit 10.63

EX-10.64

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Exhibit 10.64

April 15, 2008

Mr. Michael Moody
Chairman and Chief Executive Officer
Force Protection Industries, Inc.
9801 Highway 78
Ladson, South Carolina 29456

RE: Modification to the Second Amendment to Loan Agreement dated February 15, 2008

Dear Michael:

        Please allow this letter to confirm the waiver of the following affirmative covenant requirement in the Second Amendment to Loan Agreement dated February 15, 2008:

"Loan Commitment—Borrower shall provide satisfactory evidence to Bank, by April 18, 2008, of Borrower's asset based lending commitment from a financial institution, which may include Bank."

        All other terms and conditions will remain in force.

        Please advise if you have any questions or concerns.

        Thank you for allowing Wachovia to serve your company's banking needs.

Kindest Regards,
Wachovia Bank, N.A.

/s/ GUY M. MEARES, III
Guy M. Meares, III
Senior Vice President
Senior Relationship Manager
Acknowledgements:

Force Protection, Inc.

By:	/s/ MICHAEL MOODY Michael Moody, Chief Executive Officer
Force Protection Technologies, Inc.
By:	/s/ MICHAEL MOODY Michael Moody, Chief Executive Officer
Force Protection Industries, Inc.
By:	/s/ MICHAEL MOODY Michael Moody, Chief Executive Officer

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Exhibit 10.64

EX-10.65

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Exhibit 10.65

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT						1. CONTRACT ID CODE	PAGE OF PAGES
						J	1    31
2.	AMENDMENT/MODIFICATION NO. P00008		3. EFFECTIVE DATE 21-Feb-2008	4.	REQUISITION/PURCHASE REQ. NO. SEE SCHEDULE	5. PROJECT NO. (If applicable)
6.	ISSUED BY	CODE	M67854	7.	ADMINISTERED BY (If other than item 6)	CODE	S1103A
	MARCORSYSCOM ATTN CT/LYNN FRAZIER 2200 LESTER STREET QUANTICO VA 22134-5010				DCMA ATLANTA ATTN: KAREN BENNER, 2300 LAKE PARK DRIVE SUITE 300 SMYNRA GA 30080	SCD:	A
8.	NAME AND ADDRESS OF CONTRACTOR (No., Street, County, State and Zip Code)				9A. AMENDMENT OF SOLICITATION NO.
	FORCE PROTECTION INDUSTRIES, INC DAMON WALSH				9B. DATED (SEE ITEM 11)
	9801 HIGHWAY 78, #1 LADSON SC 29456			X	10A. MOD. OF CONTRACT/ORDER NO. M67854-06-C-5162
CODE 1EFH8		FACILITY CODE		X	10B. DATED (SEE ITEM 13) 11-Aug-2006
11.    THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
o	The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer    o is extended,     o is not extended.
Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: (a) By completing Items 8 and 15, and returning    copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.
12.	ACCOUNTING AND APPROPRIATION DATA (If required)
See Schedule
13.    THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
	A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
	B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103 (B).
X	C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: FAR 43.103(b) and FAR 6.302-4
	D. OTHER (Specify type of modification and authority)
B.	IMPORTANT:    Contractor    o is not,    ý is required to sign this document and return 1 copies to the issuing office.
14.	DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)
	Modification Control Number:    hamptonc081003
	Modification issued to order 174 additional Mastiff MK2 (Cougar 6x6l) vehicles for the United Kingdom Ministry of Defense in accordance with the configuration requirements as defined in FPII's February 14, 2008, attachment; extend the period of performance for Field Service Representatives (FSR) by one more year for each current FSR; provide for additional FSR support; purchase of battery powered motorized traversing units, spares, workshop infrastructure sets, and special tool sets.
	This modification also incorporates special contract requirements for Field Service Representatives in Iraq and Afghanistan. In addition, provisions are incorporated to allow for definitization of the not to exceed prices incorporated in this modification. NOTE: FPII Technical Representative for this modification, Susan Harp, can be reached at 843-574-7157.
All other terms and conditions remain in effect.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, is heretofore changed, remains unchanged and in full force and effect.

15A. NAME AND TITLE OF SIGNER (Type or print)		16A. NAME AND TITLE OF CONTRACTING/OFFICER (Type or print)
OTIS BYRD		CARL V. BRADSHAW / CONTRACTING OFFICER
DIRECTOR OF CONTRACTS		TEL: (703) 432-4825    EMAIL: carl.bradshaw@usmc.mil
15B. CONTRACTOR/OFFEROR	15C. DATE SIGNED	16B. UNITED STATES OF AMERICA	16C. DATE SIGNED
/s/ OTIS BYRD (Signature of person authorized to sign)	2/21/2008	BY /s/ Carl V. Bradshaw (Signature of Contracting Officer)	22-Feb-2008

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

SECTION SF 30 BLOCK 14 CONTINUATION PAGE

SUMMARY OF CHANGES

SECTION A—SOLICITATION/CONTRACT FORM

The total cost of this contract was increased by $115,167,467.00 from $71,258,176.16 to $186,425,643.16.
The Authority USC 41 checkbox not checked has been added.
The Authority USC 10 checkbox has changed from checked to not checked.
The Authority USC 10 4 has been deleted.

SECTION B—SUPPLIES OR SERVICES AND PRICES

CLIN 0110 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0110		25	Each	$[***]	$[***]NTE
	Mastiff MK2—Lot 1
	FFP
	FMS CASE: UK-P-LTQ, MILSTRIP: PUK245/7351/6001/0LTO; RSN: 008;
	PURCHASE REQUEST NUMBER: M6785408RCF0051AA
	The vehicle will be a 6x6 Cougar vehicle similar in configuration as those delivered previously under this contract, modified to reflect configuration changes identified in document entitled Mastiff MK2 CONFIGURATION 2-14-08, copy of which is attached to this modification. Early delivery of vehicles is acceptable.
	FOB: Origin
				NET AMT	$[***]
	ACRN BP				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

2

CLIN 0111 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0111		2	Each	$[***]	$[***]NTE
	Mastiff MK2—Lot 2
	FFP
	FMS CASE: UK-P-LTQ, MILSTRIP: PUK245/7351/6011/0LTQ; RSN: 009;
	PURCHASE REQUEST NUMBER: M6785408RCF0051AB
	The vehicle will be a 6x6 Cougar vehicle similar in configuration to those delivered previously under this contract, modified to reflect configuration changes identified in document entitled Mastiff MK2 CONFIGURATION 2-14-08, copy of which is attached to this modification. Early delivery of vehicles is acceptable.
	FOB: Origin
				NET AMT	$[***]
	ACRN BM				$[***]
	CIN: 000000000000000000000000000000
CLIN 0112 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0112		150	Each	$[***]	$[***] NTE
	Transversing Units
	FFP
	FMS CASE: UK-P-LTQ, MILSTRIP: PUK245/7036/6020/0LTQ; RSN: 007;
	PURCHASE REQUEST NUMBER: M6785408RCF0051AC
	Battery Powered Motorized Transversing Units. Early delivery of units is acceptable.
	FOB: Origin
				NET AMT	$[***]
	ACRN BN				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3

CLIN 0113 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0113		72	Months	$[***]	$[***]NTE
	Field Service Representative—Lot 1
	FFP
	FMS CASE: UK-P-LTQ, MILSTRIP: PUK244/7351/6021/0LTQ; RSN: 010;
	PURCHASE REQUEST NUMBER: M6785408RCF0051AD
	Extend FSR services. Extension for 6 FSR's from 25 Feb 2008 to 24 Feb 2009. This category FSR is for Specialist Welder and Mechanic/Welder.
	FOB: Origin
				NET AMT	$[***]
	ACRN BQ				$[***]
	CIN: 000000000000000000000000000000
CLIN 0114 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0114		12	Months	$[***]	$[***] NTE
	Field Service Representative—Lot 2
	FFP
	FMS CASE: UK-P-LTQ, MILSTRIP: PUK244/7351/6023/0LTQ; RSN: 010;
	PURCHASE REQUEST NUMBER: M6785408RCF0051AF
	Extend FSR services—Extension for 1 FSR from 3 July 2008 to 2 July 2009. This rate is for FSR Maintenance Manager.
	FOB: Origin
				NET AMT	$[***]
	ACRN BR				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

4

CLIN 0115 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0115		12	Months	$[***]	$[***]NTE
	Field Service Representative
	FFP
	FMS CASE: UK-P-LTQ; MILSTRIP: PUK244/7351/6022/0LTQ; RSN: 010;
	PURCHASE REQUEST NUMBER: M6785408RCF0051 AE
	FSR services for Category II Vehicles—1 Additional FSR from 1 July 2008 to 30 June 2009. This FSR Rate is for Specialist Welder and Mechanic/Welders and will provide support as a roving FSR primarily for services to be performed in the UK.
	FOB: Origin
				NET AMT	$[***]
	ACRN BS				$[***]
	CIN: 000000000000000000000000000000
CLIN 0116 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0116		147	Each	$[***]	$[***] NTE
	Mastiff MK2—Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/6001/0LTR; RSN: 001;
	PURCHASE REQUEST NUMBER: M6785408RCF0076 AA
	The vehicle will be a 6x6 Cougar vehicle similar in configuration to those delivered previously under this contract, modified to reflect configuration changes identified in document entitled Mastiff MK2 CONFIGURATION 2-14-08, copy of which is attached to this modification. Early delivery of vehicles is acceptable. Vehicle Delivery requirements are as follows: 3 on June 30, 2008; 30 on 31 July 2008; 30 on 31 Aug 2008; 30 on 30 Sep 2008; 30 on 31 Oct 2008; and 24 on 30 Nov 2008.
	FOB: Origin
				NET AMT	$[***]
	ACRN BV				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

5

CLIN 0117 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0117		1	Lot	$[***]	$[***] NTE
	Mastiff Spares for Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/6011/0LTR; RSN: 002;
	PURCHASE REQUEST NUMBER: M6785408RCF0076AB
	FOB: Origin
				NET AMT	$[***]
	ACRN BU				$[***]
	CIN: 000000000000000000000000000000
CLIN 0118 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0118		12	Months	$[***]	$[***] NTE
	FSR—Maintenance Manager for Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/8001/0LTR; RSN: 004;
	PURCHASE REQUEST NUMBER: M6785408RCF0076AC
	In accordance with Statement of Work
	FOB: Destination
				NET AMT	$[***]
	ACRN BZ				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

6

CLIN 0119 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0119		24	Months	$[***]	$[***] NTE
	FSR—Mechanic Welder for Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/8002/0LTR; RSN: 004;
	PURCHASE REQUEST NUMBER: M6785408RCF0076 AD
	In accordance with Statement of Work
	FOB: Destination
				NET AMT	$[***]
	ACRN CA				$[***]
	CIN: 000000000000000000000000000000
CLIN 0120 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0120		36	Each	$[***]	$[***] NTE
	FSR-Mechanic Welder for Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/8003/0LTR; RSN: 004;
	PURCHASE REQUEST NUMBER: M6785408RCF0076 AE;
	In accordance with Statement of Work.
	FOB: Destination
				NET AMT	$[***]
	ACRN CB				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

7

CLIN 0124 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0124		2	Set	$[***]	$[***] NTE
	Operator, Maintenance & Parts Catalogues
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/9001/0LTR; RSN: 003;
	PURCHASE REQUEST NUMBER: M6785408RCF0076 AF
	Current Catalogues for MRAP 6x6 Vehicles
	FOB: Origin
				NET AMT	$[***]
	ACRN CC				$[***]
	CIN: 000000000000000000000000000000
CLIN 0125 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0125		2	Each	$[***]	$[***] NTE
	Workshop Infrastructure Sets for Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/6012/0LTR; RSN: 002;
	PURCHASE REQUEST NUMBER: M6785408RCF0076 AG
	In accordance with Statement of Work.
	FOB: Origin
				NET AMT	$[***]
	ACRN CE				$[***]
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

8

CLIN 0126 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0126		12	Each	$[***]	$[***] NTE
	Special Tool Sets for Lot 3
	FFP
	FMS CASE: UK-P-LTR; MILSTRIP: PUK045/8022/6013/0LTR; RSN: 002;
	PURCHASE REQUEST NUMBER: M6785497RCF0076 AH
	In accordance with Statement of Work
	FOB: Origin
				NET AMT	$[***]
	ACRN CD				$[***]
	CIN: 000000000000000000000000000000

SECTION C—DESCRIPTIONS AND SPECIFICATIONS

The following have been added by full text:

ATTACHMENT

The following have been added by full text:

SHIP TO ADDRESS FOR THIRD PARTY DELIVERY:

The contractor is authorized to delivery to the following third party warehouse under this contract—Premier Logistics Solutions Warehousing LLC

904 Commerce Circle
Charleston, SC 29406-3002
Cage: 4WR19

PLACE OF PERFORANCE:

The place of performance may take place at either of the following locations:

a.

Force Protection Industries, Inc.

99801 Highway 78
Ladson, SC 29456
Cage: 1EFH8

b.

Premier Logistics Solutions Warehousing LLC

904 Commerce Circle
Charleston, SC 29406-3002
Cage: 4WR19

Mastiff MK2 CONFIGURATION 1-30-08
Contract No. M67854-06-C-5162

The configuration changes identified in Attachment A: MASTIFF MK2 SPECIFICATION of 2-14-08 are included in the unit price for CLINs 0110, 0111, and 0116:

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

9

DESCRIPTION / STATEMENT OF WORK

1.0    Introduction

This Statement of Work defines the effort required to procure and deliver version two of the Mastiff Protected Patrol Vehicles (MK2) to the United Kingdom Ministry of Defense (UK MoD). The contractor, Force Protection Industries Incorporated (FPII), shall provide warranties, parts blocks, and field support representatives.

2.0    Guidance Documents

MIL-STD-129P, dated 15 January 2004, Military Marking for Shipment and Storage
MIL-STD 2073, Standard Practice for Military Packaging
UK Letter of Request, dated 21 September 2007
UK Letter of Request (revision), dated 9 November 2007
UK Letter of Request (revision), dated 14 December 2007
STANAG 4107, Mutual Acceptance of Government Quality Assurance and Usage of the Allied Quality Assurance Publications
AQAP-2070, NATO Mutual Government Quality Process

3.0    Requirements

FPII shall build and deliver Mastiff MK2 vehicles as set forth under this contract. Visual and functional quality control inspections shall be performed at FPII on all Mastiff MK2 vehicles prior to delivery to the United Kingdom Defense Procurement Office.

Additional support shall include delivering Mastiff MK2, warranties, spares, special tools and test equipment (STTE) as well as providing Field Support Representatives (FSR) required to perform maintenance and support . FSR activity shall be contracted for one year.

3.1    Technical Compliance with Performance Specification.    FPII shall propose and deliver Mastiff MK2 vehicles which are compliant with the capabilities stated within the Performance Specifications. Technical compliance shall be based upon evidence (i.e. test or performance data) of ability of the platform to meet the requirements as set forth in the specification, as well as conformance to the delivery schedule.

3.1.2    Safety.    FPII shall deliver Mastiff MK2 vehicles that can be safely operated in harsh, improved road environments. FPII shall provide sufficient evidence of the safety of the platform, as defined by commercial and industrial standards in effect at the time of award of the contract. FPII shall minimize or eliminate hazards associated with the vehicle and its use.

3.2    Support

3.2.1    Supply Support.    FPII shall ship in place all vehicles, spares, special tools and test equipment, publications and Battery Powered Motorized Traversing Units (BPMTUs) added under this contract, citing the following In-Country/Mark For Address:

NP Aerospace Ltd.
Mastiff MK2 Integration Section
473 Folehill Road
Coventry CV6 5AQ, England.

The UK Ministry of Defense Freight Forwarder will arrange for all shipments to the UK or to the theater of operations.

3.2.2    Field Service Representatives.    FPII shall extend the current seven (7) Field Service Representatives (FSRs) under CLINs 0113 and 0114. FPII will also provide an additional one (1) FSR under CLIN 0115 to support operation and maintenance of the Mastiff MK1 as a roving FSR primarily in the UK as well as provide an additional six (6) FSRs under CLINs 0118, 0119 and 0120 to support the operation and maintenance of the Mastiff MK2 to

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

10

Forward Operating Bases (FOB) in Afghanistan. The UK MoD requires the additional six (6) FSRs for Afghanistan with the following skill sets; One (1) maintenance manager. three (3) certified mechanic welders and two (2) specialist armor welders. FSRs shall possess certifications and experience in Automotive Technician Repair and Universal Air Conditioning Certification. FSR welders will be certified by FPII in armor welding.

FPII shall be responsible for the recruitment and deployment preparation process, to include medical and dental screening, and necessary travel documentation. Prior to deployment to theater, FSRs shall be suitably qualified and skilled in the operation and maintenance, troubleshooting, repair, service, warranty actions, training, and logistics functions required to support the Mastiff MK1 and MK2 at FPII. FPII shall equip FSRs with the necessary diagnostic equipment and special tools and test equipment (STTE) to support the Mastiff MK1 and MK2 in theater.

The UK Government shall provide subsistence, lodging, prompt (emergency) medical and dental treatment, personal protective equipment and clothing as required and secure transportation within theater. Secure travel is defined as military fixed-wing or rotary-wing aircraft, STANAG Level III-A armored vehicles to include armored combat vehicles and up-armored troop transport vehicles.

The UK Government shall, within 60 calendar days of award of this modification, provide a pick-up truck for use by FSRs at each Theater of Operations.

FSRs shall have dedicated work location access to a secure internet site to view technical data packages, order repair parts, and for e-mail communication to complete assigned tasks. FPII will provide for Broadband Internet Access for these FSRs in each Theater of Operation during the performance periods identified for CLINS 0113,0114, 0115, 0118, 0119 and 0120.

FSRs shall be provided secure worksites, petroleum, oils and lubricants (POL) products, heavy lift capabilities (crane, fork lift, vehicle jacks, etc.), on-call Material Handling Equipment (MHE), storage, support personnel and other items to support Mastiff vehicles. Government owned parts, tools, vehicles, and materials under control of FPII FSRs shall be administered in accordance with FAR Subpart 45-402 and FAR Clause 52.245-2.

FSRs shall provide Intermediate Level Repair and replacement of major components of the Mastiff MK2 to maintain combat readiness. FSRs shall be responsible for Preventive Maintenance Services or Scheduled Services to ensure safe and efficient operation of the vehicle and its sub-components. FSRs shall provide the UK Operating Forces with a written schedule indicating the intervals with service to be performed at the prescribed FOB or site. FSRs shall perform scheduled services in accordance with the procedures outlined in the maintenance Technical Manual (TM) and maintenance shall be recorded in the service schedule maintenance database. FSRs shall also perform unscheduled maintenance, to include maintenance and supply actions resulting from Preventive Maintenance Checks and Services and PMS inspections, breakdowns, fair wear and tear as specified in the maintenance TM. Maintenance and supply actions not covered in the applicable maintenance TM shall be treated on a case-by-case basis and negotiated between the Contracting Officer (CO) and FPII.

Specific maintenance functions of the FSRs will also include inspection, receipt, de-processing, issue, transfer, service, diagnosis, maintenance of Line Replaceable Units (LRUs), and conduct battle damage assessment and repairs.

Mastiffs with catastrophic damage from combat action and require extensive repairs, will be referred to the CO or his designated representative for classification and disposition. The supported UK military activities are responsible for towing and evacuation of their vehicles. Dependent upon the details of the tactical situation, FSRs could be called upon to assess and assist with the recovery operations.

FPII will support inventory management and part ordering through the Government Program Office. Repair parts, to include warranty action shipments, shall be located at the central FOB. Movement of all repair parts shall be conducted by the supported UK military activities.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

11

FSRs shall provide weekly equipment status readiness report to the UK MoD Mastiff PM or designated project officer. Readiness reports indicate overall readiness of equipment for mission capable, and ready status in the applicable TM. FSRs should have Broadband Internet Access provided and funded uner this contract in order to provide this report and pass technical information required to provide support of these vehicles.

FSRs shall conduct Operator New Equipment Training (OPNET) and Maintenance New Equipment Training (MNET), as required. FSR instructors shall also assist UK Operating Forces in the development of qualified trainers by participating in Train-the-Trainer sessions.

3.2.3    Forward Operating Base Facilities (FOB).    UK Forward Operating Base Facilities (FOB) shall provide an environmentally protected work area suitable for conducting 24-hour maintenance operations. The worksite shall have available facility power, or power generation equipment capable of 110VAC (nominal), 60Hz, 220VAC (nominal) 60Hz, or 220VAC (nominal) 50 Hz capable of uninterrupted supply of continuous amperage (10 KW, nominal) to operate one welder, one air compressor, one standard window mounted air conditioner, shop lights, small ventilation and exhaust fans, and hand-operated electric power tools. The supported UK military activities shall provide Petroleum, Oils, and Lubricants (POL) products required for maintenance and services. FOB shall provide the FSRs with overhead lift capabilities, dedicated equipment to support sustained lift of 12 tons, approximately ¹/2 the vehicle weight. The FOB shall also provide basic material handling equipment to support supply and storage operations (e.g. single fork truck). FOB shall have suitable entry and egress for vehicles, overflow vehicle storage, storage space for bulk POL provisioned separately, disposal of waste POL products, and space for military shipment containers, ISO containers, CONEX containers or other secure storage containers for repair parts and tools. The worksite should also provide local telephone access. Additionally, FOB shall provide tire mounting equipment required for operations.

3.3    Technical Data

FPII shall provide Manufacturers Bill of Material (MBOM) to identify the configuration of the vehicle and all associated parts. This data will support the design changes from Mastiff MK1 configuration to Mastiff MK2 configuration. The Purchaser will use this data to develop Mastiff MK2 Army Engineering Support Publications (AESP) using the previous Mastiff MK1 manuals. This data will further be used to modify the Purchaser's Mastiff training manuals.

3.4    Copyrighted Material—FPII shall identify copyrighted material, if any, and shall obtain the written approval of the copyright owner. FPII shall furnish appropriate copyright release giving both the U.S. and the UK Governments permission to reproduce and use copyrighted information.

3.5    Warranty Actions—The assigned FSRs shall make initial determination of warranty actions in accordance with the warranty statements provided in the prime contract. Maintenance or supply actions resulting from fair wear and tear, negligence, willful misuse, and combat damage may not be considered for warranty actions. Damage resulting from a lack of performance of Preventive Maintenance Checks and Services (PMCS) may not be eligible under warranty claims. Damage resulting from recovery operations will be treated as accident damage or combat damage and may also not be eligible for consideration under warranty claims. FPII's Warranty Statement is attached.

3.6    Program Management—FPII shall ensure that administration, logistics, financial, and other task requirements are duly organized in their Program Management to ensure full compliance. FPII management structure ensures overall quality of the vehicle program, as well as, assurance of compliance with the delivery schedule. FPII's designated UK Mastiff MK2 Program Manager serves as the principal representative throughout the contract performance and shall coordinate all activities related to successful performance of the contract including but not limited to coordination of training schedules, interface with logistics activities, conduct meetings with the Marine Corps Systems Command MRAP International Programs Office and UK Ministry of Defense personnel on program status.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

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3.7    Marking and Packing—Each delivery order shall be marked in accordance with MIL-STD-129P. Each order shall be packaged in accordance with MIL-STD 2073, Standard Practice for Military Packaging (Method 10).

3.8    Delivery Dates—The delivery dates listed in Schedule F are contingent upon changes to be made to other USMC contracts that defer vehicle delivery on other contracts to accommodate the delivery schedule incorporated in this modification.

FSRS IN AFGHANISTAN AND IRAQ

The following have been added by full text:

SECTION D—PACKAGING AND MARKING

The following has been modified:

(1)    All shipping documents, both hardcopy DD250's and those in Wide Area Workflow (WAWF,) must cite the applicable FMS Case, MILSTRIP or Transportation Control Number (TCN), and RSN for each Contract Line Item (CLIN) shipped. This information can be found in Section B, under description of Supplies or Services as exampled below:

FMS CASE: UK-P-LTQ
MILSTRIP: PUK245/7351/6001/0LTQ
RSN: 008

For multiple shipments under one CLIN each shipment must have a unique Transportation Control Number (TCN) for tracking purposes. This TCN is made up of the 1^st 14 characters of the MILTRIP followed by a three digit serial number for customs tracking purposes. For example the 1^st shipment under CLIN 0110 would be PUK24573516001XX1, the 2^nd would be PUK24573516001XX2, the 3^rd would be PUK24573516001XX3 and so on until all items are shipped under that CLIN.

(2)    For customs purposes, all shipping documents must correctly identify the export value of the items shipped. For partial shipments, the total CLIN value must not be used, an actual value of the items being shipped under that document must be easily identified for customs personnel.

(3)    Each delivery order shall be marked in accordance with MIL-STD-129P.

(4)    Each order shall be packaged in accordance with MIL-STD 2073, Standard Practice for Military Packaging (Method 10)

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

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September 17, 2007
Force Protection Industries, Inc.
Blast & Ballistic Protected Vehicle Warranty

        Force Protection Industries, Inc. (the "Company") warrants the material and workmanship of its blast & ballistic protected vehicle (the "Vehicle") to be of good quality and free of defects for a period of one (1) year from the date of delivery to the customer. Delivery date for the Vehicle is defined as the DD Form 250 acceptance date. The Company warrants all spare parts for a period of ninety (90) days. This warranty does not extend to the Vehicle's engine, transmission, axles and other systems to the extent that such components are covered by third party OEM manufacturer warranties (list of pass-through warranties contained in Attachment 1).

        This warranty does not cover Vehicle defects caused by neglect, improper use or maintenance, intentional damage, unauthorized modifications or damage as a result of acts of war or terrorism. This warranty does not cover defects caused during the transportation of the vehicle from the place of customer acceptance and the final user location. Except as set forth herein, the Company makes no other representation or warranty, express or implied as to the Vehicle's condition, performance or fitness for its intended use, and in no event shall the Company be liable for any consequential or indirect damages whether such damages result from a defect otherwise covered by this warranty.

        Warranty claims shall be submitted to the Company within a reasonable time after discovery of any defect (see warranty claim procedure, Attachment 2). The company reserves the right to inspecting any vehicle prior to accepting any warranty claim. The Company's obligation under this Warranty is limited to making repairs or providing replacements parts for the defective material or workmanship, such determination to be made in the Company's sole discretion. This warranty does not provide the labor to replace the subject items; except as that which may be provided by the Company Field Service Representatives (FSRs) that are deployed to the vehicle location under contract by the customer.

        In addition to the warranty offered by the Company, the Company will, to the best of their ability, assist in the administration of third party OEM manufacturer warranties. The Customer is to contact the Company, when making all warranty claims; where possible the Company will process the claims to meet the requirements of the company or any third party OEM manufacturer warranties.

        The parties agree the intended use of the Vehicle may include operation in areas of war, civil unrest, insurgency or conflict and that as a result the Vehicle may be exposed to threat of ballistic and/or blast attack. The protective technology incorporated into the Vehicle is intended to minimize the effect of such ballistic and blast attack, however the customer acknowledges and expressly agrees that the Company makes no warranty or representation, express or implied, regarding the ability of the Vehicle to withstand such attack or the occupants to survive bodily injury or death. The customer assumes all risks associated with the use of the Vehicle and waives all claims against the Company arising from or related in any way to the operation and use of, or attack upon, the Vehicle. The Company reserves the right to exclude all warranty claims of whatever kind in the event that the subject defective material is determined to be the result of combat or acts of war. Furthermore, the Vehicle shall be excluded from any warranty claims following the first encounter with a blast event.

        The Vehicle incorporates the Company's proprietary blast protection technology and the customer agrees that it shall not itself, nor shall it knowingly allow any third party to, modify, reverse engineer or otherwise use or exploit such technology for its own purposes. The Customer shall not resell or transfer the Vehicle to any third party without the Company's prior written consent. This Warranty and all claims made hereunder shall be governed by the laws of the State of South Carolina.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

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APPENDIX A—FORCE PROTECTION INDUSTRIES INC.

PASS-THROUGH WARRANTIES

•

Caterpillar (Engine)

        –     36 months, or...

        –     150,000 miles, or...

        –     3,600 hours

        –     In-theater representation (Iraq, Kuwait and Afghanistan)

        –     Inspection Requirements

•

On-site

        –     Engine must be in a vehicle or static test facilities must be available

        –     ECU must be present

•

Evacuation

        –     Engine and ECU must be present

•

Allison (Transmission)

        –     24 months

        –     Miles/Hours—No limit

        –     In-theater representation (Kuwait)

        –     Inspection Requirements

•

Transmission must be in original vehicle



•

Cushman (Transfer)

        –     12 months, or...

        –     1,500 hours

        –     No on-site inspection

        –     Govt. must return unit to FPII via RMA process

•

FPII must return unit to OEM via RMA process



•

Marmon-Herrington (Axles)

        –     12 months, or...

        –     12,000 miles

        –     No on-site inspection

        –     Govt. must return unit to FPII via RMA process

•

FPII must return unit to OEM via RMA process



•

C.E. Niehoff (Alternator)

        –     12 months, or...

        –     1,500 hours, or...

        –     50,000 miles

        –     No on-site inspection

        –     Govt. must return unit to FPII via RMA process

•

FPII must return unit to OEM via RMA process



•

Spartan

        –     12 months

        –     Repair or replacement

        –     Pass-through warranties apply

        –     No on-site inspection

        –     Govt. must return unit to FPII via RMA process

•

FPII must return unit to OEM via RMA process

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

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APPENDIX B—WARRANTY PROCEDURES—WARRANTY CLAIMS PROCESS
I. PURPOSE

A.

These Force Protection Industries, Inc. (FPII) instructions are provided to establish the warranty claim process for reporting product failures from the field, which occur within the prescribed vehicle warranty period and conditions.

B.

The warranty claim process is intended to provide for the initial reporting, corrective action, and tracking status of all warranty claims issued by the using unit.

C.

The warranty claim process is intended to facilitate problem identification and resolution in order to minimize vehicle down time.

II. METHODS OF REPORTING

A.    FPII Field Service Representatives (FSR) will act as the focal point for warranty claim submittals. If equipment is not maintained by an FPII FSR, user designated maintenance personnel shall follow the procedures listed below.

B.    FSRs will conduct initial investigation into all warranty claims and provide recommendation for disposition of warranty claim when reporting the problem.

C.    FSR analysis and investigation will ensure that timely and thorough corrective actions are taken in response to the reported warranty problem.

D.    In addition to normal reporting procedures, warranty claims will be submitted using the FPII Equipment Inspection and Maintenance Worksheet (FPII Form 2404). FSRs will communicate warranty claims to the FPII Integrated Logistics Support (ILS) Department, and send follow-up FPII Form 2404 to FPII via e-mail, to warranty@forceprotection.net. Non-FPII maintenance personnel may request a FPII Form 2404 from this address.

E.    FPII Form 2404 fields should be filled out by the submitting activity to capture all supporting data and facilitate warranty claim processing.

F.    FPII FSR will ensure that FPII Form 2404 is filled out properly and verify that reported failure occurred within the contractually prescribed warranty period.

G.    FPII FSR investigation may determine that failure was not caused by conditions covered under warranty. In this case, the FPII Form 2404 will be submitted as "Information Only," and any repair parts that are needed will be requisitioned by the using unit through the normal supply chain.

III. FPII WARRANTY ADMINISTRATOR

A.    FPII Warranty Administrator will maintain a database for each warranty claim.

B.    Warranty database will include:

•

FPII Form 2404 data



•

Vendor diagnosis (if applicable)



•

Replacement part(s) (if applicable)



•

Services performed (if applicable)

C.    FPII Warranty Administrator will coordinate all warranty actions, as needed, from major equipment vendors.

D.    FPII Warranty Administrator will direct additional failure analysis and/or diagnostic services as needed to resolve open issues.

E.    FPII Warranty Administrator will ensure that warranty replacement parts are shipped in a timely manner to the FSR at the vehicle's base location.

F.    FPII Warranty Administrator will direct, on a case-by-case basis, the distribution of warranty parts and/or systems. Parts or systems directed to be returned to FPII should be sent to:

Force Protection Industries, Inc.

ATTN: Warranty Manager
9801 Highway 78, Bldg. 6
Ladson, SC 29456 USA

IV. CLOSURE OF WARRANTY CLAIM

A.    Warranty claim may be considered closed when a cause has been identified and reported; corrective actions have been completed and documented; FPII has provided disposition instructions for the defective part/equipment; and disposition by using unit has been acknowledged and completed.

B.    Upon completion of warranty claim process, a close-out report will be issued by the FPII Warranty Administrator to include:

•

Results of FSR investigation



•

Results of failure analysis (if applicable)



•

Need for Safety Alerts or Technical Bulletins (if applicable)

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

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C.    During the time period beginning Jan 1, 2007 and ending Sep 15, 2007, FPII has processed twenty-three warranty sales orders.

MASTIFF MK2 CONFIGURATION 2-14-2008 REVISION A

1)

400 Amp Alternator with 10 rib belt

2)

22k axle on all wheel stations, acknowledging a 335 bolt circle (FPI will only rate it at 18,000 lb GAWR—front and 2 × 17,000 or 34,000 lb GAWR—rear)

3)

Reyco Fabricated Front Spring Hangers

4)

ILAV Front Bumper without the ILAV tow bar mounting brackets; tow bar to be supplied with the vehicle and shipped at the same time. (Delete front bumper tow bar mounting brackets

5)

Front towing eyes to be braced as per current Mastiff modification programme (Customer to verify cutout from red-line drawing); Add cut out to front towing support structure for shackle clearance.

6)

Koni shock absorbers on the front axle

7)

Rotation of central axle differential lock

8)

Modification of front wheel arches to avoid contact with wheels when suspension is at full compression.

9)

Trailer socket to interface with UK NATO standard plug; both front and rear will have female connector

10)

Removal of ladders on rear of vehicle and vehicle door

11)

No spall, except the S2 glass and armor on the rear door and the S2 glass for the V-shape hull; this also includes the provision of bosses.

12)

Delete Kevlar roof blankets

13)

Delete tire pressure labels

14)

Diver and Co-Driver seats only

15)

Delete crew seat base tops

16)

Delete A Frame on M-1114 ring mount

17)

Headache Racks and all Associated Mounting Hardware—Keep vertical support and mounting tabs only

18)

Delete crew windows on vehicle sides; Driver and commander side windows to be maintained.

19)

Two escape hatches in rear of vehicle

20)

Delete NBC unit, intake holes and harnesses

21)

Michelin J Rated Tires only

22)

2 × 51 US Gallon fuel tanks

23)

Delete gunners step

24)

UK specified headlights

25)

Delete personal weapon mounts—crew, driver, and co-driver

26)

Delete capsule side blast deflectors—keep front and rear blast deflectors

27)

Delete side door handles (those welded to the capsule)

28)

Delete Fire Extinguishers and Mounting

29)

Delete Rear Step and all Associated Mounting Hardware

30)

Pintle Hook—Keep mounting and pass-through

31)

Delete Tool Boxes and Mounting Studs

32)

Delete Winch, Controls, Mounting and Hardware

33)

Delete Side Marker Lights and Mounting from Front and Rear Fenders but keep harness

34)

2-Piece Seat Belt Brackets at Each Crew Position—keep brackets/vertical structure but no u-channel.

35)

"Red" Blackout Lights

36)

Retain Grote Dome Lights—current design is "velcro'd" to roof

37)

Retain Rear Antenna Mounts

38)

Retain Mastiff Roof Height

39)

Relocation of lines/harnesses underneath right front fender.

40)

Delete front side marker lights and mounting holes. Leave harness

41)

Delete rear side marker lights and mounting holes. Leave harness

42)

Delete left hand / right hand work lights and harnesses.

43)

Front and rear trailer harness to be female connector

44)

Delete inverter and associated cabling

45)

Delete 110V outlet in right rear of vehicle and interior 110V outlets

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

17

46)

Air Conditioning system to be of one type only—either Red Dot or Boosted Mobile Climate Control System.

47)

Windshield wiper system—bottle and filter only. Delete external wiper hardware.

48)

Delete PDM and cables

49)

Delete Go-Light

50)

Add the new 4" access hole within sugar scoop for antenna cable routing with associated ballistic cover welded to capsule

FSRS IN AFGHANISTAN AND IRAQ

The following have been added by full text:

MRAP FIELD SERVICE REPRESENTATIVE (FSR) SOW ADDENDUM

AI 22.1 Prohibition Against Human Trafficking, Inhumane Living Conditions, and Withholding of Employee Passports: The following mandatory requirement applies to all contracts with performance in Iraq and Afghanistan:

Prohibition Against Human Trafficking, Inhumane Living Conditions, and Withholding of Employee Passports (5 Nov 07): All contractors ("contractors" herein below includes subcontractors at all tiers) are reminded of the prohibition contained in Title 18, United States Code, Section 1592, against knowingly destroying, concealing, removing, confiscating, or possessing any actual or purported passport or other immigration document, or any other actual or purported government identification document, of another person, to prevent or restrict or to attempt to prevent or restrict, without lawful authority, the person's liberty to move or travel, in order to maintain the labor or services of that person, when the person is or has been a victim of a severe form of trafficking in persons.

        Contractors are also required to comply with the following provisions:

1)    Contractors shall only hold employee passports and other identification documents discussed above for the shortest period of time reasonable for administrative processing purposes.

2)    Contractors shall provide all employees with a signed copy of their employment contract, in English as well as the employee's native language that defines the terms of their employment/compensation.

3)    Contractors shall not utilize unlicensed recruiting firms, or firms that charge illegal recruiting fees.

4)    Contractors shall be required to provide adequate living conditions (sanitation, health, safety, living space) for their employees. Fifty square feet (50 sf) is the minimum acceptable square footage of personal living space per employee. Upon contractor's written request, contracting officers may grant a waiver in writing in cases where the existing square footage is within 20% of the minimum, and the overall conditions are determined by the contracting officer to be acceptable. A copy of the waiver approval shall be maintained at the respective life support area.

5)    Contractors shall incorporate checks of life support areas to ensure compliance with the requirements of this Trafficking in Persons Prohibition into their Quality Control program, which will be reviewed within the Government's Quality Assurance process.

6)    Contractors shall comply with international laws regarding transit/exit/entry procedures, and the requirements for work visas. Contractors shall follow all Host Country entry and exit requirements.

        Contractors have an affirmative duty to advise the Contracting Officer if they learn of their employees violating the human trafficking and inhumane living conditions provisions contained herein. Contractors are advised that contracting officers and/or their representatives will conduct random checks to ensure contractors and subcontractors at all tiers are adhering to the law on human trafficking, humane living conditions and withholding of passports.

        The contractor agrees to incorporate the substance of this clause, including this paragraph, in all subcontracts under his contract.

AI 25.2 Fitness for Duty and Limits on Medical / Dental Care in Iraq and Afghanistan: The following clause is mandatory for all contracts with performance in Iraq or Afghanistan. When DFARS 252.225-7040 is included, this mandatory language supplements paragraph (c)(2):

Fitness for Duty and Limits on Medical / Dental Care in Iraq and Afghanistan (5 Nov 07): The contractor shall perform the requirements of this contract notwithstanding the fitness for duty of deployed employees, the provisions

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

18

for care offered under this section, and redeployment of individuals determined to be unfit. The contractor bears the responsibility for ensuring all employees are aware of the conditions and medical treatment available at the performance. The contractor shall include this information and requirement in all subcontracts with performance in the theater of operations.

        The contractor shall not deploy an individual with any of the following conditions unless approved by the appropriate CENTCOM Service Component (ie. ARCENT, CENTAF, etc.) Surgeon: Conditions which prevent the wear of personal protective equipment, including protective mask, ballistic helmet, body armor, and chemical/biological protective garments; conditions which prohibit required theater immunizations or medications; conditions or current medical treatment or medications that contraindicate or preclude the use of chemical and biological protectives and antidotes; diabetes mellitus, Type I or II, on pharmacological therapy; symptomatic coronary artery disease, or with myocardial infarction within one year prior to deployment, or within six months of coronary artery bypass graft, coronary artery angioplasty, or stenting; morbid obesity (BMI >/= 40); dysrhythmias or arrhythmias, either symptomatic or requiring medical or electrophysiologic control; uncontrolled hypertension, current heart failure, or automatic implantable defibrillator; therapeutic anticoagulation; malignancy, newly diagnosed or under current treatment, or recently diagnosed/treated and requiring frequent subspecialist surveillance, examination, and/or laboratory testing; dental or oral conditions requiring or likely to require urgent dental care within six months' time, active orthodontic care, conditions requiring prosthodontic care, conditions with immediate restorative dentistry needs, conditions with a current requirement for oral-maxillofacial surgery; new onset (< 1 year)) seizure disorder, or seizure within one year prior to deployment; history of heat stroke; Meniere's Disease or other vertiginous/motion sickness disorder, unless well controlled on medications available in theater; recurrent syncope, ataxias, new diagnosis (< 1year) of mood disorder, thought disorder, anxiety, somotoform, or dissociative disorder, or personality disorder with mood or thought manifestations; unrepaired hernia; tracheostomy or aphonia; renalithiasis, current; active tuberculosis; pregnancy; unclosed surgical defect, such as external fixeter placement; requirement for medical devices using AC power; HIV antibody positivity; psychotic and bipolar disorders. (Reference: Mod 8 to USCENTCOM Individual Protection and Individual/Unit Deployment Policy, PPG-Tab A: Amplification of the Minimal Standards of Fitness for Deployment to the CENTCOM AOR).

        In accordance with military directives (DoDI 3020.41, DoDI 6000.11, CFC FRAGO 09-1038, DoD PGI 225.74), resuscitative care, stabilization, hospitalization at Level III (emergency) military treatment facilities and assistance with patient movement in emergencies where loss of life, limb or eyesight could occur will be provided. Hospitalization will be limited to emergency stabilization and short-term medical treatment with an emphasis on return to duty or placement in the patient movement system. Subject to availability at the time of need, a medical treatment facility may provide reimbursable treatment for emergency medical or dental care such as broken bones, lacerations, broken teeth or lost fillings.

Routine and primary medical care is not authorized. Pharmaceutical services are not authorized for routine or known prescription drug needs of the individual. Routine dental care, examinations and cleanings are not authorized.

        Notwithstanding any other provision of the contract, the contractor shall be liable for any and all medically-related services or transportation rendered. In accordance with OUSD(C) Memorandum dated January 4, 2007, the following reimbursement rates will be charged for services at all DoD deployed medical facilities. These rates are in effect until changed by DoD direction.

        Inpatient daily rate: $1,918.00. Date of discharge is not billed unless the patient is admitted to the hospital and discharged the same day.

        Outpatient visit rate: $184.00. This includes diagnostic imaging, laboratory/pathology, and pharmacy provided at the medical facility.

AI 25.4 Quarterly Contractor Census Reporting. The following mandatory language in the Statement of Work applies to all contracts with contract employees performing in Iraq and Afghanistan:

Quarterly Contractor Census Reporting (12 Nov 07). The prime contractor will report upon contract award and then quarterly thereafter, not later than January, 1 April, 1 July and 1 October, to JCCI.J2J5J7@pco-iraq.net for Iraq and to BGRMPARC-A@swa.army.mil for Afghanistan the following information for the prime contract and all subcontracts under this contract:

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

19

(1)

The total number of contract employees performing on the contract who receive any support benefits, including but not limited to billeting, food, use of exchanges, laundry by host nation, US Nationals, and Third Country Nationals;

(2)

The total number of prime contract employees performing on the contract by host nation, US Nationals, and Third Country National;

(3)

The total number of subcontractor employees performing on the contract by subcontractor, host nation, US Nationals, and Third Country National;

(4)

The company names and contact information of its subcontractors at all tiers; and

(5)

The name of all company POCs who are responsible for entering and updating employee data in the Synchronized Predeployment & Operational Tracker (SPOT) IAW DFAR 252.225-7040 DOD class deviation 2007-O0004 or DFAR DOD class deviation 2007-O0010.

The following clause is added to the contract:

C.6.3.11 IRAQ SOCIOECONOMIC PROGRAM (5 Nov 07)

The Contractor shall maximize the employment, training, and transfer of knowledge, skills and abilities to the Iraqi workforce. The Contractor shall maximize utilization of Iraqi subcontractors and businesses. The offeror shall maximize utilization of material of Iraqi manufacture.

Iraqi First Program Definitions:

Employment means the total number of Iraqi citizens proposed by the offeror for the contract effort, and the total number of Iraqi citizens proposed for the contract effort by each subcontractor, to be directly employed, full or part time, during the life of the contract.

An "Iraqi" company (or subsidiary company) has a principal place of business located within Iraq and the majority shareholder is an Iraqi citizen.

An Iraqi citizen or employee is an individual whose ordinary residence is in Iraq and holds an Iraq-issued passport or Iraq residency papers.

Materiel of Iraqi manufacture includes all items where significant value is added, or a change of form, fit, and function, leading to the final form of the procured end item takes place, within the country of Iraq.

The contractor's efforts to encourage the Iraqi First program will be considered by the government in performance evaluations.

SECTION E—INSPECTION AND ACCEPTANCE

The following Acceptance/Inspection Schedule was added for CLIN 0110:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government
The following Acceptance/Inspection Schedule was added for CLIN 0111:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

20

The following Acceptance/Inspection Schedule was added for CLIN 0112:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government
The following Acceptance/Inspection Schedule was added for CLIN 0113:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0114:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0115:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0116:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0117:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0118:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0119:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0120:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government
The following Acceptance/Inspection Schedule was added for CLIN 0124:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government
The following Acceptance/Inspection Schedule was added for CLIN 0125:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Destination	Government	Destination	Government

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

21

The following Acceptance/Inspection Schedule was added for CLIN 0126:
INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government

SECTION F—DELIVERIES OR PERFORMANCE The following Delivery Schedule item has been added to CLIN 0110:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
30-JUN-2008	25	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0111:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
30-JUN-2008	2	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 3 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0112:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
20-JUL-2008	150	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

22

The following Delivery Schedule item has been added to CLIN 0113:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 25-FEB-2008 TO 24-FEB-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 3 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0114:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 03-JUL-2008 TO 02-JUL-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 3 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0115:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 01-JUL-2008 TO 30-JUN-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 3 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0116:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 30-JUN-2008 TO 30-NOV-2008	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0117:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
31-AUG-2008	1	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

23

The following Delivery Schedule item has been added to CLIN 0118:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 31-MAY-2008 TO 30-MAY-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Destination
The following Delivery Schedule item has been added to CLIN 0119:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 31-MAY-2008 TO 30-MAY-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Destination
The following Delivery Schedule item has been added to CLIN 0120:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
POP 30-JUN-2008 TO 30-JUN-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Destination
The following Delivery Schedule item has been added to CLIN 0124:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
31-MAY-2008	2	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

24

The following Delivery Schedule item has been added to CLIN 0125:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
31-MAY-2008	2	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin
The following Delivery Schedule item has been added to CLIN 0126:
DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
31-MAY-2008	12	FORCE PROTECTION INDUSTRIES, INC. SUSAN HARP 9801 HIGHWAY 78, BLDG 1 LADSON SC 29456 843.740.7015 EXT 330 FOB: Origin

SECTION G—CONTRACT ADMINISTRATION DATA

Accounting and Appropriation

Summary for the Payment Office

        As a result of this modification, the total funded amount for this document was increased by $115,167,467.00 from $71,258,176.16 to $186,425,643.16.

CLIN 0110:

Funding on CLIN 0110 is initiated as follows:

ACRN: BP


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK245/7351/6001/0LTQ


Increase: $14,262,500.00


Total: $14,262,500.00

CLIN 0111:

Funding on CLIN 0111 is initiated as follows:

ACRN: BM


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK245/7351/6011/0LTQ


Increase: $1,141,000.00


Total: $1,141,000.00

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

25

CLIN 0112:

Funding on CLIN 0112 is initiated as follows:

ACRN: BN


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK245/7036/6020/0LTQ


Increase: $1,340,100.00


Total: $1,340,100.00

CLIN 0113:

Funding on CLIN 0113 is initiated as follows:

ACRN: BQ


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK244/7351/6021/0LTQ


Increase: $1,908,000.00


Total: $1,908,000.00

CLIN 0114:

Funding on CLIN 0114 is initiated as follows:

ACRN: BR


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK244/7351/6023/0LTQ


Increase: $420,000.00


Total: $420,000.00

CLIN 0115:

Funding on CLIN 0115 is initiated as follows:

ACRN: BS


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK244/7351/6022/0LTQ


Increase: $318,000.00


Total: $318,000.00

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

26

CLIN 0116:

Funding on CLIN 0116 is initiated as follows:

ACRN: BV


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK045/8022/6001/0LTR


Increase: $83,863,500.00


Total: $83,863,500.00

CLIN 0117:

Funding on CLIN 0117 is initiated as follows:

ACRN: BU


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK045/8022/6011/0LTR


Increase: $9,018,757.00


Total: $9,018,757.00

CLIN 0118:

Funding on CLIN 0118 is initiated as follows:

ACRN: BZ


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK044/8022/8001/0LTR


Increase: $420,000.00


Total: $420,000.00

CLIN 0119:

Funding on CLIN 0119 is initiated as follows:

ACRN: CA


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK044/8022/8002/0LTR


Increase: $636,000.00


Total: $636,000.00

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

27

CLIN 0120:

Funding on CLIN 0120 is initiated as follows:

ACRN: CB


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK044/8022/8003/0LTR


Increase: $954,000.00


Total: $954,000.00

CLIN 0124:

Funding on CLIN 0124 is initiated as follows:

ACRN: CC


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK045/8022/9001/0LTR


Increase: $2,210.00


Total: $2,210.00

CLIN 0125:

Funding on CLIN 0125 is initiated as follows:

ACRN: CE


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK045/8022/6012/0LTR


Increase: $592,139.00


Total: $592,139.00

CLIN 0126:

Funding on CLIN 0126 is initiated as follows:

ACRN: CD


CIN: 000000000000000000000000000000


Acctng Data: MILSTRIP: PUK045/8022/6013/0LTR


Increase: $291,261.00


Total: $291,261.00

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

28

SECTION H—SPECIAL CONTRACT REQUIREMENTS
The following have been added by full text:

AFGHANISTAN AND IRAQ REQMTS

SPECIAL CONTRACT REQUIREMENTS

SECTION H—SPECIAL CONTRACT REQUIREMENTS

The following special conract requirement is added to the contract:

H8 AI 25.3 COMPLIANCE WITH LAWS AND REGULATIONS.

The Contractor shall comply with, and shall ensure that its personnel and its subcontractors and subcontractor personnel at all tiers obey all existing and future U.S. and Host Nation laws, Federal or DoD regulations, and Central Command orders and directives applicable to personnel in Iraq and Afghanistan, including but not limited to USCENTCOM, Multi-National Force and Multi-National Corps fragmentary orders, instructions and directives.

Contractor employees performing in the USCENTCOM Area of Operations are under the jurisdiction of the Uniform Code of Military Justice (UCMJ). Under the UCMJ, U.S. commanders may discipline contractor employees for criminal offenses. Contractors shall advise the Contracting Officer if they suspect an employee has committed an offense. Contractors shall not permit an employee suspected of a serious offense or violating the Rules for the Use of Force to depart Iraq or Afghanistan without approval from the senior U.S. commander in the country.

(End)

SECTION I—CONTRACT CLAUSES

The following have been added by reference:

52.232-32	Performance-Based Payments	JAN 2008
252.211-7003	Item Identification and Valuation	JUN 2005

The following have been added by full text:

CONTRACTOR FURNISHED MATERIEL

CONTRACTOR FURNISHED MATERIEL (CFM).

The contractor is authorized IAW FAR clause 52.251-1 to use DLA as a Source of Supply (SOS) via use of Contractor Furnished Materiel (CFM) Department of Defense Activity Address Code (DODAAC). Authorization enables contractor or authorized subcontractor to use DLA as first source of supply for DLA managed items in support of the contract. Any acquisition from DLA will be a direct transaction between the contractor and DLA. Use of DLA as a SOS will not relieve the contractor of performance under the terms of this contract. DLA will assist USMC CO and contractor and sub-contractors in coordination of required TAC information to build DODAACs to insure proper invoicing and payment.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

29

52.216-23 EXECUTION AND COMMENCEMENT OF WORK (APR 1984)

The Contractor shall indicate acceptance of this letter contract by signing three copies of the contract and returning them to the Contracting Officer not later than seven (7) calendar days. Upon acceptance by both parties, the Contractor shall proceed with performance of the work, including purchase of necessary materials.

(End of clause)

52.216-24 LIMITATION OF GOVERNMENT LIABILITY (APR 1984)

(a) In performing this contract, the Contractor is not authorized to make expenditures or incur obligations exceeding $57,583,733.50 dollars.

(b) The maximum amount for which the Government shall be liable if this contract is terminated is $57,583,733.50 dollars.

(End of clause)

252.217-7027 CONTRACT DEFINITIZATION (OCT 1998)

(a) A fixed-price contract modification is contemplated. The Contractor agrees to begin promptly negotiating with the Contracting Officer the terms of a definitive contract that will include (1) all clauses required by the Federal Acquisition Regulation (FAR) on the date of execution of the undefinitized contract action, (2) all clauses required by law on the date of execution of the definitive contract action, and (3) any other mutually agreeable clauses, terms, and conditions. The Contractor agrees to submit a detailed fixed price proposal and cost or pricing data supporting its proposal.

(b) The schedule for definitizing this contract is as follows (insert target date for definitization of the contract action and dates for submission of proposal, beginning of negotiations, and, if appropriate, submission of the make-or-buy and subcontracting plans and cost or pricing data).

Submission of detailed proposal:	March 15, 2008
Audit of proposal by DCAA:	April 28, 2008
Technical evaluation received:	April 28, 2008
Negotiations completed:	May 12, 2008
Conract Modificaiton Definitized:	May 27, 2008

(c) If agreement on a definitive contract action to supersede this undefinitized contract action is not reached by the target date in paragraph (b) of this clause, or within any extension of it granted by the Contracting Officer, the Contracting Officer may, with the approval of the head of the contracting activity, determine a reasonable price or fee in accordance with subpart 15.4 and part 31 of the FAR, subject to Contractor appeal as provided in the Disputes clause. In any event, the Contractor shall proceed with completion of the contract, subject only to the Limitation of Government Liability clause.

(1) After the Contracting Officer's determination of price or fee, the contract shall be governed by—

(i) All clauses required by the FAR on the date of execution of this undefinitized contract action for either fixed-price or cost-reimbursement contracts, as determined by the Contracting Officer under this paragraph (c);

(ii) All clauses required by law as of the date of the Contracting Officer's determination; and

(iii) Any other clauses, terms, and conditions mutually agreed upon.

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

30

(2) To the extent consistent with paragraph (c)(1) of this clause, all clauses, terms, and conditions included in this undefinitized contract action shall continue in effect, except those that by their nature apply only to an undefinitized contract action.

(d) The definitive contract resulting from this undefinitized contract action will include a negotiated firm-fixed price in no event to exceed $115,167,467.

(End of clause)

The following have been deleted:

52.232-32 Performance-Based Payments FEB 2002

(End of Summary of Changes)

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

31

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Exhibit 10.65

EX-10.66

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Exhibit 10.66

TEAMING AGREEMENT

        THIS TEAMING AGREEMENT ("Agreement") is entered into by the following entities:

DRS Sustainment Systems, Inc., a Delaware corporation, with an address of 201 Evans Lane, St. Louis, MO 63121 ("Prime"),

and

Force Protection, Inc., a Nevada corporation, with an address of 9801 Highway 78 Ladson, SC 29456 ("Sub").

        Prime and Sub may also be referred to in this Agreement individually as a "Party" or collectively as the "Parties" or the "Team."

BACKGROUND

1.

The U.S. Army TACOM Life Cycle Management Command [TACOM LCMC] ("Customer") has issued a solicitation for the Joint Light Tactical Vehicle—Technology Demonstration Phase (the "Procurement").



2.

Prime is experienced in military ground systems integration, as well as the design, development, and production of military trailers, and possesses Intellectual Property (as defined in Article 25) relating thereto that is valuable and proprietary to Prime.



3.

Sub is experienced in the design, development, and production, of wheeled armored vehicles, and possesses Intellectual Property, as defined in Article 25, relating thereto that is valuable and proprietary to Sub.



4.

The Parties thus have unique and complementary backgrounds and capabilities that, together, will enhance the likelihood of achieving the Customer's objectives, reduce technical and financial risks to the Customer, and ensure the maximum potential for competition in responding to the Customer's solicitation.



5.

The Parties recognize the efficiency of teaming and wish to team for the purpose of competitively responding to the Customer's solicitation and performing any resulting contract(s). The Parties have agreed, as set forth in Exhibit A, to the Parties' scope of work.

AGREEMENT

        NOW, THEREFORE, in consideration of the foregoing, and in express reliance on the mutual covenants and conditions contained herein, the Parties agree as follows:

ARTICLE 1.—FORMATION OF TEAM

        Prime and Sub hereby team, in accordance with Federal Acquisition Regulation ("FAR") 9.601, for the purposes of (a) competing for the Procurement (as defined in Article 25), and (b) performing any resulting contract(s). The Parties agree that DRS shall be the prime contractor on behalf of the Team.

ARTICLE 2.—RELATIONSHIP OF THE PARTIES

2.1

Prime and Sub shall act as independent contractors in the performance of this Agreement, and neither Party shall act as agent for or partner of the other Party without the consent of the other Party. Nothing in this Agreement shall be deemed to constitute, create, give effect to or otherwise recognize a joint venture, partnership, or formal business entity of any kind, and the rights and obligations of the Parties shall be limited to those expressly set forth herein. Nothing contained in this Agreement shall be construed as providing for the sharing of profits or losses arising out of the efforts of either or both Parties.

2.2

This Agreement has been entered into solely for the benefit of the Parties and is not intended to create any legal, equitable, or beneficial interest in any third party, or to vest in any third party, any interest with respect to the enforcement or performance of this Agreement. The Parties agree that no customer has any legal interest in this Agreement, or in any dispute arising hereunder, and that no customer is a necessary or indispensable party to any action or proceeding for the resolution of such disputes. The Parties further agree not to assert in any such proceeding that any third party is necessary or indispensable to such proceeding or to a determination of the relief to be granted therein.

ARTICLE 3.—TECHNOLOGY TRANSFER

3.1

Throughout the term of this Agreement, subject always to applicable export control laws and regulations as well as the execution of any required enabling export licenses or agreements:

(a)

Prime shall disclose, and license to Sub, on a nonexclusive, royalty-free basis, on such terms as are provided herein, Intellectual Property relating to the Procurement solely to enable Sub to perform its obligations under this Agreement;

(b)

Sub shall disclose and license to Prime, on a nonexclusive, royalty-free basis, on such terms as are provided herein, Intellectual Property relating to the Procurement solely to enable Prime to perform its obligations under this Agreement; and

(c)

Any subcontract between the Parties resulting from this Agreement shall contain appropriate nonexclusive, royalty-free cross licenses between the Parties, to the extent allowed by law, so as to enable each Party to use the Intellectual Property of the other Party solely to perform its obligations under the subcontract and the related prime contract. Such cross licenses shall terminate no later than the close out of the related prime contract.

3.2

Intellectual Property and proprietary or confidential information disclosed hereunder shall be protected in accordance with the Nondisclosure Agreement between the Parties, dated January 11, 2008. A copy of such agreement is attached as Exhibit B.

3.3

In the event of a termination by Prime of this Agreement due to a material breach or material default of Sub, Sub shall, within five (5) business days from written notification from Prime, transfer and license to Prime all Intellectual Property owned or controlled by Sub that is necessary to enable Prime independently to perform or have performed by others all subcontract requirements under the Procurement that Sub would have been obligated to perform subject to negotiation of a mutually acceptable production license, including fees for the use of Sub's Intellectual Property and Improvements (as hereafter defined) to manufacture Sub's vehicles for the Procurement. This clause, suitably modified to identify the subcontracting parties, shall be included in any subcontract(s) entered into pursuant to this Agreement.

ARTICLE 4.—RESPONSIBILITIES

4.1

Because the proposal effort will involve business risks and necessarily will require the full cooperation of the Parties, the Parties agree, during the term of this Agreement, to work exclusively with each other on the Procurement and to not discuss any aspect of, make proposals to or agreements with, or solicit bids from any other person, firm or legal entity regarding the Procurement, excepting that (a) either Party may deal with vendors, consultants, and other third-parties whose information is reasonably necessary to develop its scope of work for the Team's proposal without approval by the other Party, (b) the parties may, by advance mutual agreement, bring in additional team members to the Team provided that such members will not include a lead systems integrator or a JLTV vehicle provider and (c) Prime may deal with the Customer as well as the Customer's representatives, contractors, and agents. This Agreement is not intended to and

2

shall not be interpreted to in any way abridge, limit, or restrict the rights of the Parties to pursue, either independently or in conjunction with any other person or entity, business opportunities other than the Procurement.

4.2

Prime will maintain exclusively on behalf of the Team responsibility for all contacts and communications with the Customer, all proposal activities and negotiations, all decisions relating to the Procurement, and all post-award activities. Sub will work with and at the direction of Prime. Because the participation of Sub is substantial, Prime will consult with Sub on all major questions of project structure, execution and on marketing and business strategy.

4.3

During the term of this Agreement, each Party will exert its reasonable best efforts, to produce a proposal(s) that will cause selection of Prime as the prime contractor for the Procurement and acceptance of Sub as the subcontractor for the work identified in Exhibit A; provided, however, that Prime may, in its sole discretion, choose not to submit any proposal(s), bids, or other submission, at which time Sub may pursue the Procurement alone or with others.

4.4

Sub will cooperate in supporting the proposal efforts on the Procurement as reasonably requested by Prime. Sub will submit to Prime a proposal for its share of the work that is required by the Customer's solicitation and identified in Exhibit A by the date requested by Prime. As part of any proposal, the Sub shall incorporate all material required to be responsive to the Customer's solicitation that is pertinent to the work assigned to it as defined in Exhibit A, including any appropriate manuscripts, art work, work breakdown structure ("WBS"), technical descriptions, and current, accurate, and complete cost and pricing data in sufficient detail to permit negotiation of the prime contract and negotiation of the subcontract for Sub's work. If required by the Customer's solicitation, Sub may submit its cost or pricing data directly to the U.S. Government for review, provided that Sub submits such data concurrently with Prime's proposal submission to the Customer. Sub represents that its proposed prices will meet the requirements of the Truth in Negotiations Act, P.L. 87-653, as amended, and its implementing regulations.

4.5

Sub shall respond as quickly as practicable to Prime's requests for data and information required by the Prime to facilitate the successful competition by the Team for the Procurement.

4.6

In the event Prime should be involved in any written communications, presentations, or visits with the Customer concerning the Procurement, Sub shall, when requested, reasonably support Prime with respect to Sub's defined areas of work contained in Exhibit A.

4.7

Prime will have the final decision on the form and content of all documents submitted to the Customer; provided, however, that prior to submission of the proposal, Prime will reasonably afford Sub the opportunity to review the form and the content of Prime's proposal and to make recommendations, evaluate and comment on the form and content of Prime's proposal. Recommendations made by Sub as to changes in Proposal content shall be given serious consideration by Prime, but Prime shall have the final determination as to such changes; provided, however, that Prime shall not, without Sub's prior approval, effect any changes in the technical content, scope of work, or pricing of that portion of any Proposal which relates to Sub's area of responsibility. Upon submission of each Proposal, Prime will furnish to Sub two copies thereof, excluding Prime's proprietary information related to cost and pricing. Prime's proposal shall identify Sub as the subcontractor responsible for the work identified in Exhibit A.

4.8

During any negotiation or presentation with the Customer by Prime relative to the Procurement, Sub's personnel, with the authority to make decisions on behalf of Sub, shall be available for consultation with Prime in order that any required changes to Sub's portion of the proposal effort may be agreed upon promptly. Prime will also afford Sub the opportunity to be present at all Procurement presentations, discussions, conferences and Project reviews with Customer and/or other team members.

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4.9

To the extent practicable, Prime shall keep Sub informed of significant events, deadlines, and milestones in the Procurement relating to Sub's effort.

4.10

Each Party shall bear all costs, risks and liabilities incurred by it arising out of its performance of this Agreement; provided, however, that the Prime shall be responsible for the costs of the graphic arts, printing, binding and delivery of the proposal(s). Neither Party shall have any right to any reimbursement, payment or compensation of any kind from the other during the period up to the award of a subcontract unless otherwise specifically agreed in writing by the Parties.

ARTICLE 5.—AWARD OF CONTRACT

5.1

If Prime is awarded a prime contract under the Procurement, Prime will award Sub a subcontract for that portion of the work required by the prime contract and identified as Sub's responsibility in Exhibit A, subject to (a) the further provisions of this Article 5; (b) any approval required by the Customer; (c) the Termination provisions of this Agreement; and (d) the mutual agreement of the Parties relative to terms and conditions of the subcontract, including price, specifications, and delivery schedule.

5.2

Any subcontract entered into by the Parties shall contain terms and conditions consistent with the Team's proposal and with the terms and conditions of the prime contract, appropriately tailored for flow-down into a subcontract, as well as such additional terms and conditions (a) mutually agreed by the Prime and Sub; (b) required by this Agreement; or (c) required as a result of the prime contract's definitization.

5.3

Prime may be required by the Customer to place some or all of the work identified as Sub's responsibility in Exhibit A with another source or to have such work bid on a competitive basis. In either of such events, Prime shall, in consultation with Sub, make good faith efforts to determine the cause for the Customer's direction and to convince the Customer to accept Sub for the work identified in Exhibit A. If such efforts are unsuccessful, it is agreed that Prime shall comply with the Customer's direction. When the Customer has redirected only a portion of the Sub's work, the Parties agree to negotiate in good faith an adjustment to Exhibit A. In the event that the Parties are unable to negotiate a prompt agreement on such an adjustment, this Agreement shall be terminated in accordance with the Termination provisions of this Agreement.

ARTICLE 6.—INTELLECTUAL PROPERTY

6.1

Subject to any rights of the Customer, each Party shall retain all right, title and interest to (a) any Intellectual Property it developed, authored, conceived or reduced to practice prior to the date of this Agreement, and (b) any Intellectual Property it develops, authors, conceives or reduces to practice independently and solely by that Party during the performance of this Agreement without the other Party's Intellectual Property. In either such event, no license, express or implied, or ownership shall inure to the benefit of the other Party to distribute or to display to the public or to prepare copies or derivative works of such works or to make, have made, use, sell, have sold, sublicense products or processes incorporating such Intellectual Property, except as expressly provided herein.

6.2

(a)    All rights, ownership, title and interest in and to (i) any derivative works or other modifications, add-ons, enhancements or improvements to Prime's Pre-Existing Intellectual Property and (ii) in and to all Intellectual Property developed (whether jointly or by Sub alone) during the performance of this Agreement that derives from and incorporates Prime's Pre-Existing Intellectual Property (collectively the "Prime Derivative Intellectual Property"), shall vest in and be and remain the property of Prime. To the extent any ownership rights in the Prime Derivative Intellectual Property would vest in Sub by operation of law, Sub hereby assigns and agrees that it

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shall assign such rights to Prime in full, and Sub agrees to cooperate with Prime to take any reasonably necessary steps to effect or perfect such rights.

(b)    Unless otherwise agreed as evidenced in an executed Teaming Agreement, in no event shall any license, express or implied, or ownership inure to the benefit of the Party not owning Pre-Existing Intellectual Property, to reproduce, distribute, publicly display, modify or create derivative works of such works or to make, have made, use, sell, have sold, or sublicense such Intellectual Property.

(c)    All rights, ownership, title and interest in and to (i) any derivative works or other modifications, add-ons, enhancements or improvements to Sub's Pre-Existing Intellectual Property and (ii) in and to all Intellectual Property developed (whether jointly or by Prime alone) during the performance of this Agreement that derives from and incorporates Sub's Pre-Existing Intellectual Property (collectively the "Sub Derivative Intellectual Property"), shall vest in and be and remain the property of Sub. To the extent any ownership rights in the Sub Derivative Intellectual Property would vest in Prime by operation of law, Prime hereby assigns and agrees that it shall assign such rights to Sub in full, and Prime agrees to cooperate with Sub to take any reasonably necessary steps to effect or perfect such rights.

(d)    Prime Derivative Intellectual Property and Sub Derivative Intellectual Property is sometimes referred to herein collectively as "Derivative Intellectual Property."

6.3

In the event Intellectual Property that does not fall within the scope of Section 6.2 is developed jointly by the Parties during the performance of this Agreement (the "Joint Inventions"), such Joint Inventions shall be owned jointly by the Parties and each Party shall own an undivided interest in the patents, copyrights and other Intellectual Property resulting from such Joint Inventions. Prime and Sub may utilize the Joint Inventions only internally (not to include sublicensing any third parties) without restraint; except that neither Party shall take action with respect thereto that will adversely affect the rights of the other Party without the prior written consent of the other Party. The Parties agree that each will execute and cause to be executed all documents and do and cause to be done all acts reasonably necessary, desirable or convenient to enable the Parties to file and prosecute patent applications for Joint Inventions or copyright registrations on such Joint Inventions, and to maintain any patents granted regarding such Joint Inventions.

Procedures for seeking and maintaining protection such as patents or copyrights for Joint Inventions shall be mutually agreed in good faith by the Parties. Any Party that does not reasonably cooperate or bear its proportionate share of expenses in securing and maintaining such patents on the Joint Inventions in any particular country or countries shall surrender its joint ownership under any resulting patents in such country or countries. Each Party shall be free to use and practice for its own purposes such Joint Inventions, with no right of accounting, except that each owning Party agrees to maintain such Joint Inventions as confidential and proprietary in the same manner it treats its own Intellectual Property of a similar character. Any licensing of such Joint Inventions by either Party shall be subject to the prior written agreement of the Parties.

6.4

Any subcontract between the Parties resulting from this Agreement shall contain intellectual property provisions consistent with Sections 6.1 through 6.3.

ARTICLE 7.—DISPUTE RESOLUTION

7.1

Any claim for the threatened, alleged, or actual breach of this Agreement by either Party (a "Dispute"), which cannot otherwise be resolved after good faith negotiations by the Parties, shall first be referred for resolution to the Parties' respective executive management in writing.

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7.2

If the Parties' executive management are unable to resolve the claim, controversy or other matter within thirty (30) calendar days of such referral, then either Party may file suit in a court of competent jurisdiction.

7.3

Notwithstanding the above, either Party may immediately seek injunctive relief in a court of competent jurisdiction against improper use, disclosure, or threatened improper use or disclosure of Intellectual Property.

7.4

Notwithstanding the above, the Parties' failure in good faith to reach mutual agreement on the terms and conditions of a subcontract under this Agreement pursuant to Article 5 shall not be considered a controversy or claim subject to litigation under this Article.

ARTICLE 8.—TERMINATION

8.1

This Agreement shall terminate and all rights and duties hereunder shall cease, subject to Article 24 ("Survival"), upon the first to occur of the following:

(a)

Official written announcement by the Customer that the Procurement has been canceled or that an award will not be made in the Procurement to any person or entity.

(b)

Award of a prime contract to a contractor(s) other than Prime; provided, however, that in the event of a protest of such award to a government agency, the General Accounting Office, or a court, this Agreement shall remain in force and effect until such time as the protest has been resolved and the contract has been awarded to a contractor(s) other than Prime.

(c)

Award of a prime contract to Prime under the Procurement, and

(i)

Award of a subcontract by Prime to Sub related to the Procurement;

(ii)

Failure of Prime and Sub, after negotiation in good faith, to reach agreement on the terms of a subcontract within thirty (30) calendar days of the award of the prime contract to Prime; or

(iii)

Customer's disapproval of a subcontract to Sub, or Customer's direction for Prime to utilize a subcontract source other than Sub or to compete a material portion of the prime contract work identified as Sub's responsibility in Exhibit A and the Parties are unable to negotiate a revision to Exhibit A as provided for in Section 5.3.

(d)

Mutual consent of both Parties in writing.

(e)

Two years after the effective date of this Agreement if the Customer has not by that time entered into negotiations or discussions with Prime for the Procurement.

(f)

Written notification to Sub of the good faith decision by Prime not to submit a proposal for the Procurement.

(g)

Official written notice that Prime is outside of the competitive range for the Procurement and is not subject to being reinstated within the competitive range.

(h)

In the discretion of a Party, in the event the other Party is suspended, debarred, has an applicable security clearance revoked, files for bankruptcy becomes insolvent, is alleged to have violated any federal law or regulation relating to procurement, or experiences any other impairment in its capacity to contract.

(i)

In the discretion of a Party, in the event of a material breach or material default by the other Party of its obligations under this Agreement.

8.2

If this Agreement is terminated for reasons other than a material breach or material default of Sub, either Party shall be free to pursue its individual technical approach, subject to Article 24

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("Survival"), in association with the successful contractor(s) or a third party for work that is the subject of this Agreement.

ARTICLE 9.—CONFLICT OF INTEREST

Prime and Sub each acknowledge and agree that a material term of this Agreement is that there is no constraint or limitation on its ability to meet its responsibilities under this Agreement. The term "constraint or limitation" includes but is not limited to an organizational conflict of interest, consultant conflicts of interest, and/or contracts or agreements with third parties.

ARTICLE 10.—INDEMNITY

Each Party (hereinafter referred to for the purpose of this clause as the "INDEMNITOR") shall indemnify and hold harmless the other Party from and against any and all claims, damages, demands, suits, actions, judgments, liabilities, defaults, or costs and expenses, including court costs and reasonable fees of outside counsel, against the other Party or the Team as a result of (a) any property damage or bodily injury to a third party to the extent caused by the INDEMNITOR in the course of performance of or as a result of the performance of this Agreement; or (b) any and all expenses, liability, and loss of any kind arising out of claims, suits, or actions alleging infringement, misuse, or misappropriation of third party Intellectual Property by the INDEMNITOR.

ARTICLE 11.—ASSIGNMENT

A Party may not assign or transfer its rights or obligations in this Agreement (by operation of law or otherwise), in whole or in part, to any person or entity without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, that either Party may assign such rights or obligations to (a) a successor or surviving corporation resulting from a merger, consolidation, sale of assets or stock or other corporate reorganization, or (b) its parent, its parent's subsidiaries or other affiliates, upon condition that the assignee will assume all of the Party's obligations hereunder.

ARTICLE 12.—NOTICES

Any notice, demand, request or statement required or permitted by this Agreement shall be in writing and shall be deemed given when delivered personally, sent by facsimile (which is confirmed), sent by overnight express courier, or mailed by certified or registered United States mail to the Parties at the following addresses (or at such other address for a Party as shall be specified by such Party by like notice):

Prime	Sub
DRS Sustainment Systems Inc	Force Protection, Inc.
Attention: Richard Marquard Manager, Business Admin. & Contracts	Attention: Otis Byrd Director, Contracts
201 Evans Lane	9801 Highway 78
Saint Louis, MO 63121	Ladson, SC 29456
Phone: 314-553-4219	Phone: 843-574-3787
Fax: 314-553-4555	Fax: 843-740-1973
E-mail: rmarouard@drs-ssi.com	E-mail: otis.byrd@forceprotection.net

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ARTICLE 13.—TAXES

Each Party shall be responsible for its respective present and future taxes, duties, tariffs, fees, imports, and other charges, including but not limited to, income, excise, import, purchase, sales, use, turnover, added value, gross receipts, gross wages, and similar assessments imposed upon the Party by any taxing authority as a result of the performance of the Party's duties and responsibilities hereunder.

ARTICLE 14.—CLASSIFIED INFORMATION

To the extent the obligations of the Parties involve access to security information bearing a United States' security classification of "Confidential" or higher, each Party shall be responsible for safeguarding such information in accordance with the provisions of applicable laws and regulations.

ARTICLE 15.—EXPORT AND IMPORT LAWS AND REGULATIONS

Each Party represents that it will comply with all applicable export and import laws and regulations during performance of this Agreement, including, but not limited to, the U.S. Arms Export Control Act, as amended (22 U.S.C. §§ 2751-2799), the International Traffic in Arms Regulations, as amended (22 C.F.R. Part 120 et seq.), the Export Administration Act, as amended (50 U.S.C. §§ 2401-2420), and the U.S. Export Administration Regulations, as amended (15 C.F.R. § 730 et seq.). The Parties shall not export, disclose, furnish or otherwise provide any article, technical data, technology, defense service, or technical assistance of the other Party to any foreign person or entity, whether within the U.S. or abroad, without obtaining, in advance, (a) appropriate U.S. government export authorization, and (b) written approval from the other Party.

ARTICLE 16.—GOVERNING LAW AND LANGUAGE

16.1

Regardless of its place of negotiation, execution, or performance, this Agreement shall be enforced and interpreted in accordance with the laws of the State of New York, without regard to that state's choice of law statutes and provisions, as well as in accordance with applicable federal procurement law as enunciated in decisions of administrative boards and the federal courts.

16.2

The English language version of this Agreement shall control over any translation.

ARTICLE 17.—PUBLICITY AND NEWS RELEASES

Except as otherwise required by law or regulation, no news release, public announcement, advertisement or publicity concerning this Agreement, any proposals, resulting contracts, or subcontracts to be carried out hereunder, shall be released by either Party without the prior written approval of the other Party. Such approval shall not be unreasonably withheld.

ARTICLE 18.—LIMITATION OF LIABILITY

18.1

Except for liability arising from a breach of the articles entitled "Technology Transfer" and/or "Intellectual Property," in no event shall either Party be liable to the other Party for anything other than direct damages, and neither Party shall be liable to the other for consequential, incidental, special (including multiple or punitive) or any other indirect damages (including lost profits) that are claimed to be incurred by the other Party whether such claim arises under contract, tort (including strict liability), indemnity or other theory or law.

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18.2

Notwithstanding the provisions of section 18.1, no limitation of liability under this agreement will be applicable with respect to a claim that is the result of a Party's gross negligence or intentional misconduct.

ARTICLE 19.—COMPLIANCE WITH LAWS

Each Party warrants that it will comply with all applicable laws and regulations, including (but not limited to), the provisions of the U.S. Foreign Corrupt Practices Act, as amended (15 U.S.C. § 78), the Procurement Integrity Act, as amended (41 U.S.C. § 423), and the Lobbying Disclosure Act of 1995, as amended (2 U.S.C. §§ 1601-1612) in connection with the performance of the activities contemplated by this Agreement.

ARTICLE 20.—NON-SOLICITATION OF EMPLOYEES

The Parties agree that, during the term of this Agreement and for a one (1) year period thereafter, neither Party shall knowingly or actively seek to hire any employee of the other Party. This restriction shall not prohibit either Party from hiring any person as a result of the use of an independent employment agency (so long as the agency was not directed by such Party to solicit such person) or as the result of the use of a general solicitation (such as an advertisement) not specifically directed to employees of the other Party.

ARTICLE 21.—MODIFICATIONS, WAIVERS

21.1

This Agreement, including any and all exhibits, shall not be amended or modified, nor shall any waiver of any right hereunder be effective unless set forth in a document executed by duly authorized representatives of the Parties.

21.2

The failure to exercise any right under this Agreement shall not be deemed to be a waiver of such right, and shall not affect the right to enforce each and every right hereof.

21.3

The waiver of any breach of any term, provision, covenant or condition herein contained shall not be deemed to be a waiver of any (a) subsequent breach of such term, provision, covenant or condition or (b) other term, provision, covenant, or condition.

ARTICLE 22.—SEVERABILITY

If any term, provision, covenant or condition of this Agreement is held invalid or unenforceable for any reason, the remaining provisions of this Agreement shall continue in full force and effect as if this Agreement had been executed with the invalid portion eliminated, provided the effectiveness of the remaining portions of this Agreement will not defeat the overall intent of the Parties. In such a situation, the Parties agree, to the extent legal and possible, to incorporate a replacement provision to accomplish the originally intended effect.

ARTICLE 23.—HEADINGS

The article headings contained in this Agreement are for convenience and reference only, and shall not, in any way, affect the interpretation of this Agreement.

ARTICLE 24.—SURVIVAL

The rights and duties of the Articles of this Agreement entitled "TECHNOLOGY TRANSFER," "INTELLECTUAL PROPERTY," "INDEMNITY," "CLASSIFIED INFORMATION," "EXPORT AND IMPORT LAWS AND REGULATIONS," "GOVERNING LAW AND LANGUAGE," "LIMITATION OF LIABILITY," AND "NON SOLICITATION OF EMPLOYEES" shall survive expiration or termination of this Agreement.

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ARTICLE 25.—DEFINITIONS

Except as otherwise specified or as the context may otherwise require, the following terms have the meanings indicated below for all purposes of the Agreement, and the definitions of such terms are equally applicable both to the singular and the plural forms:

25.1

A "Derivative" of the Product means variations of, or modifications to, the Product by the Customer to accommodate: (a) varying mission capabilities, (b) any modifications to accommodate new or improved technology, or (c) any other modification or variation of any nature by the Customer.

25.2

"Intellectual Property" means, but is not limited to, patents; patent applications, whether filed or not, and improvements; inventions of any kind, whether patentable or not, including inventions conceived or reduced to practice; copyrights; copyrighted or copyrightable materials; ideas expressed in any tangible or electronic medium of expression; trademarks; service marks; trade secrets; Technical Data; Computer Software; Technical Know-How, or any other recognized form of Intellectual Property.

25.3

"Pre-Existing Intellectual Property" means, all rights, ownership, title and any other interest in and to any Intellectual Property owned by or in possession of either Party that was developed, invented or conceived prior to the date of this Agreement and to any Intellectual Property developed by a Party independent of this Agreement without (i) the use of the other Party's Pre-Existing Intellectual Property and (ii) without the payment of a substantial portion of the cost of development of such Intellectual Property ("Pre-Existing Intellectual Property"). All such rights, ownership, title and any other interest in and to any Pre-Existing Intellectual Property are and shall remain with the Party owning such rights.

25.4

"Procurement" means the entire process pursuant to which the Customer selects, designs, develops, and procures the Product or a Derivative, including, but not limited to, any and all pre-proposal activity, the submission of proposals, the conduct of negotiations (if any), qualification testing (if any), and the performance of any resulting contract(s).

25.5

"Technical Data" and "Computer Software" mean those terms as defined in Sections 252.227-7013 and 252.227-7014, respectively, of the Department of Defense Federal Acquisition Regulation Supplement, 48 C.F.R. Part 252.

25.6

"Technical Know-How" means all recorded and unrecorded information and know how relating to the design, development or production of the Product including, but not limited to, specific application of the knowledge gained from experience in the design, development, or production of an article that is necessary or helpful in interpreting, applying or interrelating Technical Data, Computer Software, or other Intellectual Property relating to the Product.

ARTICLE 26.—ENTIRE AGREEMENT

This Agreement, including the exhibits and attachments referenced herein, constitutes the entire understanding and agreement of and between the Parties as of the date and relative to the subject matter hereof, and it supersedes and replaces any and all previous understandings, commitments or agreements, oral or written.

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        IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in duplicate originals by each Party's duly authorized representative effective as of the day and year last written below.

DRS SUSTAINMENT SYSTEMS, INC.		FORCE PROTECTION, INC.
Signature	/s/ RICHARD A. MARQUARD	Signature	/s/ MICHAEL MOODY
Name	Richard A. Marquard	Name	Michael Moody
Title	Mgr., Business Admin. & Contracts	Title	Interim CEO
Date	14 February 2008	Date	25 February 2008

Attachments:

Exhibit A—Scope of Work

Exhibit B—Nondisclosure Agreement

11

EXHIBIT A

JLTV PROGRAM

SCOPE OF WORK

Joint Light Tactical Vehicle
(JLTV)

Scope of Work
for
JLTV Vehicle Platform
Technology Development

Prepared by:
DRS Technologies

WARNING: EXPORT CONTROLLED

THIS DOCUMENT CONTAINS TECHNICAL DATA AS DEFINED IN 22 CFR 120.10 OF THE INTERNATIONAL TRAFFIC IN ARMS REGULATIONS. EXPORT OF THIS MATERIAL IS RESTRICTED BY THE ARMS EXPORT CONTROL ACT (22 U.S.C. 2751 ET SEQ). VIOLATIONS OF THESE EXPORT LAWS ARE SUBJECT TO SEVERE CRIMINAL PENALTIES.

COMPETITION SENSITIVE

TABLE OF CONTENTS

1.	Background	3
2.	Program Description	3
3.	Work Split	3
4.	Scope of Work	3
5.	Applicable Documents	4
6.	Specific Tasks	4
7.	Data Deliverables	6
8.	Communication	7
9.	Period of Performance	7
10.	Abbreviations	7

Joint Light Tactical Vehicle (JLTV)
Scope of Work

JLTV Vehicle Platform

1.

General Background:    Force Protection, Inc. (FPI) and DRS Technologies Inc. (DRS) have entered into an exclusive teaming agreement to jointly pursue the Joint Light Tactical Vehicle (JLTV) Technology Demonstration (TD) program. As a major team member and subcontractor, FPI's primary role will be to design and produce the JLTV Base Vehicle for this effort.

DRS will prime the JLTV program effort and will lead the system integration effort. The JLTV system integration includes, but is not limited to, Government-Furnished Equipment (GFE), sensors, workstations, power management, health management, etc. The JLTV base vehicle platform includes, but is not limited to, power train components, wheels/tires, suspension assembly, vehicle hull/cab, seats, A-structure armor solution, chassis, transparent armor/glass, etc.

This Scope of Work (SOW) identifies requirements associated with the DRS procurement of JLTV vehicles and other services from FPI.

2.

Program Description:    The JLTV is a family of vehicles (FoV) that fill mission role gaps identified from the current HMMWV program, The JLTV FoV is composed of three Payload Category vehicles, A, B, and C. The performance, force protection and physical characteristics of these Payload Category vehicles have been tailored to fulfill mission roles they will be required to execute. Each of the Payload Categories will have the capability of towing JLTV Companion Trailers as well as specified legacy trailers.

3.

Work Split:    Notwithstanding the work scope hereinafter described, both parties have agreed to and will strive for a work split goal of 50/50 on a revenue basis for this effort.

4.

Scope of Work:    This document defines the extent of tasks to be performed by FPI under the terms and conditions of the Teaming Agreement dated XXX and all Amendments thereto. These tasks shall consist of providing the necessary personnel, technical support, materials, documentation, services, and facilities required to:

a.

Design, fabricate, perform validation tests, and deliver the JLTV prototype vehicle platforms for the JLTV program's TD phase.

b.

Provide appropriate management activities to ensure timely and economic performance.

c.

Deliver the supporting data and ancillary items defined herein.

5.

Applicable Documents:    The following applicable documents listed and their contents form the basis of this Scope of Work (SOW):

a.

Joint Services Solicitation Number XXXX date issued XXX.

b.

Joint Services—Purchase Description for the Joint Light Tactical Vehicle (JLTV)—DRAFT Version 1.8 dated 7 Dec 2007.

c.

Joint Services—Purchase Description for the Joint Light Tactical Vehicle (JLTV) Annexes A—K—DRAFT Version 1.8 dated 7 Dec 2007.

6.

Specific Tasks:

a.

Unless modified or amended by the final Request for Proposal, FPI shall provide the following JLTV base vehicles/ballistic hulls for the Technical Demonstration phase of the JLTV program:

•

two (2) Payload Category A base vehicles



•

four (4) Payload Category B base vehicles



•

one (1) Payload Category C base vehicles and

•

one (1) Payload Category A ballistic hull/cab



•

two (2) Payload Category B ballistic hull/cabs



•

one (1) Payload Category C ballistic hull/cab



•

Ballistic Coupons—TBD



b.

Hardware performance and environmental capabilities shall be in compliance with Purchase Description version 1.8 dated 7 Dec 2007.



c.

Testing/Certifications: FPI shall perform acceptance testing on all deliverable base vehicle hardware. FPI shall also perform all inspections, tests and provide all certifications, as agreed upon with DRS, applicable to the JLTV base vehicles. Refer to Version 1.8 of the PD dated 7 Dec 2007 for applicable inspections, tests, and certifications.



d.

FPI shall submit its procedure for conducting the Acceptance Inspection and Test (AI&T) to DRS for review and approval not later than 30 days prior to the scheduled planned delivery of the prototype vehicles to DRS.



e.

Program Reviews/Meetings: FPI shall support meetings and reviews to provide DRS and the Government the means to assess the progress of the total program. FPI shall support JLTV Program meetings (Start of Work Meeting, Preliminary Design Review (PDR), Critical Design Review (CDR), etc.).



f.

Configuration Control: FPI shall be responsible for configuration control of its own contracted Configuration Items (CIs) throughout the JLTV program. FPI shall provide DRS with all the appropriate technical data required to perform the system-level integration tasks, to include proper Interface Control Documentation (ICD) per SDRL (CM001) [See Section 7]. All FPI internal/developmental changes to the technical data will be provided to DRS in a timely manner. FPI shall obtain DRS concurrence prior to implementing any changes to the vehicle/vehicle structure that may impact the system integration tasks.



g.

Logistics Support: FPI shall assist DRS in developing, testing, and producing the logistical data for the JLTV TD phase. FPI shall provide logistics source data for inclusion in Training Materials for training programs and training to DRS personnel in the operation and maintenance of the JLTV base vehicle.



h.

FPI shall provide on-site assistance during program duration to resolve any issues with FPI produced equipment that cannot be resolved remotely. This includes assistance, as required, during Government testing of the JLTV system at the Government test sites (including support for ballistic testing).



i.

Welding—FPI shall submit its welding procedures and welder certifications to DRS to show compliance with the Purchase Description and the Subcontract.

7.

Data Deliverables

        FPI shall submit data items identified below in accordance with applicable Data Item Description (DID) requirements as they apply to the JLTV base vehicles (FPI's format is acceptable):

SDRL	Title	Frequency	Submission Date	Approval	No of Copies
CM001	Interface Control Documentation	As Required	As Generated	As Needed	1 Copy
A005	Logistics Management Information (LMI) Data Products (DI-ILSS-81529)	As Required	As Generated	30 days after submission to DRS	1 Copy
A011	Proposed Spare Parts List (DI-ILSS-80134 A)	One w/Revisions	180 Days After Subcontract Award	15 days after submission to DRS	1 Copy
A017	Failure Analysis and Corrective Action Report (D1-RELI-81315 T)	As Required	10 Days After Failure	15 days after submission to DRS	1 Copy
A019	Certificates of Conformance	As Required	With Delivery of Prototype to DRS	15 days after submission to DRS	1 Copy
B001	Acceptance Test Procedure	One w/Revisions	30 Days Prior to Acceptance Testing	10 days after submission	1 Copy
B004	Welding Certifications	As Required	180 Days After Subcontract Award	30 days after submission to DRS	1 Copy

GENERAL NOTES:

i.

Each SDRL shall be prepared in supplier's format. Electronic submittal of the data via email is preferred.



ii.

Unless otherwise stated the number of days is calendar days. For approvals of less than 30 days, data to be faxed or emailed.



iii.

Data items too large to fax or email are to be sent by courier and have a fax or email message indicating date shipped and carrier's waybill number.



iv.

Each SDRL submittal shall indicate the SDRL title, SDRL number and status of the content (e.g., preliminary, final, change pages, revision level, document date, etc.)

8.    Communication:

        Program communication will be required and will be considered only as a technical information exchange. Any contractual correspondence and communications between FPI and DRS shall be conducted through the companies' respective Contracts/Subcontracts Administrator.

9.    Period of Performance:

        The period of performance shall be as further delineated within the subcontract and will be dependent on quantities ordered and delivery schedule.

10.    ABBREVIATIONS

AI&T	Acceptance Inspection and Test
ATP	Acceptance Test Procedures
CDR	Critical Design Review
CI	Configuration Item
DID	Data Item Description
ECP	Engineering Change Proposal
FAT	First Article Test
ILS	Integrated Logistics Support
JLTV	Joint Light Tactical Vehicle
LMI	Logistics Management Information
MRB	Material Review Board
PDR	Preliminary Design Review
PO	Purchase Order
QAR	Quality Assurance Review
RFD	Request for Deviation
RFW	Request for Waiver
SDRL	Subcontract Data Requirement List
SOW	Scope of Work
TD	Technology Demonstration

EXHIBIT B

JLTV PROGRAM

MUTUAL NONDISCLOSURE AGREEMENT

MUTUAL NONDISCLOSURE AGREEMENT

        THIS MUTUAL NONDISCLOSURE AGREEMENT ("Agreement") is entered into by the following entities:

DRS Sustainment Systems, Inc., a Delaware corporation, with an address of 201 Evans Lane, St. Louis, Missouri 63121 ("DRS SSI"),

and

Force Protection, Inc., a Nevada corporation, with an address of 9801 Highway 78, Ladson, South Carolina 29456 ("FPI").

        DRS SSI and FPI, may also be referred to in this Agreement individually as a "Party" or collectively as the "Parties."

BACKGROUND

1.

Each Party represents that it possesses competitively valuable proprietary and confidential information which is not generally available to the public and which the Party desires to protect against disclosure or competitive use (the "Proprietary Information").

2.

Proprietary Information may include, but is not limited to, tangible or intangible information related to a Party's products, processes, methods, ideas, concepts, discoveries, designs, drawings, specifications, techniques, practices, models, diagrams, source code, object code, software, programs, know-how, technical data, research and development, or business and financial data.

3.

The Parties contemplate engaging in business discussions during which it may become necessary to exchange Proprietary Information, and desire to establish a mutual understanding concerning the preservation and safeguarding of such information.

AGREEMENT

        NOW, THEREFORE, in consideration of the foregoing, and in express reliance on the mutual covenants and conditions contained herein, the Parties agree as follows:

1.

During the term of this Agreement, the Parties, to the extent of their right to do so, may exchange information that is considered by the disclosing Party to be Proprietary Information. For such information to be considered Proprietary Information and subject to this Agreement, it shall be identified in writing at the time of the disclosure by an appropriate legend, marking, stamp or positive written identification on the face thereof to be Proprietary Information. In order for any Proprietary Information that is exchanged between the Parties orally or visually to be subject to this Agreement, it shall be identified as Proprietary Information to the receiving Party orally at the time of disclosure and in writing within fourteen (14) calendar days after such oral or visual disclosure.

2.

Proprietary Information delivered by the disclosing Party to the receiving Party shall be used solely for the purpose of discussions relative to the Joint Light Tactical Vehicle (JLTV) Program and evaluation of various items for potential application to the program, such as vehicle electronics, diagnostics, and power applications; C4ISR; Situational Awareness Systems; Armor; and ground combat & tactical wheeled vehicles (the "Permitted Purpose"). No other use of Proprietary Information is granted without the prior written consent of the disclosing Party.

3.

This Agreement shall (unless extended by written, mutual agreement) automatically terminate on January 31, 2010, but may be terminated earlier by either Party giving thirty (30) days notice in writing to the other Party of its intention to terminate. Termination shall not, however, affect the rights and obligations in this Agreement with respect to Proprietary Information supplied prior to termination.

4.

From the date of its disclosure until three (3) years after the date of termination of this Agreement, the receiving Party shall protect the disclosing Party's Proprietary Information by using the same degree of care, but no less than a reasonable degree of care, to prevent the dissemination to third-parties or publication of the Proprietary Information as the receiving Party uses to protect its own Proprietary Information of a like nature. The receiving Party shall further restrict disclosure of such Proprietary Information to those of its directors, officers, employees, agents, and advisors (including attorneys, accountants, and financial advisers) who have a need to know and who have been advised of and agreed to the restrictions on disclosure and use contained in this Agreement. Notwithstanding the period set forth in the first sentence of this section, the Parties may agree in writing to an extended period of protection for certain Proprietary Information.

5.

This Agreement imposes no obligation upon a receiving Party with respect to Proprietary Information which: (a) was in the receiving Party's possession before receipt from the disclosing Party; (b) is or becomes a matter of public knowledge through no fault of the receiving Party; (c) is rightfully received by the receiving Party from a rightfully possessing third party without a duty of confidentiality; (d) is required to be disclosed by court order or other lawful governmental action, but only to the extent so ordered, and provided that the Party so ordered shall notify the disclosing Party of the underlying proceeding in sufficient time so that the disclosing Party may attempt to obtain a protective order; (e) is disclosed by the receiving Party with the disclosing Party's prior written approval in accordance with that written approval; or (f) is independently developed by the receiving Party without access to Proprietary Information exchanged hereunder as provable by competent evidence.

6.

All Proprietary Information is and shall remain the sole and exclusive property of the disclosing Party, and neither Party acquires any license, intellectual property rights, or legal or equitable interest in the other Party's Proprietary Information except for the limited right to make copies as necessary, and in accordance with this Agreement, for the Permitted Purpose.

7.

All Proprietary Information is provided "AS IS," and neither Party makes any warranty regarding the accuracy, appropriateness or reliability of such information. The entire risk arising out of the use of the Proprietary Information remains with the receiving Party.

8.

The receiving Party shall notify the disclosing Party immediately upon discovery of any unauthorized use or disclosure of Proprietary Information, or any other breach of this Agreement by the receiving Party, and will cooperate with the disclosing Party in every reasonable way to help the disclosing Party regain possession of the Proprietary Information and prevent further unauthorized use or disclosure.

9.

This Agreement shall not be construed as a sales agreement, teaming agreement, joint venture or other similar arrangement; rather, the Parties expressly agree that this Agreement is solely for the purpose of protecting Proprietary Information.

10.

Neither Party has an obligation to supply Proprietary Information to the other Party; furthermore, neither Party has an obligation under this Agreement to purchase any item or service from the other Party.

11.

The preferred, but nonexclusive, points of contact for the Parties with respect to the exchange of Proprietary Information are:

DRS SSI:	FPI:
Michael O'Leary	John F. Wall III
Director, Business Development	VP, Legal Affairs
Telephone: (314) 553-4912	Telephone: (843) 574-0571
Fax: (314) 553-4979	Fax: (843) 553-1311
Email: moleary@drs-ssi.com	Email: john.wall@forceprotection.net

Proprietary Information may and written notices shall be sent to the points of contact at the addresses on the first page of this Agreement. Each Party may revise its point of contact or address by written notice to the other.

12.

Each Party represents that it will comply with all applicable export and import laws and regulations during performance of this Agreement, including but not limited to, the U.S. Arms Export Control Act; as amended (22 U.S.C. §§ 2751-2799), the International Traffic in Arms Regulations, as amended (22 C.F.R. Part 120 et seq.), the Export Administration Act, as amended, (50 U.S.C. §§ 2401-2420), and the U.S. Export Administration Regulations, as amended (15 C.F.R. § 730 et seq.). The Parties shall not export, disclose, furnish or otherwise provide any article, technical data, technology, defense service, or technical assistance of the other Party to any foreign person or entity, whether within the U.S. or abroad, without obtaining in advance, (a) appropriate U.S. government export authorization, and (b) written approval from the other Party.

13.

This Agreement shall apply in lieu of and notwithstanding any specific legend or statement associated with any particular information or data exchanged, and the duties of the Parties shall be determined exclusively by the terms and conditions of this Agreement.

14.

Upon written request of the disclosing Party, the receiving Party shall return all originals, copies, reproductions and summaries of Proprietary Information in the receiving Party's possession or control or, at the disclosing Party's option, destroy and certify to such destruction.

15.

The Parties agree that, during the term of this Agreement and for a one (1) year period thereafter, neither Party shall knowingly or actively seek to hire any employee of the other Party. This restriction shall not prohibit either Party from hiring any person as a result of the use of an independent employment agency (so long as the agency was not directed by such Party to solicit such person) or as the result of the use of a general solicitation (such as an advertisement) not specifically directed to employees of the other Party.

16.

The receiving Party acknowledges that monetary damages may be an insufficient remedy for damages resulting from the unauthorized disclosure of Proprietary Information and that the disclosing Party shall be entitled, without waiving any other rights or remedies, to seek such injunctive or other equitable relief as may be deemed appropriate by a court of competent jurisdiction. Nothing herein shall be construed as prohibiting the disclosing Party from pursuing any other available remedy for unauthorized disclosure or for breach or threatened breach of this Agreement.

17.

The Parties shall perform their respective obligations hereunder without charge to the other, and neither Party shall assign any rights hereunder or disclose the existence of this Agreement publicly without the prior written approval of the other Party.

18.

Regardless of its place of negotiation, execution, or performance, this Agreement shall be enforced and interpreted in accordance with the laws of the State of Delaware, without regard to that state's choice of law statutes and provisions. This Agreement shall be binding on the Parties, their successors and assigns.

19.

If any term, provision, covenant or condition of this Agreement is held invalid or unenforceable for any reason, the remaining provisions of this Agreement shall continue in full force and effect as if this Agreement had been executed with the invalid portion eliminated, provided the effectiveness of the remaining portions of this Agreement will not defeat the overall intent of the Parties. In such a situation, the Parties agree, to the extent legal and possible, to incorporate a replacement provision to accomplish the originally intended effect.

20.

This Agreement shall not be amended or modified, nor shall any waiver of any right hereunder be effective unless set forth in a document executed by duly authorized representatives of the Parties. The failure to exercise any right under this Agreement shall not be deemed to be a waiver of such right, and shall not affect the right to enforce each and every right hereof. The waiver of any breach of any term, provision, covenant or condition herein contained shall not be, deemed to be a

waiver of any (a) subsequent breach of such term, provision, covenant or condition or (b) other term, provision, covenant, or condition.

21.

This Agreement constitutes the entire understanding and agreement of and between the Parties relative to the protection of Proprietary Information relating to the Permitted Purpose and supersedes and replaces any and all previous understandings, commitments or agreements, oral or written.

        IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by each Party's duly authorized representative, and this Agreement shall be effective as of the day and year last written below.

DRS SUSTAINMENT SYSTEMS, INC.		FORCE PROTECTION, INC.
Signature	/s/ MICHAEL P. JONES	Signature	/s/ JOHN F. WALL, III
Name	Michael P. Jones	Name	John F. Wall, III
Title	Mgr., Bus. Admin & Contr.	Title	VP, Legal Affairs
Date	11 January 2008	Date	1/11/08

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Exhibit 10.66

EX-10.78

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Exhibit 10.78

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT						1. CONTRACT ID CODE	PAGE OF PAGES
						J	1    7
2.	AMENDMENT/MODIFICATION NO. P00011		3. EFFECTIVE DATE 02-May-2008	4.	REQUISITION/PURCHASE REQ. NO. SEE SCHEDULE	5. PROJECT NO. (If applicable)
6.	ISSUED BY	CODE	M67854	7.	ADMINISTERED BY (If other than item 6)	CODE	S1103A
	MARCORSYSCOM ATTN CT/LYNN FRAZIER 2200 LESTER STREET QUANTICO VA 22134-5010				DCMAATLANTA ATTN: KAREN BENNER, 2300 LAKE PARK DRIVE SUITE 300 SMYNRA GA 20080	SCD:	A
8.	NAME AND ADDRESS OF CONTRACTOR (No., Street, County, State and Zip Code)					9A. AMENDMENT OF SOLICITATION NO.
	FORCE PROTECTION INDUSTRIES, INC DAMON WALSH					9B. DATED (SEE ITEM 11)
	9801 HIGHWAY 78, #1 LADSON SC 29456				X	10A. MOD. OF CONTRACT/ORDER NO. M67854-06-C-5162
CODE 1EFH8			FACILITY CODE		X	10B. DATED (SEE ITEM 13) 11-Aug-2006
11.    THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
o	The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer    o is extended,     o is not extended. Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: (a) By completing Items 8 and 15, and returning                        copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.
12.	ACCOUNTING AND APPROPRIATION DATA (If required) See Schedule
13.	THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
	A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A:
	B. THE ABOVE NUMBERED CONTRACT/ORDER ISMODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103 (B).
X	C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: FAR 43.103(a)(3) Mutual Agreement of the Parties
	OTHER (Specify type of modification and authority)
E.	IMPORTANT:    Contractor    o is not,    ý is required to sign this document and return 1 copies to the issuing office.
14.	DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)
	Modification Control Number:        hamptonc082639
The contract is modified to (1) place 151 Ridgback vehicles on contract; and (2) place spare parts on contract for the Ridgback vehicles.
Except as provided herein, all terms and conditions of the document referenced in Item9A or 10A, as heretofore changed, remains unchanged and in full force and effect.

15A. NAME AND TITLE OF SIGNER (Type or print)		16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Otis Byrd		DAVID J. HANCE / CONTRACTING OFFICER
Director of Contracts		TEL: (703) 432-5018	EMAIL: david.hance@usmc.mil
15B. CONTRACTOR/OFFEROR	15C. DATE SIGNED	16B. UNITED STATES OF AMERICA	16C. DATE SIGNED
/s/ Otis Byrd (Signature of person authorized to sign)	5/15/2008	BY/s/ David J. Hance	19-May-2008
		(Signature of Contracting Officer)
EXECPTION TO SF 30 APPROVED BY OIRM 11-84		30-105-04	STANDARD FORM 30 (Rev. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

1

SECTION SF 30 BLOCK 14 CONTINUATION PAGE

SUMMARY OF CHANGES

SECTION A—SOLICITATION/CONTRACT FORM

        The total cost of this contract was increased by $91,549,216.00 from $189,091,509.16 to $280,640,725.16.

SECTION B—SUPPLIES OR SERVICES AND PRICES

CLIN 0128 is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0128		151	Each	$[***]	$[***]NTE
	Ridgback Vehicles
	FFP
	FMS CASE: UK-P-LTS, MILSTRIP: PUK045/8121/6003/0LTS; RSN: 001;
	PURCHASE REQUEST NUMBER: M6785408RCF0137 AA
	See attached Performance Specification for Ridgback Vehicles
	FOB: Contractor Facility
	FOB: Origin
			NET AMT		$[***]
					$[***]
	ACRN CG
	CIN: 000000000000000000000000000000
CLIN 0129 is added as follows:
ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0129		1	Lot	$[***]	$[***]NTE
	Ridgback Spare Parts
	FFP
	FMS CASE: UK-P-LTS, MILSTRIP: PUK044/8121/6011/0LTS; RSN: 002;
	PURCHASE REQUEST NUMBER: M6785408RCF0137 AB
	Detailed list of Ridgback spare parts to be determined during definitization process.
	FOB: Origin
			NET AMT		$[***]
					$[***]
	ACRN CH
	CIN: 000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

2

SECTION E—INSPECTION AND ACCEPTANCE

The following Acceptance/Inspection Schedule was added for CLIN 0128:

INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government

The following Acceptance/Inspection Schedule was added for CLIN 0129:

INSPECT AT	INSPECT BY	ACCEPT AT	ACCEPT BY
Origin	Government	Origin	Government

SECTION F—DELIVERIES OR PERFORMANCE

        The following have been added by full text:

RIDGBACK DELIVERY SCHEDULE

        The following Delivery Schedule item has been added to CLIN 0128:

CLIN	DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
0128	31-AUG-2008	5	FORCE PROTECTION INDUSTRIES, INC. Susan Harp, Program Manager
	30-SEP-2008	10	9802 Hwy 78, Bldg 1 Ladson, SC 29456
	31-OCT-2008	10	Office (843) 574-7157 Mobile (843) 224-3054
	30-NOV-2008	10	susan.harp@forceprotection.net FOB: Origin
	31-DEC-2008	10
	31-JAN-2009	30
	27-FEB-2009	40
	31-MAR-2009	36
The following Delivery Schedule item has been added to CLIN 0129:
CLIN	DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
0129	POP 31-AUG-2008 TO 31-MAR-2009	N/A	FORCE PROTECTION INDUSTRIES, INC. Susan Harp, Program Manager 9802 Hwy 78, Bldg 1 Ladson, SC 29456 Office (843) 574-7157 Mobile (843) 224-3054 susan.harp@forceprotection.net FOB: Origin

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3

SECTION G—CONTRACT ADMINISTRATION DATA

Accounting and Appropriation

Summary for the Payment Office

As a result of this modification, the total funded amount for this document was increased by $91,549,216.00 from $189,091,509.16 to $280,640,725.16.

CLIN 0128:
Funding on CLIN 0128 is initiated as follows:

ACRN: CG


CIN: 000000000000000000000000000000

Acctng Data: 97-11X8242 2880 000 74 802 0 065916 2D PUK045/8121/6003/0LTS

Increase: $79,549,216.00


Total: $79,549,216.00

CLIN 0129:
Funding on CLIN 0129 is initiated as follows:

ACRN: CH


CIN: 000000000000000000000000000000

Acctng Data: 97-11X8242 2880 000 74 802 0 065916 2D PUK044/8121/6011/0LTS

Increase: $12,000,000.00


Total: $12,000,000.00

SECTION I—CONTRACT CLAUSES

The following have been added by full text:

RIDGEBACK PRICING CLAUSES

The following have been added by full text:

RIDGBACK PROVISIONS

52.216-23 EXECUTION AND COMMENCEMENT OF WORK (APR 1984)

The Contractor shall indicate acceptance of this modification by signing and returning one copy to the Contracting Officer no later than seven (7) calendar days from receipt. Upon acceptance by both parties, the Contractor shall proceed with performance of the work, including purchase of necessary materials.

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

4

52.216-24 LIMITATION OF GOVERNMENT LIABILITY (APR 1984)

(a)

In performing this contract, the Contractor is not authorized to make expenditures or incur obligations exceeding 50% of the amount of this modification.

(b)

The maximum amount for which the Government shall be liable if this contract is terminated is 50% of the amount of this modification.

252.217-7027 CONTRACT DEFINITIZATION (OCT 1998)

(a)

A fixed-price contract modification is contemplated. The Contractor agrees to begin promptly negotiating with the Contracting Officer the terms of a definitive contract that will include (1) all clauses required by the Federal Acquisition Regulation (FAR) on the date of execution of the undefinitized contract action, (2) all clauses required by law on the date of execution of the definitive contract action, and (3) any other mutually agreeable clauses, terms, and conditions. The Contractor agrees to submit a detailed fixed price proposal and cost or pricing data supporting its proposal.

(b)

The schedule for definitizing this contract is as follows (insert target date for definitization of the contract action and dates for submission of proposal, beginning of negotiations, and, if appropriate, submission of the make-or-buy and subcontracting plans and cost or pricing data).

Submission of detailed proposal:	June 13, 2008
Audit of proposal by DCAA:	July 14, 2008
Technical evaluation received:	July 14, 2008
Negotiations completed:	July 21, 2008
Conract Modificaiton Definitized:	August 11, 2008

(c)

If agreement on a definitive contract action to supersede this undefinitized contract action is not reached by the target date in paragraph (b) of this clause, or within any extension of it granted by the Contracting Officer, the Contracting Officer may, with the approval of the head of the contracting activity, determine a reasonable price or fee in accordance with subpart 15.4 and part 31 of the FAR, subject to Contractor appeal as provided in the Disputes clause. In any event, the Contractor shall proceed with completion of the contract, subject only to the Limitation of Government Liability clause.

(1)

After the Contracting Officer's determination of price or fee, the contract shall be governed by—

(i)

All clauses required by the FAR on the date of execution of this undefinitized contract action for either fixed-price or cost-reimbursement contracts, as determined by the Contracting Officer under this paragraph (c);

(ii)

All clauses required by law as of the date of the Contracting Officer's determination; and

(iii)

Any other clauses, terms, and conditions mutually agreed upon.

(2)

To the extent consistent with paragraph (c)(1) of this clause, all clauses, terms, and conditions included in this undefinitized contract action shall continue in effect, except those that by their nature apply only to an undefinitized contract action.

(d)

The definitive contract resulting from this undefinitized contract action will include a negotiated firm-fixed price in no event to exceed 100% of the amount of this not-to-exceed contract modification.

        (End of clause)

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

5

SECTION J—LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS

The following have been added by full text:

RIDGBACK PERFORMANCE SPEC

SECTION J—LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS

The Table of Contents has changed to add Attachment 8, RIDGBACK Performance Specification:

Exhibit/Attachment Table of Contents

DOCUMENT TYPE	DESCRIPTION	DATE
Attachment 1	Attachment B:
	Performance
	Specifications
Attachment 2	Attachment A: Statement of Work
Attachment 3	Attachment 3 OCB		20-DEC-2006
Attachment 4	Attachment 4 FDB
Attachment 5	Attachment 5 MWB		20-DEC-2006
Attachment 6	FSR TOOLS LIST		09-FEB-2007
Attachment 7	BPMTU and Tools list		01-MAY-2007
Attachment 8	RIDGBACK Performance Specification		16-MAY-2008

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

6

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

7

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Exhibit 10.78

EX-10.79

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Exhibit 10.79

		MASTER PROJECT #
SALES AUTHORIZATION RELEASE		PROJECT #
		WORK ORDER #
CONTRACT:	M67854-07-D-5031	SALES AUTHORIZATION RELEASE #	08-117
MODIFICATION:	DO 0003-08	CONTRACT/MOD TYPE:	FFP
CONTRACT/MOD DATE:	5/30/2008	PROGRAM MGMT POC:	MICHAEL MARTYN
F.O.B. POINT	DESTINATION	CONTRACT POC:	RHONDA EARNEY
DESCRIPTION:
SCOPE OF WORK:	The purpose of the modification is for (1) Correct CLIN description; (2) Order supplies and services in support of the vehicles ordered under this contract. The total cost of this contract was increased by $28,456,471.08 from $479,433,195.00 to $507,889,666.08.
	CLINS 0093; 0095; 0097 extended description has changed.
	CLIN 0093AC is added for CAT I Battle Damage Repair (BDAR) Qty: 24 for a total price of $[***]
	CLIN 0093AD is added for CAT I Battle Damage Repair (BDAR) Qty: 4 for a total price of $[***]
	CLIN 0094AA is added for CAT II Battle Damage Repair (BDAR) Qty:7 for a total price of $[***]
	CLIN 0094AB is added for CAT II Battle Damage Repair (BDAR) Qty: 3 for a total price of $[***]
	CLIN 0095AC is added for CAT I Deprocessing Kit Qty: 5 for a total price of $[***]
	CLIN 0095AD is added for CAT I Deprocessing Kit Qty: 1 for a total price of $[***]
	CLIN 0096 is added for CAT II Deprocessing Kit QTY: 7 for a total price of $[***]
	CLIN 0097AA is added for CAT I Special Tools Qty: 6 for a total price of $[***]
	CLIN 0097AB is added for CAT I Special Tools Qty: 6 for a total price of $[***]
	CLIN 0098 is added for CAT II Special tools Qty: 2 for a total price of $[***]
	CLIN 1084 is added for Welder OCONUS QTY: 24 Manmonths for a total price of $[***]
	SEE ATTACHED MODIFICATION (SAR 8-117)
SPECIAL TERMS & CONDITIONS, IF APPLICABLE:
NOTE: Contract and contract modifications are available on S/Library/Contracts

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT					1.	CONTRACT CODE J		PAGE OF PAGES 1            22
2.	AMENDMENT/MODIFICATION NO. 08		3.	EFFECTIVE DATE 19-May-2008	4.	REQUISITION/PURCHASE NO. SEE SCHEDULE		5.	PROJECT NO. (If applicable)
6.	ISSUED BY		CODE      M67854		7.	ADMINISTERED BY (If other item then 6)		CODE    S110SA
COMMANDING GENERAL MARINE CORPS SYSTEMS COMMAND ATTN: PMM 2041 2200 LESTER STREET QUANTICO, VA 22134					DCMA ATLANTA ATTN: KAREN DENNER, 2300 LAKE PARK DRIVE SUITE 300 SMYNRA, GA 80080
8.	NAME AND ADDRESS OF CONTRACTOR (No., Street, County, State and Zip Code)					9A. AMENDMENT OF SOLICITATION NO.
	FORCE PROTECTION INDUSTRIES, INC. DAMON WALSH					9B. DATED (SEE ITEM 11)
	9801 HIGHWAY 78 #1 LADSON SC 29456				X	10A.	MOD. OF CONTRACT/ORDER NO. M67854-D7-D-5031-0003
CODE 1EFH8			FACILITY CODE		X	10B.	DATED (SEE ITEM 13) 23-Apr 2007
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
o	This above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of offer. o is extended    o is not extended.
Offer must acknowledge receipt of this amendment prior to the hour and date specified in the application as amended by one of the following methods: (a) By completing items 8 and 15, and returning    copies to the amendment, (b) by acknowledging receipt of the amendment on each copy of the offer submitted; or (c) by separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THIS RECEIPT OF OFFERS PRIOR TO THIS HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.
12.	ACCOUNTING AND APPROPRIATION DATA (If required) See Schedule
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACT/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
	A.	THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
	B.	THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(B)
X	C.	THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF : FAR 43.103(A) Bilateral agreement
	D.	OTHER (Specify type of modification and authority)
B.	IMPORTANT: Contactor o is not, ý is required to sign this document and return 1 copies to the issuing office.
14.	DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.
	Modification Control Number: slmsa082834
The purpose of the attached modification is for 1) Correct CLIN description, 2) Order supplies and services to support the vehicles ordered under this contract.
Except as provided herein, all terms and condition of the document referenced in Item 9A or 10A, is heretofore changed, remains and in full force and effect.
15A.	NAME AND TITLE OF SIGNER (Type or print) Otis Bryd Director of Contracts				16A.	NAME AND TITLE OF CONTRACTOR/OFFICER (Type or Print) CARL V. BRADSHAW CONTRACTING OFFICER
					Tel:			Email:
15B.	CONTRACTOR/OFFEROR   /s/ OTIS BYRD (Signature of person authorized to sign)		15C.	DATE SIGNED 5/21/2008	16B.	UNITES STATES OF AMERICA    BY /s/ CARL V. BRADSHAW (Signature of Contracting Officer)		16C.	DATE SIGNED 30 May 08

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

SECTION SP 30 BLOCK 14 CONTINUATION PAGE

SUMMARY OF CHANGES

SECTION A—SOLICITATION/CONTRACT FORM

        The total cost of this contract was increased by $28,456,471.08 from $479,433,195.00 to $507,889,666.08.

SECTION B—SUPPLIES OR SERVICES AND PRICES

        CLIN 0093

        The CLIN extended description has changed from The Contractor shall provide BDAR Parts IAW the SOW and CAT I BDAR parts list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items to The Contractor shall provide BDAR Parts IAW the 13 March 2008 SOW and CAT I BDAR parts list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items.

        SUBCLIN 0093AA

        The CLIN extended description has changed from The Contractor shall provide BDAR Parts TAW the SOW and CAT I BDAR parts list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short invoice for shipped to The Contractor shall provide BDAR. Parts IAW the 13 March 2008 SOW and CAT I BDAR parts list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items.

        SUBCLIN 0093AB

        The CLIN extended description has changed from The Contractor shall provide BDAR Parts IAW the SOW and CAT I BDAR parts list incorporated on the Base Contract. 1 Lot equals I of each part listed. Vendor is authorized to ship short and invoice for shipped to The Contractor shall provide BDAR Part, IAW the 13 March 2008 SOW and CAT I BDAR parts list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped.

        CLIN 0095

        The CLIN extended description has changed from The Contractor shall provide Depocessing Kits IAW SOW and CAT I Depocessing Kit list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped to The Contractor shall provide Depocessing Kits IAW 13 March 2008 SOW and CAT I Depocessing Kit list incorporated on the Base Contract. 1 Lot equals l of each part listed. Vendor is authorized to ship short and invoice for shipped.

        SUBCLIN 0095AA

        The CLIN extended description has changed from the Contractor shall provide Depocessing Kits IAW SOW and CAT I Depocessing Kit list incorporated on the Base Contract 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped. to The Contractor shall provide Depocessing Kits IAW 13 March 2008 SOW and CAT I

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

2

Depocessing Kit list incorporated in the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped.

        SUBCLIN 0095AB

        The CLIN extended description has changed from The Contractor shall provide Depocessing Kits IAW SOW and CAT I Depocessing Kit list incorporated on the Base Contact. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped. to The Contractor shall provide Depocessing Kits IAW 13 March 2008 SOW and CAT I Depocessing Kit list incorporated on the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped.

        CLIN 0097

        The CLIN type priced has been deleted.

        The. CLIN extended description has changed from The Contractor shall provide Special Tools IAW SOW and CAT I Special Tools list incorporated in the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped. to The Contactor shall provide Special Tools IAW 13 March 2008 SOW and CAT 1 Special Tools list incorporated in the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped.

        The pricing detail quantity 3.00 has been deleted.

        The unit price amount has decreased by $[***] from $[***] to $[***].

        The total cost of' this line item has decreased by $89,997.00 from $89,997.00 to UNDEFINED.

        SUBCLIN 0093AC is added as follows:

ITEM NO.	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0093AC	Cat I Battle Damage Repair (BDAR) FFP	24	Lot	$[***]	$[***]
	The Contractor shall provide BDAR Parts IAW the 13 March 2008 SOW and CAT I BDAR parts List. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC765090011 PURCHASE REQUEST NUMBER: M9545007RC765090010
			NET AMT		$[***]
					$[***]
	ACRN AG CIN:000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3

        SUBCLIN 0093AD is added as follows:

ITEM NO.	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0093AD	Cat I Battle Damage Repair (BDAR) FFP	4	Lot	$[***]	$[***]
	The Contractor shall provide BDAR Parts IAW the 13 March 2008 SOW and CAT I BDAR parts List. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC76415 PURCHASE REQUEST NUMBER: M9545007RC765090009
			NET AMT		$[***]
					$[***]
	ACRN AG CIN:000000000000000000000000000000

        CLIN 0094 is added as follows:

ITEM NO.	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094	Cat II Battle Damage Repair (BDAR) FFP		Lot	$[***]
	The Contractor shall provide BDAR Parts IAW the 13 March 2008 SOW and CAT II BDAR parts list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC76509 PURCHASE REQUEST NUMBER: M9545007RC765090010
			NET AMT		$[***]

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

4

        SUBCLIN 0094AA is added as follows:

ITEM NO.	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094AA	Cat II Battle Damage Repair (BDAR) FFP	7	Lot	$[***]z	$[***]
	The Contractor shall provide BDAR Parts IAW the 13 March 2008 SOW and CAT II BDAR parts list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC765090011 PURCHASE REQUEST NUMBER: M9545007RC765090011
			NET AMT		$[***]
					$[***]
	ACRN AII CIN:000000000000000000000000000000

        SUBCLIN 0094AB is added as follows:

ITEM NO.	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0094AB	Cat II Battle Damage Repair (BDAR) FFP	3	Lot	$[***]	$[***]
	The Contractor shall provide BDAR Parts IAW the 13 March 2008 SOW and CAT II BDAR parts list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC76415 PURCHASE REQUEST NUMBER: M9545007RC764150009
			NET AMT		$[***]
					$[***]
	ACRN AK CIN:000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

5

        SUBCLIN 0095AC is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0095AC	CAT I Deprocessing Kit FFP	5	Lot	$[***]	$[***]
	The Contractor shall provide Deprocessing Kits IAW 13 March 2008 SOW and CAT I Deprocessing Kit list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and in invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC765090011 PURCHASE REQUEST NUMBER: M9545007RC764150011
			NET AMT		$[***]
	ACRN AI				$[***]
	CIN:000000000000000000000000000000

        SUBCLIN 0095AD is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0095AD	CAT I Deprocessing Kit FFP	1	Lot	$[***]	$[***]
	The Contractor shall provide Deprocessing Kits IAW 13 March 2008 SOW and CAT I Deprocessing Kit list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and in invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC7641500009 PURCHASE REQUEST NUMBER: M9545007RC7641500009
			NET AMT		$[***]
	ACRN AK				$[***]
	CIN:000000000000000000000000000000

        CLIN 0096 is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0096	CAT II Deprocessing Kit FFP	7	Lot	$[***]	$[***]
	The Contractor shall provide Deprocessing Kits IAW 13 March 2008 SOW and CAT II Deprocessing Kit list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and in invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC765090011 PURCHASE REQUEST NUMBER: M9545007RC765090011
			NET AMT		$[***]

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

6

ACRN AG	$[***]
CIN:000000000000000000000000000000

        SUBCLIN 0097AA is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0097AA	CAT I Special Tools FFP	6	Lot	$[***]	$[***]
	The Contractor shall provide Special Tools IAW 13 March 2008 SOW and CAT I Special Tools list incorporated in the Base Contract. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and in invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC765090011 PURCHASE REQUEST NUMBER: M9545007RC765090011
			NET AMT		$[***]
	ACRN AJ				$[***]
	CIN:000000000000000000000000000000

        SUBCLIN 0097AB is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0097AB	CAT I Special Tools FFP	6	Lot	$[***]	$[***]
	The Contractor shall provide Special Tools IAW 13 March 2008 SOW and CAT I Special Tools. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and in invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC76415 PURCHASE REQUEST NUMBER: M9545007RC764150009
			NET AMT		$[***]
	ACRN AK				$[***]
	CIN:000000000000000000000000000000

        CLIN 0098 is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
0098	CAT II Special Tools FFP	2	Lot	$[***]	$[***]
	The Contractor shall provide Special Tools IAW 13 March 2008 SOW and CAT II Special Tools list. 1 Lot equals 1 of each part listed. Vendor is authorized to ship short and in invoice for shipped items. FOB: Destination MILSTRIP: M9545007RC765090011 PURCHASE REQUEST NUMBER: M9545007RC765090010
			NET AMT		$[***]
	ACRN AG				$[***]
	CIN:000000000000000000000000000000

        CLIN 1084 is added as follows:

ITEM NO	SUPPLIES/SERVICES	QUANTITY	UNIT	UNIT PRICE	AMOUNT
1084	Welder OCONUS FFP	24	Manmonth	$[***]	$[***]
	The Contractor shall provide Welder OCONUS IAW paragraph in C.12.2 OCONUS Welder × 12 months—24 FOB: Destination MILSTRIP: M9545007RC76415 PURCHASE REQUEST NUMBER: M9545007RC764150009
			NET AMT		$[***]
	ACRN AC				$[***]
	CIN:000000000000000000000000000000

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

7

SECTION E—INSPECTED AND ACCEPTANCE

The following Acceptance/Inspection Schedule was added for SUBCLIN 0093AC, 0093AD, 0094-0094AC, 0096, 0097AA, 0097AB, AND 0098:

INSPECT AT	INSPECTED BY	ACCEPTED AT	ACCEPTED BY
Origin	Government	Destination	Government

The following Acceptance/Inspection Schedule was added for CLIN 1084

INSPECT AT	INSPECTED BY	ACCEPTED AT	ACCEPTED BY
Destination	Government	Destination	Government

SECTION F—DELIVERIES OR PERFORMANCE

The following Delivery Schedule item for CLIN 0003 has been changed from:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
09-APR-2008	82	N/A FOB: Destination
To:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
09-APR-2008	82	305 LRS LGS 1757 Vandenberg AVE MCGUIRE AFB NJ 08641-5528 DSN 650-3451 FOB: Destination	FB4484
		Mark For: (41) CAT 1 90 DAY CONSUMABLE W91DX3 MRAP FIELDING SITE (FOB KANDAHAR) KANDAHAR AFGHANISTAN APO AE 09355 POC DAVID JIMINEZ, TONY DELUCA RANDY RANKIN, AND MAJ NEWBOLD FRUSTRATED CARGO: Ronald.l.Wilson1.CTR@usmc.mil DSN 567-7518

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

8

Mark For:
(41) CAT 1 90 DAY CONSUMABLE
W91EB8
3RD BN 401ST AFSBN-AF
APS-5 MRAP YARD
ATTN: ROY BILBRETH, RANDY RANKIN, AND MAJ
NEWBOLD
OEF JLI SUPPLY COORD
BAGRAM AFB AFGHANISTAN
APO AE 09354
FRUSTRATED CARGO:
Ronald.l.Wilson1.CTR@usmc.mil
DSN 567-7518

        The following Delivery Schedule item for CIJN003 has been changed from:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
31-JAN-2008	467	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 09C11 BLDG 3112 M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-16939 843-218-4876 FOB: Destination	N62536
To:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
31-JAN-2008	258	RECEIVING OFFICE/SPAWARSYSCEN CHARLESTON PETE WARD CODE 616PW 09C11 BLDG 3112 M/F BROOKS O'STEEN MCHS PROJECT NORTH CHARLESTON SC 29405-16939 843-218-4876 FOB: Destination	N65236

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

9

        The following Delivery Schedule item has been added to CLIN 0003:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	4	SUPPLY OFFICER CMC CHAD KELLER SEABEE CAMP SHIELDS OKINAWA FPO AP 96370-0060 1181-611-732-4152 FOB: Destination	R66688

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	4	RIVERINE GROUP ONE CMC ROBERT GRENIER BUILDING 2012, NAB LITTLE CREEK, 2340 AMP NORFOLK VA 23521-2422 757-462-7400 X113 FOB: Destination	N40540

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	6	RECEIVER OFFICER BUC BERNAD SBABEE CAMP MITCHELL, BLDG 55 SUPPLY DEPT APO AE 11530 DSN 314-727-1436 FOB: Destination	N66740

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	4	RECEIVING OFFICER CMC JEFF BRIGHT SEABEE CAMP COVINGTON GUAM GU 96540 671-339-5159 FOB: Destination	R66687

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	37	OFFICER IN CHARGE LTCOL TIERNAN, CHRIS SMU IIP ACCT, 1ST SUPPLY BN, BLDG #2261 CAMP PENDLETON CA 92055-5627	MMC160

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

10

DSN 36J-6575
FOB: Destination

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	4	MARINE CORPS ENGINEER SCHOOL BB-49 JACKSON STREET COURTHOUSE BAY CAMP LEJEUNE NC 28542 FOB: Destination	MML199

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	24	TMO OKINAWA MSGT FLETCHER, I.L. TMO MF FORCE FED ACCT HP GENERAL ACCT MMRFFA BLDG 400 BAY 1 CAMP KINSER OKINAWA 96604-8413 DSN 315-224-8322 FOB: Destination	MMRFFA

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	76	TMO M/F M35014 MSGT BARBER EXERCISE SUPPORT DIV MCAGCCC MARINE CORPS AIR GROUND COMBAT CENTER TWNEYNINE PALMS CA 92278-5011 760-830-3976 FOB: Destination	M35014

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	39	II MEF MSGYSGT SMITH/SGT FOSTER TRAFFIC MANAGEMENT OFFICE BLGD 1011 MFMM CAMP LEJEUNE NC 28542-500 910-451-7779 FOB: Destination	MML199

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
02-JUN-2008	11	GULFPORT, MS GREG STANLEY RECEIVING OFFICER RECEIVING OFFICER CONTRUCTION BATTALION CENTER 2401 UPPER NIXON AVE, M/F R3 L GULFPORT MS 39501-5001 228-871-3856 FOB: Destination	N62604

The following Delivery Schedule item for CLIN 0006 has been changed from:

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

11

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
09-APR-2008	8	N/A FOB: Destination

To:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
09-APR-2008	8	305 LRS LGS CPL DAVIS 1757 VANDENBERG AVE MCGUIRE AFB, NJ 08641-5528 DSN 650-3451 FOB: Destination	FB4484

The following Delivery Schedule item has been added to SUBCLIN 0093AC:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	24	APX TRTC RECEIVING 500 ATLANTIS ST. BLDG DOVER AFB DE 19902-5061 302-677-4390 FOB: Destination	FY9125
		MARK FOR: USMC MDC EAST—MMX200 POC: TIME FARLEY OIF MF MMX200 AL, TAQUADDUM AB HABBANIYAH IQ Tel: DSN: 318-342-4304

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

12

The following Delivery Schedule item has been added to SUBCLIN 0093AD:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	4	APX TRTC RECEIVING 550 ATLANTIC ST, BLDG 550 DOVER AFB DE 19902-5061 302-677-4390 FOB: Destination	FY9125
		MARK FOR: USMC MDC EAST—MMX200 POC: TIME FARLEY OIF MF MMX200 AL, TAQUADDUM AB HABBANIYAH JQ Tel: DSN: 318-342-4304

The following Delivery Schedule item has been added to SUBCLIN 0094AA:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	7	APX TRTC RECEIVING 550 ATLANTIC ST, BLDG 550 DOVER AFB DE 19902-5061 302-677-4390 FOB: Destination	FY9125
		MARK FOR: USMC MDC EAST—MMX200 POC: TIME FARLEY OIF MF MMX200 AL, TAQUADDUM AB HABBANIYAH IQ Tel: DSN: 318-342-4304

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

13

The following Delivery Schedule item has been added to SUBCLIN 0094AB:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	3	APX TRTC RECEIVING 550 ATLANTIC ST, BLDG 550 DOVER AFB DE 19902-5061 302-677-4390 FOB: Destination	FY9125
		MARK FOR: TMO EAST OIF M/F MMX160 AL, TAQUADDUM AB HABBANIYAH IQ Tel: 318-340-1325

The following Deliver Schedule item had been added to SUBCLIN 0095AC:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	5	APX TRTC RECEIVING 550 ATLANTIC ST, BLDG 550 DOVER AFB DE 19902-5061 302-677-4390 FOB: Destination	FY9125
		MARK FOR: TMO EAST OIF M/F MMX160 AL, TAQUADDUM AB HABBANIYAH IRAQ HABBANIYAH Tel: 318-340-1325

The following Deliver Schedule item had been added to SUBCLIN 0095AD:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	1	436 APS TRTC JEFF WRIGHT BLDG 550 CP 302  677 550 ATLANTIC DOVER DE 19902-5061 FOB: Destination	FY9125
		MARK FOR:

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

14

TMO EAST
OIF M/F MMX160
AL, TAQUADDUM AB
HABBANIYAH IRAQ
HABBANIYAH
Tel: 318-340-1325

The following Delivery Schedule item has been added to CLIN 0096:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
15-NOV-2008	7	APX TRTC RECEIVING 550 ATLANTIC ST, BLDG 550 DOVER AFB DE 19902-5061 302-677-4390 FOB: Destination
		MARK FOR: TMO EAST OIF M/F MMX160 AL, TAQUADDUM AB HABBANIYAH IRAQ HABBANIYAH Tel: 318-340-1325	FY9125

The following Delivery Schedule item has been added to CLN 1084:

DELIVERY DATE	QUANTITY	SHIP TO ADDRESS	UIC
18-JUN-2008	24	3RD BN 401ST AFSBN-AF APS-5 MRAP Yard Attn: Roy Bilbreth Randy Rankin and Maj Newbold OEF ILI SUPPLY COORD BAGRARN AFB AFGANHISTAN APO AR 09354	W9IEB8

SECTION G—CONTRACT ADMINISTRATION DATA

Accounting and Appropriation

Summary for the Payment Office

As a result of this modification, the total funded amount for this document was increased by $28,456,471.08 from $479,433,195.00 to $507,889,666.08.

SUBCLIN 0093AC:

Funding on SUBCLIN 0093AC is initiate as follows:

ACRN: AG
CIN:000000000000000000000000000000
Accing Data: 17711096520 310 67854 067443 2D 6520S9
Increase: $[***]
Total: $[***]
Cost Code: 00007RC76509

SUBCLIN 0093AD:

FUNDING ON SUBCLIN 0093AD IS INITIATED AS FOLLOWS:

ACRN: AK

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

15

CIN:000000000000000000000000000000
Accing Data: 17711096520  250 67854 06743 2D 6520B7
INCREASE: $[***]
TOTAL: $[***]

SUBCLIN 0094AA:

Funding on SUBCLIN 0094AA is initiated as follows:

ACRN: AII
CIN: 000000000000000000000000000000
Accing Data: 17711096520  250 67854 067443 2D 6520B7
Increase: $[***]
Total: $[***]

SUBCLIN 0094AB:

Funding on SUBCLIN 0094AB is initiated as follows:

ACRN: AK
CIN: 000000000000000000000000000000
Accing Data: 17711096520  250 67854 067443 2D 6520B7
Increase: $[***]
Total: $[***]

SUBCLIN 0094AC:

Funding on SUBCLIN 0094AC is initiated as follows:

ACRN: AJ
CIN: 000000000000000000000000000000
Accing Data: 17711096520  310 67854 067443 2D 652089
Increase: $[***]
Total: $[***]
Cost Code: 325837P0791W

SUBCLIN 0095AD

FUNDING ON SUBCLIN 0095AD IS INITIATED AS FOLLOWS:

ACRN: AK
CIN: 000000000000000000000000000000
Accing Data: 17711096520  250 67854 067443 2D 6520B7
Increase: $[***]
Total: $[***]

CLIN 0096:

Funding on CLIN 0096 Is Initiated as follows:

ACRN: AG
CIN: 000000000000000000000000000000
Accing Data: 17711096520  310 67854 067443 21D 6520S9
Increase: $[***]
Total: $[***]
Cost Code: 00007RC76509

CLIN 0097:

Accing Data: I77181K15XG 312 9B616 1 068688 2D CMQ791 625837P079IW (CIN 000000000000000000000000000000) was decreased by $89,997.00 from $89,997.00 to $0.00

SUBCLIN 0097AA:

Funding SUBCLIN 0097AA is initiated as follows:

ACRN: AG
CIN: 000000000000000000000000000000
Accing Data : 17711096520  310 67854 067443 2D 6520S9
Increase: $[***]
Total: $[***]
Cost Code: 625837P079IW

SUBCLIN 0097AB:

Funding on SUBCLIN 0097AB is initiated as follows:

ACRN: AK
CIN: 000000000000000000000000000000
Accing Data: 17711096520  250 67854 067443 2D 6520B7
Increase: $[***]
Total: $[***]

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

16

CLIN 0098:

Funding on CLIN 0098 is initiated as follows:

ACRN: AG
CIN: 000000000000000000000000000000
Accing Data: 17711096520  310 67854 067443 2D 6520S9
Increase: $[***]
Total: $[***]
Cost Code: 00007RC76509

CLIN 1084:

Funding on CLIN 1084 is initiated as follows:

ACRN: AC
CIN: 000000000000000000000000000000
Accing Data: 17711096520  250 67854 067443 2D 6520B7
Increase: $[***]
Total: $[***]
Cost Code: 00007RC76415
(End of Summary of Changes)

[***] INDICATES MATERIAL THAT HAS BEEN OMMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

17

QuickLinks

Exhibit 10.79

EX-10.81

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Exhibit 10.81

Aerospace/Defense, Inc.
4838 Jenkins Avenue
North Charleston, SC 29405
Telephone: (843) 744-5174
Facsimile: (843) 747-4092
E-mail: garfinklel@intertechse.com

June 2, 2008

John F. Wall, III, Esquire
Vice President, Legal Affairs
Force Protection Industries, Inc.
9601 Highway 78
Ladson, SC 29456

Re:

Amendment to each of the following Leases between Aerospace/Defense, Inc. (the "Landlord") and Force Protection Industries, Inc. and Force Protection, Inc. (collectively, the "Tenant") (covering various buildings/sites located at the Landlord's industrial development situated in Ladson (Charleston County) South Carolina—extending the Initial Term from January 14, 2009 to March 31, 2009:



1.

Fourth Amended and Restated Industrial Lease (covering certain premises within Building No. 1) effective as of July 1, 2007;



2.

Office Lease dated June 1, 2005 (covering a portion of the Office Area in Building No. 1) last amended by First Amendment to Office Lease effective as of July 1, 2007;



3.

Industrial Lease dated July 13, 2004 (covering a portion of Building No. 2) last amended by Fourth Amendment to Lease effective as of November 1, 2007;



4.

Industrial Lease dated September 2, 2003 (covering Building No. 3) last amended by Second Amendment to Lease effective as of July 1, 2007; and



5.

(Ground Lease dated February 1, 2007 (covering the Ground Lease on which Building No. 6 has been built) last amended by First Amendment to Ground Lease effective as of July 1, 2007.

(collectively, the "Leases" and individually a "Lease").

Dear Mr. Wall:

        Pursuant to Section 27K of the Leases (referencing amending each Lease), this letter, when signed by an authorized representative of each Tenant, shall serve as an amendment (the "Second Extension Amendment") to each of the Leases referenced above (as amended by Extension Amendment dated January 10, 2008).

        The Initial Term (as that term is defined in each such Lease) is hereby extended to and will expire on March 31, 2009.

        For clarification and avoidance of doubt, Section 2 of each Lease (with respect to extending the terms of each Lease) provides in part that the Tenant may extend its option to renew by notice in writing to the Landlord served at least six (6) months and not more than twelve (12) months prior to the end of the Initial Term or the then-current Option Period, as the case may be. Therefore, in order for the Tenant to exercise its option to extend the Initial Term of each Lease (should the Tenant so desire to exercise such right(s)) due to expire on March 31, 2009, as provided for in this Second

Extension Amendment, the Tenant must serve a notice in writing upon the Landlord no later than September 30, 2008.

        If this Second Extension Amendment or the signature page, as executed, is transmitted by one party to the other by facsimile transmission or electronic "pdf" transmission, such transmission shall be deemed an executed original of this Second Extension Amendment and of such signature.

        Except as modified by this Second Extension Amendment, the Leases remain unchanged.

        If the Tenants agree to the terms and provisions of this Second Extension Amendment, please have an authorized representative of each Tenant sign below and thereafter either fax or pdf to me the original hereof.

Aerospace/Defense, Inc.

By:	/s/ M. JERRY GARFINKLE M. Jerry Garfinkle
Its:	Senior Vice President

We agree to the above Second Extension Amendment

Force Protection Industries, Inc.		Force Protection, Inc.
By:	/s/ LENA RUTH MACDONALD	By:	/s/ LENA RUTH MACDONALD
Its:	Chief Strategy Officer, General Counsel and Corp Secretary 6/25/08	Its:	Chief Strategy Officer, General Counsel and Corp Secretary 6/25/08

2

QuickLinks

Exhibit 10.81

EX-14

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Exhibit 14.1

FORCE PROTECTION

CODE OF CONDUCT AND ETHICS

Force Protection, Inc.

Code of Conduct and Ethics Certification

I hereby certify:

(1)

I have received and read Force Protection, Inc.'s Code of Conduct and Ethics;

(2)

I understand that every employee is required to comply with the policies set out in this Code of Conduct and Ethics;

(3)

When I have a concern about a possible violation of Force Protection policy, I will report the concern to a manager within my department, the Company's Legal Department, the Company Hotline, or another contact listed in the Code of Conduct and Ethics; and

(4)

I understand and agree that the Code of Conduct and Ethics is implemented to ensure that all employee conduct is in accordance with applicable laws and self-imposed ethical standards.

(5)

I FURTHER UNDERSTAND THAT THIS DOCUMENT IS NOT A CONTRACT AND THAT I, AND THE COMPANY, HAVE THE RIGHT TO TERMINATE THE EMPLOYMENT RELATIONSHIP AT ANY TIME, FOR ANY REASON AND WITHOUT PAYMENT OF ANY TERMINATION DAMAGES OR SEVERANCE PAY OF ANY KIND.

Signature

Name (printed) and Date

Social Security Number

Location

1

Michael Moody
Chief Executive Officer & President

July 1, 2008

Re:

Code of Conduct and Ethics

Dear Force Protection Employees:

        The subject of this booklet is ethics and business conduct, and it is a subject about which all of us should have strong and aligned views. All Force Protection directors, officers and employees must hold themselves to the highest ethical and legal standards of conduct. Each employee should be proud to be a part of Force Protection and each employee should recognize that it takes a significant effort to build and maintain a good corporate reputation.

        The Force Protection Code of Conduct and Ethics serves as a guide for each director, officer and employee on how to manage, on a daily basis, specific business activities. This Code is intended to focus directors, officers and employees on areas of ethical risk, provide guidance to help recognize and deal with ethical issues, provide mechanisms to report questionable or unethical conduct, foster a culture of honesty and accountability, deter wrongdoing and promote fair and accurate disclosure and financial reporting. Please read it carefully and keep it continually in mind. There are no easy answers to many ethical issues that a company may face in daily business activities. When faced with a tough ethical decision, or whenever there is any doubt as to the right thing to do, or if a question is raised, whether it involves the director, officer, employee or not, they should talk to someone such as their supervisor, another manager, or our Compliance Officer. Further, if a director, officer or employee needs assistance in understanding or interpreting the Code, they should contact their supervisor or the Compliance Officer. Asking questions or seeking guidance as soon as the issue or concern arises will help the director, officer or employee resolve questions and take appropriate action.

Sincerely,

Michael Moody
Chief Executive Officer & President

Force Protection, Inc. -- 9801 Highway 78, Building 1 -- Ladson, South Carolina 29492 -- 843.574.7000

2

FORCE PROTECTION

CODE OF CONDUCT AND ETHICS (HEREINAFTER, THE "CODE")

Introduction

        The Audit Committee ("Audit Committee") of the Board of Directors of Force Protection, Inc. ("Board") has approved the following Code for the guidance of directors, officers and employees (including every full and part-time employee) of Force Protection, Inc. and its subsidiaries (the "Company" or "Force Protection") to be used in conducting the business affairs of the Company. It is the Company's policy to comply with all applicable laws, rules and regulations, and it is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations.

EMPLOYMENT IS "AT-WILL" AND MAY BE ENDED BY THE COMPANY OR THE EMPLOYEE AT ANY TIME FOR ANY REASON. THIS CODE OF CONDUCT AND ETHICS DOES NOT CONSTITUTE A CONTRACT OF EMPLOYMENT FOR ANY TERM. NOTHING IN THIS CODE OF CONDUCT AND ETHICS SHALL BE CONSTRUED TO CONSTITUTE A CONTRACT, AND NOTHING HEREIN LIMITS THE COMPANY'S RIGHTS TO TERMINATE EMPLOYMENT OR THE EMPLOYEE'S(S') RIGHTS TO TERMINATE EMPLOYMENT. ALL EMPLOYEES OF THE COMPANY ARE AT-WILL EMPLOYEES, EXCEPT AS MAY BE OTHERWISE DECLARED BY SEPARATE WRITTEN CONTRACT BETWEEN THE COMPANY AND THE EMPLOYEE.

Business Ethics and Compliance

        Force Protection is committed to operating in compliance with the law and in conformity with the highest standards of business conduct. The Company sustains customer loyalty, vendor relationships, employee satisfaction and shareholder support with its reputation for ethical conduct. The Company requires candor, honesty and cooperation from all directors, officers and employees in the performance of their responsibilities, and it is essential that the highest standards of conduct be observed in all business dealings. Each director, officer and employee should endeavor to deal fairly with the Company's customers, shareholders, service providers, suppliers, competitors, governmental officers, and fellow employees. The Company does not seek competitive advantages through illegal or unethical business practices. Manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any unfair dealing practice will not be tolerated from any director, officer or employee.

        This Code is intended to be consistent with and refer to certain key corporate policies, processes and work instructions. Further, the Company's adopted policies, processes and work instructions may provide greater detail than is provided by this Code, or in some instances the policies, procedures and work instructions may provide additional directives not covered by this Code. It is the responsibility of each Force Protection director, officer and employee to ensure that his or her behavior and activity is consistent with this Code, Company policies, processes and work instructions, as well as all applicable federal, state and local laws and regulations.

        Directors, officers and employees should not be, or appear to be, subject to influences, interests or relationships that conflict with the interests of the Company. In addition, all directors, officers and employees should protect the Company's assets and ensure their efficient use for legitimate business purposes only. The Company also expects directors, officers and employees to conform to standards of behavior which will ensure a positive and productive working environment.

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The select corporate policies included as an integral part of this Code are:

1.

Accounts, Accounting Controls and Reporting



2.

Antitrust Laws and Compliance



3.

Confidential and Proprietary Information



4.

Conflicts of Interest



5.

Contracting Authority



6.

Corporate Advances



7.

Corporate Opportunities



8.

Environmental, Health and Safety



9.

Export and Import Controls / ITAR



10.

Equal Employment Opportunity and Workplace Environment



11.

Gifts / Business Entertainment



12.

Insider Trading



13.

International / Foreign Corrupt Practices Act



14.

Litigation Authority



15.

Outside Activities of Employees



16.

Political Contributions, Positions and Activities



17.

Outside Ideas



18.

Records Management



19.

Regulation FD / Disclosure Policy



20.

Special Considerations for Doing Business with the United States Government ("U.S. Government" or "Government")



21.

Working with Suppliers



22.

Technology / Intellectual Property Developed During the Course of Employment

Administration of this Code of Conduct and Ethics

        The Company's approach to implementing and administering this Code will be active, open and ethically sound. The commitment to ensure compliance with this Code extends to all matters, including decisions relating to trade, investment, subcontracting, supplying, business development, and in all other business activities. The Company recognizes that there are often no easy answers to many ethical issues that employees may face in daily business activities. If a director, officer or employee is faced with a difficult ethical decision, or if ever there is any doubt as to the right course of action, this Code should be utilized. Director, officer and employee compliance with the Code is mandatory.

        Directors, officers and employees should have or should obtain sufficient knowledge about the laws, regulations and policies that apply to their duties to enable them to recognize an issue that should be addressed.

        To encourage employees to report any violations or concerns about misconduct, the Company will not tolerate or allow retaliation for reports made in good faith.

4

How to handle a question, concern or report a suspected violation regarding this Code

FIRST

        Define the concern by answering the following questions:

(a)

Who or what is the question, concern or complaint?



(b)

When did the question, concern or complaint surface?



(c)

Where did the incident happen?

NEXT

        Locate the Code (either from Human Resources or on the Company's internet site at www.forceprotection.net).

OR

        If an employee does not have access to the internet, or if the question, concern or complaint is not resolved by reference to the Code, the employee should raise the concern or report the suspected violation in one of the following ways:

(a)

Communicate the concern to whomever the employee feels most comfortable:


•

His or her supervisor or manager,



•

The next level of management, or



•

The appropriate human resources representative.



(b)

Utilize the Force Protection Compliance Program:


•

Call the confidential Company Hotline (toll-free) at 800.695.5218,



•

Send an email to the Company's compliance email address at Compliance@forceprotection.net, or



•

Write to the Compliance Officer at: 9801 Highway 78, Building 1, Ladson, SC 29456.

        Force Protection directors, officers and employees at all levels are prohibited from retaliating against anyone who, in good faith, raises an issue regarding a concern, question or possible violation of law or Company policy. Such retaliation can include, but is not limited to, discharge, demotion, suspension, threats, or harassment. The employee's confidentiality will be protected to the extent possible, consistent with law, Company policy and the requirements necessary to conduct an effective investigation.

        If an employee feels that he or she is experiencing retaliation for reporting a possible violation, an anonymous report can be made by writing to the Compliance Officer or by calling the toll free Company Hotline at 800.695.5218. The Company Hotline is available 24 hours a day, 7 days a week and is serviced by an independent contractor. The Hotline will not be answered by an employee of Force Protection. You have the option to remain anonymous. No retaliation or reprisals will be taken against anyone utilizing this confidential service in good faith. Any person who retaliates against an employee as a result of such employee's report of an alleged violation of law or Company policy will be subject to disciplinary action, including termination, and may risk criminal sanctions as a result of such actions.

        All matters reported are subject to review and investigation. The Audit Committee and Compliance Officer shall take all actions they consider appropriate to investigate any violations reported to them. With regard to any allegations involving a director or officer, the matter will be referred to the Audit Committee. With regard to all other employees, the matter will be referred to the

5

Vice President—Human Resources and the General Counsel. If a violation has occurred, the Company will take such disciplinary or preventative action as it deems appropriate.

        In order to facilitate implementation and administration of this Code, all directors, officers and employees have a duty to cooperate fully with the Company's investigation process and to maintain the confidentiality of investigative information unless specifically authorized or required by law to disclose such information. It is the policy of the Company that all directors, officers and employees cooperate fully with all lawful requests for information from Government investigating authorities. The Legal Department will determine whether a refusal may warrant an exception to the rule in particular circumstances.

Program

        Force Protection has established and will maintain a Compliance Program to ensure compliance with the law and with all policies and any additional standards the Company may adopt. Compliance with the Code is not a stand-alone requirement; the standards contained herein should be considered in relation to and governing Company business activities. In the event that a policy, procedure, or work instruction fails to incorporate appropriate reference to or provision of the Code, the director, officer, or employee should document this failure as instructed in the Company's processes and forward such information to the Compliance Officer at Compliance@forceprotection.net. A list of employees holding certain positions referenced in this Code can be found at http://forceprotection-lcec.lrn.com.

        The Compliance Program includes, among other things, (a) this Code; (b) other codes, directives, statements, policies, procedures, work instructions and handbooks as may be promulgated by the Company from time to time; (c) in-person training and on-line intranet educational programs; (d) processes for the documentation, evaluation and assessment of the effectiveness of internal controls; (e) processes for quarterly and annual Chief Executive Officer and Chief Financial Officer certifications; (f) processes for the documentation, evaluation and assessment of Company public disclosures; (g) establishment of a Company Hotline; and (h) appointment of a Compliance Officer.

        From time to time, the Company may waive some provisions of this Code. Any waiver of the Code for officers or directors of the Company may be made only in writing by the Board or the Audit Committee and must be disclosed as required by Securities and Exchange Commission ("SEC") rules. Any waiver for other employees may be made only in writing by the Compliance Officer.

        As part of the Compliance Program, the Company has established a 24-hour, toll-free Company Hotline monitored by a professional, independent contractor through which concerns, questions or suspected violations of laws, regulations, Company policies, or the Code may be reported by an employee, vendor, client, customer, or contractor. While reports to the Company Hotline can be made anonymously, it is not intended to replace normal supervisory channels for reporting questionable conduct or seeking advice about appropriate ethical behavior.

        Company Hotline (toll-free): 800.695.5218

        Or write to:

Force Protection, Inc.
Compliance Officer
9801 Highway 78, Building 1
Ladson, South Carolina 29456

        Or email to:

Compliance@forceprotection.net

6

        Please note that in most cases, email communication cannot be sent anonymously. To ensure anonymity, please report any concerns to the toll-free Company Hotline.

Policy 1. Accounts, Accounting Controls and Reporting

        As a public company, the Company is required by law to:

(a)

keep books, records and accounts which accurately and fairly reflect the transactions and dispositions of the assets of the Company; and



(b)

maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are properly authorized and recorded, that access to assets is permitted only as authorized, and that recorded assets are compared with existing assets at reasonable intervals.

        No secret or unrecorded funds or assets may be created or maintained for any purpose, and false, fictitious or misleading entries regarding any transaction or asset is prohibited.

        The Company is required to disclose, on a timely basis, information necessary to present its financial position and results of operation in an understandable disclosure which is fair, complete and accurate. Improper concealment, alteration or withholding of information from authorized auditors or regulatory agencies is prohibited.

        It is unlawful for any officer or director of the Company, or any other person acting under the direction thereof, to take any action to fraudulently influence, coerce, manipulate, or mislead any independent public or certified accountant engaged in the performance of an audit of the financial statements of the Company for the purpose of rendering such financial statements materially misleading.

        In this respect, the following guidelines must be followed:

(a)

No undisclosed, unrecorded, or "off-book" funds or assets will be established for any purpose;



(b)

No false or fictitious invoices will be paid or created;



(c)

No false or artificial entries will be made or misleading reports issued; and



(d)

Assets and liabilities of the Company shall be recognized and stated in accordance with the Company's standard practices and generally accepted accounting principals ("GAAP").

        If an employee believes that the Company's books and records are not being maintained in accordance with these requirements, the employee should report the matter directly to their supervisor or confidentially to the Company Hotline.

Policy 2. Antitrust Laws and Compliance

        The purpose of the antitrust laws is to ensure free and open competition among market participants, which is regarded as essential to the proper functioning of a market-based economic system. This Policy is intended to be a practical guide to antitrust compliance during the course of the Company's normal business activities. Employees who have any questions regarding the contents of this Policy should contact their manager or the Secretary of the Company.

        It is the policy of the Company to comply fully with all antitrust laws. While Company officers bear primary responsibility in the area of compliance, all employees are responsible for Company and individual compliance. The consequences of non-compliance, which can involve large fines, jail sentences, treble damages and other very onerous sanctions, can be devastating; even the costs of a successful defense against claimed violations are enormous. Any person who is aware of a possible violation of antitrust laws should notify his or her manager or the Company Hotline immediately

7

(without the necessity of following normal reporting channels), and the Legal Department will be consulted as each situation warrants.

        The antitrust laws of principal concern to the Company are the U.S. Sherman, Clayton, Federal Trade Commission and Robinson-Patman Acts. However, most of the States, the European Union and many foreign nations also have similar antitrust or competition laws. The U.S. antitrust laws apply not only to domestic business, but also to exports and imports and to acts taken in foreign countries that affect U.S. trade or commerce. In most cases, the conduct of the Company's current business in compliance with the U.S. antitrust laws will result in compliance with these other laws as well.

        Certain business arrangements or agreements with one or more competitors or other third parties are treated under the antitrust laws as illegal per se (a Latin term meaning "in or of itself" or "intrinsically"). Such arrangements are so inherently anti-competitive and so rarely beneficial that a precise analysis of their effects is deemed unnecessary. Restraints of trade that are per se illegal include price fixing, bid rigging, territorial market divisions and customer allocation agreements.

        Acts and practices that are not per se illegal but that may be subject to challenge as being anti-competitive are unlawful only if they impose unreasonable restraints upon competition. In these cases, courts and regulators examine those acts and practices under the so-called "rule of reason," considering the effects on competition, any non-anti-competitive justification for the act or practice, and the availability of less anti-competitive alternatives.

        Some business conduct that would be lawful if carried out independently nevertheless violates the antitrust laws if carried out jointly by agreement or understanding with others. Examples of such conduct include refusals to deal with suppliers or customers, publication of price lists, entry into or withdrawal from markets and limitations on production. It is irrelevant whether an offending agreement or understanding is formal or informal, written or oral, made directly or through an intermediary or concluded by a nod, wink, silence or other indication of acquiescence. Parallel business behavior, such as uniform raising or lowering of prices, does not alone establish an agreement. However, such behavior can be evidence from which the existence of an agreement is inferred. An example would be institution of a uniform price change closely following an industry trade association meeting.

Specific Prohibited or Risky Conduct

Relationships with Competitors

        Price Fixing.    Any agreement or understanding between competitors, express or implied, direct or indirect, to raise, reduce or stabilize prices is per se unlawful. The word "price" encompasses all the terms of sale, including credit terms, rebates, allowances or discounts.

        An illegal agreement or understanding may be inferred from the fact that a common price movement or stabilization followed communication between competitors. Employees should avoid any contact or communication with competitors that would permit an inference that any similarity in price behavior is due to prior agreements or understandings. If a competitor seeks to discuss with an employee prices or any of the other competitively sensitive subjects identified in this Policy, the employee must immediately terminate the conversation, inform the other person that such discussions are against the Company's policy, and promptly report the incident to his or her manager.

8

        Price lists, prices, pricing or discounting practices or information concerning factors affecting prices must not be exchanged with competitors, either directly or through a third party. The source of price lists and other competitive price information obtained from customers, suppliers, brokers or trade publications should be clearly identified on the face of any document reflecting or reporting competitor pricing information.

         Bid Rigging.    Agreements or understandings with competitors regarding bids for business, including comparison of bids or agreements to refrain from bidding, are illegal per se.

         Restrictions on Production.    It is generally unlawful for competitors to agree upon limitations involving production or supply of goods. Decisions to increase or decrease production levels or to stock inventory must be made independently by the Company consistent with its commercial interest and without consultation with competitors. Production rates, costs, works in progress, inventories, order backlogs or cancellations and future plans should not be exchanged or discussed with competitors.

         Divisions of Markets or Customers.    It is a per se violation of the antitrust laws for competitors or potential competitors to agree upon a division of markets, either by geographical area, by customer or by product. Allocations by mutual withdrawals from business or by prorating market shares are equally unlawful. Employees must not discuss with a competitor or potential competitor any matter relating to whether or to what extent the Company will compete in a particular geographic or product market. Additionally, customers should not be discussed with competitors in order to avoid the appearance of an understanding not to compete for their business.

         Trade Association Meetings.    Trade association meetings, when properly controlled with a formal agenda and with an attorney present, are a legal forum for the discussion of legitimate common business interests. However, such meetings expose each participant to an inference of collusion if several participants take similar action afterwards, particularly on price or production. Discussion of depressed prices, excess production or inventories, decreased or increased profits or losses, other than in terms of general overall supply, demand, production, consumption and industry-wide economics, should not take place, either formally or informally. "Off-the record" meetings with competitors in hospitality suites and hotel rooms or otherwise outside the formal agenda are particularly dangerous and generally should be avoided.

        If, during the course of any meeting, the conversation turns to a prohibited topic, the employee is instructed to announce that participation in the exchange is against corporate policy and that he or she will not be a party to any further discussion. If the discussion continues, the employee is instructed to leave the room (preferably in a manner which makes the withdrawal obvious and likely to be remembered). The employee is instructed to immediately notify the appropriate manager or call the Company's Hotline to notify of the possibility of illegal activity.

Relationships with Customers and Suppliers

        Refusals to Deal.    The Company is free to choose its customers or suppliers as it pleases, so long as it acts independently. This includes the right to limit the sale of certain products to certain customers or distribution channels. However, the Company may not agree with any of its competitors or customers to refuse or cease to do business with a third party. As a precaution, decisions to terminate distributors and other customers should be cleared in advance with the Legal Department.

         Exclusive Dealing Agreements.    Agreements requiring customers to buy only from the Company are prohibited by the antitrust laws if they foreclose competitive suppliers from a substantial part of a market. Exclusive arrangements with buyers should not be imposed or accepted without advice of the Legal Department.

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         Resale and Use Restrictions.    The Company may freely establish the price at which it sells products to distributors and other customers, but may only recommend resale prices to distributors or others who purchase Company products for inventory and resale. It is a per se violation of antitrust laws to impose resale prices by contract or to otherwise agree on, or to attempt to enforce, such prices.

         Price Discrimination.    The Robinson-Patman Act ("Act") makes it illegal for a seller to discriminate in prices charged for commodities of like grade and quality to buyers where the effect is to substantially lessen competition between (a) the seller and other suppliers, (b) two buyers who compete with one another, or (c) competing customers of the buyers. The Act also prohibits indirect price discrimination, such as better terms of credit or delivery, rebates or allowances given to some competing buyers and not others.

        As a general rule, under the Act, sellers may charge different prices in three circumstances (the party charging the discriminatory price bears the burden of proving that one of these defenses is applicable and satisfied as to each discriminatory price):

(a)

Cost Justification.    Price discrimination may be justified on the basis of savings to the seller in production costs, handling, order service or delivery from selling to a particular buyer, provided that the seller can prove the amounts saved. Volume discounts, for example, should not be granted unless a determination of cost savings has been made.



(b)

Meeting Competition.    Price reductions to some buyers are allowed if the seller believes in good faith that a lower competitive price has been offered and must be met to obtain the sale. This defense allows a change in price only to meet competition, not to beat it. While it is important to document the basis for believing a lower price has been offered, which may be a competitor's quotation reported by the customer or other customers, competitors must never be contacted for price verification. It is unlawful for a buyer to induce or receive a discriminatory price reduction from a seller by claiming falsely to have received a lower competitive offer.



(c)

Changed market conditions.    Changed conditions affecting the market for a product permit the seller to charge different prices to competing buyers. For example, price changes may reflect changes in aluminum metal prices, seasonal fluctuations, volatility of market prices, supply and demand and occurrence of unusual events.

        Prior consultation with the Legal Department can be helpful in avoiding potential risks of violating the Act and in finding ways of accomplishing the sales objective that are consistent with the law.

         Tying Arrangements.    A seller may not lawfully use a strong market position in one product (the "tying" product) as leverage to force or induce a customer to purchase another product of the seller (the "tied" product).

         Reciprocal Arrangements.    Reciprocal business arrangements may be unlawful as involving unacceptable restraints of trade. No goods or services should be purchased by the Company on the condition or understanding that the supplier will, in turn, make purchases from the Company. Similarly, no sales are to be made by the Company on the condition or understanding that the Company will, in turn, make purchases from the customer.

Mergers and Acquisitions

        Mergers and acquisitions involving the Company are subject to the antitrust laws, including the pre-merger notification requirements of the U.S. Hart-Scott-Rodino Act. Any such proposed activity should be reviewed with the Legal Department.

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General Antitrust Compliance

        Because antitrust violations may be and usually are established by inferences and implications from written documents and reports of oral communications, it is important to keep antitrust principles in mind when making business statements and preparing written material. Personal notes, diaries, calendars, e-mail messages and tapes concerning Company business are discoverable in legal proceedings. Every statement, letter, memorandum or report dealing with competitors or competition should be made or prepared on the assumption that it will one day be examined with suspicion and hostility by Government enforcement authorities or private litigants. Careless language can result in an inference of wrongful motive or conduct, regardless of the true state of the facts.

        Employees should avoid careless use of terms and phrases that suggest a competitor or the competition will "go along," "follow," be "parallel" or "aligned"; that there is "an industry consensus," that production or prices should be "normalized," "rationalized," "stabilized" or "disciplined"; or that a plan or course of action will result in "domination" or "control" of a market or in the acquisition, maintenance or increase of a large share of any market. Suspicious practices, such as code messages, use of home addresses, fictitious names, instructions to destroy documents and the like are prohibited.

        The Company is committed to compliance by its employees with the antitrust laws and this Policy and to cooperating appropriately with any Governmental antitrust investigations involving the Company. The Company must be notified immediately if any employee is contacted by anyone investigating Company conduct under the antitrust laws, whether on behalf of the Government or a private party. Employees must not answer questions or provide documents until after consulting with the Legal Department. Any person making such an inquiry should be referred to the Legal Department.

        The Company will not tolerate any conduct that is contrary to the antitrust laws or this Policy. Penalties for violations of this Policy include termination of employment, demotion, reduction in pay or other actions the Company deems appropriate. The Company will not accept as an excuse for conduct that violates the antitrust laws or this Policy that the employee thought his or her improper actions were "in the best interest of the Company." The willful withholding or concealment of information concerning a violation, or possible violation, of this Policy will result in disciplinary sanctions or dismissal.

        It is the policy of the Company to comply fully and strictly with domestic and international antitrust and competition laws of all countries where we do business. These laws protect the free enterprise system and encourage vigorous, but fair, competition. Among other stipulations, these laws prohibit any formal or informal understanding, agreement, plan or scheme among competitors that involves prices, territories, market share or customers to be served and activities or agreements that unfairly restrict competition. All mergers, acquisitions, strategic alliances, and other types of extraordinary business combinations should receive timely legal review to assure that they do not raise concerns of market dominance or improper coordination among competitors.

Policy 3. Confidential and Proprietary Information

Company Confidential Information

        The Company's technology, business transactions and relationships, financial data, projections and plans, among other things, constitute company confidential or proprietary information. Upon employment, every employee is required to sign a Non-Disclosure and Confidentiality Agreement which more specifically address every employee's obligation not to disclose Company information, including but not limited to Company Trade Secrets and Company Confidential information.

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Special Protection for Confidential Documents

        As an aid to the protection of confidential material, every document or other writing that contains proprietary or otherwise confidential information should be clearly labeled as COMPANY CONFIDENTIAL. The originator of the document should determine whether it contains proprietary or other confidential information and, if so, cause the document or writing to be labeled COMPANY CONFIDENTIAL. The relevant Manager should see that employees are educated as to the types of documents that should be labeled COMPANY CONFIDENTIAL.

        The fact that a document or other writing is not labeled COMPANY CONFIDENTIAL does not necessarily mean that it is not company confidential; employees should treat all Company materials as company confidential unless it is clear that they contain no confidential information.

        All company confidential documents should be kept in a secure location within the area of the Company to which they relate.

        Further guidance on maintaining Government classified materials can be found in Policy 20, Special Considerations for Doing Business with the United States Government.

Policy 4. Conflicts of Interest

        Directors, officers and employees of the Company and their immediate families are expected to conduct their affairs in a manner which will avoid conflicts between their personal interests and those of the Company. Directors, officers and employees should not permit any influence, interest, or relationship to arise or continue that may conflict or interfere, or even appear to conflict or interfere, with the interests of the Company or prejudice its reputation for integrity and fair dealing. Conflicts of interest are prohibited as a matter of Company policy unless they have been specifically approved in writing by an authorized official of the Company or the Audit Committee of the Company's Board. In particular, an employee, officer or director should never use or attempt to use his or her position with the Company to obtain any personal benefit for himself or herself, for his or her family, or for any other person, including loans or guarantees of obligations from any person or entity without the written authorization of the Company. The Company shall not extend or maintain credit, renew an extension of credit, or arrange for the extension of credit, either directly or indirectly, in the form of a personal loan to or for any director or officer of the Company.

        In this connection:

(a)

Employees and their families are expected to refrain from having any financial interest in, loans from, or other personal business relationships with suppliers and customers of the Company. An investment in publicly-traded securities of a supplier or customer normally would not be considered to present a conflict of interest unless it represented a material part of the individual's savings or of the capitalization of the supplier or customer.



(b)

Employees and their families also are expected to refrain from accepting non-nominal gifts or entertainment from suppliers and customers. This is not intended to prohibit the exchange of social amenities or business courtesies of a reasonable nature, consistent with good taste and mature judgment.

        Employees should be cautious in any situation that may involve, or may even appear to involve, a conflict between their personal interests and the interests of the Company. An actual or potential conflict of interest arises when a director, officer or employee is in a position to influence a decision that may result in personal gain for that individual or for a relative of that director, officer or employee as a result of the Company's business dealings. For the purposes of this Code, a relative is any person who is related by blood or marriage, or whose relationship with the employee is similar to that of persons who are related by blood or marriage.

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        In dealings with current or potential customers, suppliers, contractors, and competitors, each director, officer and employee should act in the best interests of the Company to the exclusion of personal advantage. In addition, business dealings with outside firms should not result in unusual gains for those firms, such as bribes, product bonuses, special fringe benefits, unusual price breaks, and other windfalls.

        Each employee should make prompt and full disclosure in writing to the General Counsel or make a report to the Company Hotline of any situation that may involve a conflict of interest. Failure to disclose any actual or perceived conflict of interest is a violation of the Code.

        All directors, officers and employees responsible for or in a position to influence the Company's dealings with suppliers and customers, and other employees will be required to complete an annual Conflicts of Interest Questionnaire. Any employee, officer or director who is aware of a conflict of interest or is concerned that a conflict might develop is required to promptly discuss the matter with the Legal Department.

Policy 5. Contracting Authority

        The authority of officers and other employees to make contractual commitments for the Company is delineated in a Board delegation of authority to the Chief Executive Officer and others in a General Authorization to Execute Contracts and Perform Acts (2008) and in similar authorizations and Board resolutions adopted from time to time.

        Only employees who are specifically authorized may commit the Company to others. A "commitment" by Force Protection includes the execution of any written agreement or any other undertaking that obligates or binds the Company in any respect, whether or not it involves the payment of money. Directors, officers and employees must never execute a document or otherwise commit the Company unless they have clear authority to do so. All such documents (contracts) must have the approval of the Legal Department before execution unless it is in a form previously approved by the Legal Department for such purpose or has been exempted by the Board from such approval. Failure to follow this policy will subject the employee to disciplinary action or dismissal.

Policy 6. Corporate Advances

        The Company may not loan money to employees except in limited circumstances. It is a violation of the Code for any employee to advance Company funds to any other employee or to himself or herself except in connection with customary business advances for legitimate corporate purposes which are approved by a supervisor or pursuant to a corporate credit card for usual and customary, legitimate business purposes. The Company will make no corporate advances to directors or officers. It is the Company's policy that any advance to an employee over five thousand dollars ($5,000) must be approved in advance by the Chief Financial Officer.

        Company credit cards are to be used only for authorized, legitimate business purposes. Any unauthorized charges to a company credit card will be the responsibility of the employee to whom the card is issued.

Policy 7. Corporate Opportunities

        Employees, officers and directors owe a duty to the Company to advance the Company's best interests when the opportunity to do so arises. Employees, officers and directors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers and directors are prohibited from

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using corporate property, information or position for personal gain or for competing with the Company.

        At times, the line between personal benefit and Company benefit is difficult to draw, and sometimes there are benefits to both the person and the Company in certain activities. The only prudent course of conduct for employees, officers and directors is to make sure that any use of Company property or services that is not solely for the benefit of the Company is approved beforehand by the Legal Department.

Policy 8. Environmental, Health and Safety

        The Company is committed to the concept of sustainable development, which requires balancing the need for economic operations and growth with good stewardship in the protection of human health and the natural environment. The Company seeks to meet and ultimately surpass the standards set by relevant legislation and regulation by diligent application of technically proven and economically feasible environmental protection measures throughout all phases of operations.

To implement this policy, the Company will endeavor to:

(a)

assess, plan, construct and operate facilities in compliance with all applicable legislation to minimize any potentially adverse impacts of its operations and products on employees, customers, the general public and the environment;



(b)

promote policies to all employees and integrate environmental, health and safety concepts into all applicable aspects of the business;



(c)

apply cost-effective, best-management practices to advance environmental protection and to minimize risks to public safety and health;



(d)

maintain active monitoring programs to evaluate operational risks to the environment and to human safety and health and apply sound risk management principles to ensure compliance with Government requirements; and



(e)

work with the Government and the public in the development of equitable, cost-effective and sensible laws and regulations for the enhancement of occupational safety and health and the protection of the environment.

Occupational Safety and Health

        All operations should be conducted safely to prevent accidents and injuries, and all practical steps are to be taken to build and maintain a safe and healthy workplace.

        The goal of the Company is zero accidents. The objective of each and every employee should be to keep accidents to a minimum to not only meet, but to surpass, the best safety practices of other similar industries and operations.

        The Company's program includes:

(a)

the avoidance of suffering, loss of time and possible impairment of employee earning power caused by accidents and occupational diseases;



(b)

the provision of sufficient mechanical and physical safeguards for all equipment;



(c)

a continuing program of education and training of personnel in good safety and health practices;



(d)

a continuing program of safety and health inspections and reviews to detect and eliminate unsafe practices and conditions; and

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(e)

the prompt and thorough investigation of all accidents and near-accidents to determine the causes, and the employment of swift corrective measures necessary to prevent recurrences.

        The health and safety of employees and the protection of the environment in the communities in which the Company conducts business is everyone's responsibility. It requires a cooperative effort among all employees in order to be successful.

Policy 9. Export and Import Controls/ITAR

        The United States Government has enacted laws and regulations governing the export of defense articles and defense services, as well as the export of civil (i.e., non-military) and dual-use items and technologies. The Company is firmly committed to complying with U.S. export control laws and regulations. A solid track record of compliance can provide the Company with a competitive advantage in responding rapidly to market opportunities by obtaining any necessary Government approvals in a timely manner.

        Force Protection will comply with all Export Control and Import laws and regulations that govern the exportation and importation of commodities and technical data, including items that are hand-carried as samples or demonstration units or for employee use. The Company will screen customers and suppliers to ensure that they do not do business with prohibited entities. It will obtain export licenses and other Government approvals prior to exporting products and technology controlled by the U.S. Government. No employee may permit a person other than a U.S. citizen or U.S. permanent resident to access the Company's technology without first determining whether such access triggers a licensing requirement. Failure to comply with these laws could result in heavy fines or the loss or restriction of Force Protection's export or import privileges, which, in turn, could seriously and adversely affect a significant portion of the Company's business.

        The Company's business activities may involve items or technologies subject to export control laws and regulations of the U.S. Department of State under the Arms Export Control Act and the International Traffic in Arms Regulations for the regulation of military items, defense services and related technical data. The Company also handles the export of civil and "dual-use" technology and materials, the export of which is subject to the Export Administration Regulations administered by the U.S. Department of Commerce, Bureau of Industry and Security.

        Almost all transfers to foreign nationals involving Company products, whether it be a shipment of vehicles, a separate shipment of documentation or spare parts, e-mails, telephone calls or meetings trigger a license requirement for any transfer of the defense article, technical data or related defense services. Even transfers to the U.S. military outside the U.S. can trigger license requirements. Violations can result in severe criminal and civil penalties for the Company and the individual(s) involved, as well as the Company's loss of export and Government contracting privileges.

        The Company has implemented separate and more detailed Export Control Policies and Procedures. Failure to comply with the applicable laws and regulations, or failure to comply with the Company's Export Control Policies and Procedures, will result in disciplinary action, up to and including termination of employment.

        Although U.S. export control law predominantly applies to the shipment of goods and information from the U.S. to foreign destinations, it can also apply to transactions that occur strictly within the U.S. The domestic disclosure of certain information and services to a foreign national is deemed to be an export to that foreign national's country of citizenship or country of permanent residence. Thus, a disclosure of information by the Company to one of its own employees may be an "export" subject to Government control.

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Applicable U.S. Export Control and Trade Sanctions Laws and Regulations

        Three principal U.S. regulatory regimes govern the export of items and technology:

         Arms Export Control Act and International Traffic in Arms Regulations.    The export of defense articles and related technical data (i.e., items or technology that are "inherently military" in nature) is subject to the Arms Export Control Act of 1976, as amended ("AECA"), Pub. L. 90-629, 82 Stat. 1320 (1976) and its implementing regulations, the International Traffic in Arms Regulations ("ITAR"), 22 C.F.R. Pt. 120, et seq. The AECA and the ITAR are administered and enforced by the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"). ITAR issues are the most likely to be confronted by the Company in its current business transactions.

         Export Administration Regulations.    The export of items or technologies that are commercial or "dual-use" in nature (i.e., having both civil and military uses) initially was subject to the Export Administration Act of 1979, as amended ("EAA"), Pub. L. 96-72, 93 Stat. 503 (1979) and its implementing regulations, the Export Administration Regulations ("EAR"), 15 C.F.R. Pt. 730 et seq. The EAA currently is being implemented through Executive Order as the EAA has lapsed. The EAA and the EAR are administered by the U.S. Department of Commerce, Bureau of Industry and Security.

         Office of Foreign Assets Control, U.S. Department of the Treasury.    For certain prohibited persons or destinations, the export of all items or technologies is generally prohibited under regulations administered by the Department of Treasury, Office of Foreign Assets Control ("OFAC").

Internal Compliance Structure & Empowered Officials

        All Company employees and persons otherwise retained by the Company are responsible for ensuring that the Company conducts its activities in compliance with the requirements of U.S. export control laws and regulations and the rules and procedures set forth in this Policy.

        The individual at the Company who will oversee the Company's compliance with U.S. export control laws and regulations and who will be primarily responsible for ensuring that this Policy is properly implemented and followed is the Company Export Compliance Official. The Company Export Compliance Official is an Empowered Official. In addition to the Company Export Compliance Official, the Vice President & Assistant General Counsel is also an Empowered Official. By regulation and company policy, an Empowered Official has the independent authority to inquire into any aspect of a proposed export or temporary import by the applicant, verify the legality of the transaction and the accuracy of the information to be submitted, and refuse to sign any license application or other request for approval without prejudice or other adverse recourse.

        In accordance with the required State Department practice, all submittals and communication with U.S. licensing authorities should be made through the Company Export Compliance Official. All written submissions require his or her signature or that of his or her designee. If the Company Export Compliance Official is out of the office or is unavailable to review an export transaction, the Legal Department should be consulted.

        The Company Export Compliance Official will regularly review and update policies and procedures for export control compliance.

Licensing Requirements Under the ITAR

        An approved export license or agreement is required for virtually every export from the United States of a defense article or technical data that is listed in the United States Munitions List ("USML") (whether of U.S. or foreign origin). In addition, a re-export license is required for virtually every re-export of items that contain any U.S.-origin components or content listed on the USML. The Buffalo, Cougar and Cheetah, as well as their derivative products and all parts and components for

16

these vehicles that are specifically designed, developed, configured, modified or adapted for military applications, are defense articles and are controlled under the ITAR. The only parts and components for these vehicles that would not be controlled under the ITAR are those parts and components originally designed for civil purposes and which have not been modified for these vehicles.

Technical Assistance Agreements and Other Agreements Under the ITAR

        In addition to export licenses (which generally authorize a single export or temporary import transaction), the ITAR provides a mechanism whereby DDTC can authorize ongoing relationships between U.S. and foreign companies for the exchange of technical data, the provision of defense services, or the manufacture abroad of defense articles. Such arrangements must be described in an agreement submitted to DDTC for approval, rather than a standard license application form. These include Technical Assistance Agreements ("TAA") and Manufacturing Licensing Agreements.

Brokering

        The ITAR regulates the activities of U.S. and certain foreign persons who engage in activities involving defense articles, technical data and defense services outside of the U.S. between third parties (See, ITAR Section 129). Brokering activities generally require a license from the State Department even if none of the items or activities is of U.S. origin. For example, procuring non-U.S. origin firearms or armored vehicle parts abroad for a third party, even the U.S. Government, can trigger the requirement for a brokering registration or brokering license.

        Any activities involving non-U.S. origin articles, technical data or services that would be on the USML if subject to U.S. jurisdiction should be reviewed by the Company Export Compliance Official for brokering requirements prior to entering into any discussions, contracts or agreements involving such items. Even negotiating or arranging a contract for a future delivery can trigger immediate license requirements.

        Brokering activities generally require separate registration, licensing and an annual report to DDTC in January for brokering activities conducted in the previous year.

Proposals for Significant Military Equipment

        All of the Company's systems (the Buffalo, Cougar and Cheetah) are Significant Military Equipment. Some proposals for large dollar volume sales to foreign customers require prior authorization by the State Department. All manufacturing abroad requires such authorization (See, 22 C.F.R. § 126.8). Note: Most parts and components for the Company's vehicles are not Significant Military Equipment at the parts and components level.

Permanent Imports

        All permanent imports of items into the U.S. listed on the USML require a license from the U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives ("ATF"). Note that this list is similar to, but differs in some respects from, the USML maintained by the State Department under the ITAR.

        The Company Export Compliance Official must review all proposed permanent imports prior to their importation into the U.S. The Company Export Compliance Official will delay all temporary imports of items known to be listed on the USML until he or she has obtained the appropriate licenses for the import, determined that no licenses are necessary, or verified that an exemption is available and that the procedural requirements for the exemption have been fulfilled.

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Scope of Controls and Licensing Requirements under the EAR

        If the item or technology involved is "subject to the EAR" (i.e., an item or technology not specifically designed for military applications), a license may be needed to export the item or technology. Determining whether a license would be required involves considering the following factors:

(a)

The classification of the item or technology within the Commerce Control List combined with the country of ultimate destination (See, Supp. No. 1 to 15 C.F.R. Pt. 774, 15 C.F.R. Pts. 738 & 742);



(b)

End-user controls—the identity of the ultimate end-user (See, 15 C.F.R. Pts. 744, 764 and relevant lists); and



(c)

End-use controls—the "known" end-use of the item or technology (See, 15 C.F.R. Pt. 744).

Hiring of Foreign Nationals

        No foreign national will be interviewed until the Company Export Compliance Official has reviewed with the officials responsible for potentially hiring the foreign national any possible export control implications in the hiring process. No foreign national will be given an offer of employment or hired as an independent contractor by the Company until the Company Export Compliance Official and the Vice President & Assistant General Counsel have reviewed the proposed employment arrangement and approved it in writing.

Exports of Items or Technology or "Deemed Exports" of Technology

        It is the Company's policy that items will not be exported and technology will not be disclosed or released to any foreign nationals by the Company or any Company employees until the Company Export Compliance Official has reviewed the potential export or "deemed export" transaction and that:

(a)

No license is required for disclosure of technical data under the ITAR or the "deemed export" of technology under the EAR to the specific destination or foreign national at issue;



(b)

An appropriate license authorizing the export is required and has been obtained; and



(c)

The transaction does not involve countries subject to sanctions or embargoes.

        Currently, several countries are subject to at least some level of sanctions pursuant to regulations administered by OFAC. It is the Company's policy to comply with all requirements for transactions with countries that are subject to U.S. unilateral or multilateral sanctions or embargoes.

        The approval of a senior official of the Company who is a U.S. person must be obtained in writing before any person retained or otherwise employed by the Company can become involved, participate or have any dealings whatsoever in transactions involving any of the countries listed in the annex to the separate Export Controls Policies and Procedures.

        The approval of the Company Export Compliance Official or the Chief Executive Officer of the Company must be obtained before any person retained or otherwise employed by the Company can become involved, participate or have any dealings whatsoever in transactions involving any of the countries subject to an embargo, or for nationals of such countries that are not U.S. citizens or lawful permanent residents. This requirement does not apply to activities for Iraq or Afghanistan in support of the governments of those countries, U.S. forces or coalition forces, although separate export licenses may be required.

Screening

        Every destination and party involved in the transaction (e.g., intermediate consignees and their locations, consignees, brokers, etc.) must be screened against the lists of restricted persons and

18

restricted destinations to ensure that the export is not prohibited. The appropriate Company employee will screen each shipment or organization or individual who will receive defense services and technical data against the relevant lists, and if any of the screens results in a match, the Company employee handling the shipment will inform an Empowered Official. For all transactions that involve parties other than Government end-users, including intermediary parties, the Company employee responsible for the transaction will search the publicly available databases to confirm that the end-user and intermediary parties are legitimate.

Directives from Government Agencies

        Generally, only the State Department has the authority to interpret the ITAR or to grant export authorizations. The Company should do everything it can to fulfill program officers' requests and requests from the Department of Defense, but some requests, particularly for access by foreign nationals, may require additional authorizations from the State Department under the ITAR.

        The Department of Defense generally does not have the ability to direct the export of ITAR-controlled defense articles, technical data and defense services with the following exceptions:

(a)

The Foreign Military Sales Program provides authorization for the shipment of defense articles, technical data and defense services abroad under the direct supervision of the U.S. Department of Defense. Authorizations require a signed Letter of Offer and Acceptance and the parties follow the procedural requirements under 22 C.F.R. §126.6.



(b)

Specific license exceptions under 22 C.F.R. §125.4 and §125.5 permit access to technical data and plant tours under specified circumstances where an appropriate U.S. Government agency has provided a specific authorization. Before relying on these exceptions, the limitations in these provisions should be reviewed. The exceptions include restrictions on the scope of access by foreign persons.



(c)

Shipments to U.S. Government agencies outside the U.S. generally require an export license. Certain shipments on U.S. Government carriers do not require an export license (See, 22 C.F.R. §126.4).

Badging and Building Access

        All visitors must be escorted. Foreign nationals are not permitted in any part of the facility where they could obtain access to technical data unless authorized by a license or other U.S. Government authorization. All employees must wear their employee badge in a visible place on their person at all times.

Information Technology Systems

        The Vice President—Information Technology, or designated officer, will ensure that the system architecture and security procedures prohibit access to controlled technical data and technology under the ITAR and EAR by foreign nationals unless authorized.

        In addition to any separate export control training, the Legal Department and/or the Facility Security Officer ("FSO") will integrate into its new employee orientation, and any refresher training for current employees, information on the need to prohibit access by foreign nationals to controlled technology through e-mails, instant messaging, and other electronic formats unless specifically authorized by license or other Government authorization.

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Training

        All employees will receive periodic training on export controls commensurate with their involvement in international transactions and exposure to foreign nationals.

Internal Reviews

        The Company Export Compliance Official will have the responsibility for auditing the compliance of various divisions within the Company with the rules and procedures set forth in this Policy.

        Individual Program Leaders, or the FSO or other Company employees with supervisory authority, are encouraged to periodically review the export control compliance activities of Company employees under their supervision. The Company Export Compliance Official will assist with such reviews, as requested.

        The Company Export Compliance Official, the FSO and the Individual Program Leaders, as appropriate, will conduct random document reviews and tracing of processes on a periodic basis.

Recordkeeping

        An essential element of this Policy is to ensure that Company export control documents are maintained in an accurate and consistent manner and are available for inspection by U.S. Government agencies with export licensing jurisdiction. The Company Export Compliance Official will establish a centralized recordkeeping system for maintaining the records that the Company is required to retain.

        Generally, the Company is required to retain certain types of documents related to export transactions for a period of five years from the date the transaction ended or the date the licensed activity was completed, whichever is later. Furthermore, the Company must make those documents available to the U.S. Government agencies administering export controls upon request. All records shall be maintained for at least five years after the last activity, or for five years until after the U.S. Government license or other authorization expires, whichever is longer.

Customs/Shipping Procedures

        In addition to export control laws and regulations, it is the Company's policy to comply with other requirements associated with exports of items or technology, including Customs requirements. This includes the filing of Shipper's Export Declarations. For all activities involving ITAR hardware, all shipments require an electronic filing through the Automated Export System ("AES"). The Company will either file the AES filings directly or will ensure that its freight forwarder or other authorized agent completes the filings on its behalf.

Reporting Violations

        If any Company employee becomes aware that a violation or possible violation of U.S. export control laws or regulations or this Policy has occurred, or is about to occur, he or she is required to personally report the details of the suspected violation directly to the Company Export Compliance Official or other senior Company official or contact the Company Hotline immediately.

Investigating Suspected Violations

        The Company Export Compliance Official, with the assistance of the Legal Department, if necessary, will investigate any suspected violations to the extent he or she feels necessary.

        If the Company Export Compliance Official determines that a violation has not occurred, he or she may (but is not be required to) notify the employee that reported the suspected violation of the

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outcome of the investigation. The Company Export Compliance Official will, with the assistance of the Legal Department, as necessary, draft a memorandum summarizing the results of the investigation.

        If the Company Export Compliance Official determines that an export control violation has occurred, he or she will inform Company management of the facts surrounding the violation and provide recommendations for what action(s) the Company can and should take in response to the violation.

        The ultimate decision as to what actions the Company will take in response to a past or potential export control violation will be made by the senior most available official of Company who is a U.S. person, with the assistance of the Company Export Compliance Official and the advice of counsel, as necessary.

        After a conclusion is reached regarding a suspected violation, the Company Export Compliance Official may (but is not be required to) notify the employee who reported the suspected violation of the decision, and the Company Export Compliance Official will draft a memorandum summarizing the factual circumstances surrounding the violation and explaining the action(s) that the Company is taking in response to the violation.

Penalties

        Violations of U.S. export control laws and regulations can result in substantial criminal and civil penalties for both the individual involved in the violation (e.g., fines of up to $1 million per violation or imprisonment for ten years) and substantial fines and penalties for the Company. Violations also can result in the loss of export privileges for the Company or for individuals involved in the violation. Failure to comply with the requirements of U.S. export control laws and regulations, and the provisions contained in this Policy, is grounds for disciplinary action, up to and including termination of employment.

Audit

        The Company Export Compliance Official shall prepare an annual audit of export control authorizations and implementation of the Company Export Control Policies and Procedures and submit this to the Board through the Legal Department. The audit plan shall include provisions for separate internal or external audits at least annually.

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Policy 10. Equal Employment Opportunity and Workplace Environment

Equal Employment Opportunity

        The Company is committed to equitable treatment in its hiring, promotion, compensation and other personnel practices and aims to provide challenging, meaningful and rewarding opportunities for personal and professional growth for all employees without regard to gender, race, ethnicity, sexual orientation, physical or mental disability, pregnancy, age, religion, veteran status, national origin or any other legally-protected status as defined by applicable federal, state or local laws. This policy applies to all aspects of the employment relationship including, but is not limited to, hiring, placement, promotion, demotion, transfer, recall, recruitment, recruitment advertising, lay-off or termination, rate of pay or other forms of compensation, selection for training, and all other terms and conditions of employment. The Company will not tolerate discrimination of any kind.

Preventing Harassment

        The Company prohibits all forms of harassment of employees by fellow employees, employees of outside contractors or visitors. This includes any demeaning, insulting, embarrassing or intimidating behavior directed at any employee related to gender, race, ethnicity, sexual orientation, physical or mental disability, pregnancy, age, religion, veteran status, national origin or any other legally- protected status as defined by applicable federal, state or local laws. Such verbal or physical conduct that unreasonably disrupts another employee in his or her work is harassment. Company employees, customers, vendors and visitors will be treated with dignity, respect and fairness.

        The Company specifically prohibits unwelcome sexual advances or physical contact, sexually- oriented gestures and statements, and the display or circulation of sexually-oriented pictures, cartoons, jokes or other materials. The Company also prohibits retaliation against any employee who rejects, protests, or complains about sexual harassment.

Workplace Violence

        The Company has a ZERO tolerance policy on acts of violence and verbal or physical behavior that could lead to or cause workplace violence. The Company does not tolerate violent behavior at our workplaces, whether committed by or against our employees. These behaviors are prohibited: making threatening remarks, causing physical injury to someone else, intentionally damaging someone else's property, and/or acting aggressively in a way that causes someone else to fear they could be injured. Use good judgment and inform your supervisor, management, Security or Human Resources if you observe behavior that could be dangerous. If you feel you are in immediate danger, you should notify 911 immediately.

        The Company prohibits employees from engaging in any hostile physical contact, intimidation, threats of such actions or violence, or any other actions that may be considered threatening or hostile in nature while on Company premises, at Company-sponsored functions, or while representing Force Protection or acting on its behalf. Any employee who has reason to believe this policy is being violated is urged to bring the matter to the attention of his or her immediate supervisor, or, if the employee thinks it appropriate, anyone senior to that person. If for any reason the employee thinks that the matter cannot or should not be raised through those channels, he or she should feel free to communicate with the Company's human resources representative or contact the Company Hotline.

Alcohol and Illegal Drugs

        The Company prohibits the manufacture, distribution, sale, purchase, transfer, possession, or use of illegal drugs in the workplace, while representing the Company outside the workplace, or if such activity (whether taking place outside or inside the workplace) affects work performance or the work

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environment of the Company. The Company has a ZERO tolerance policy prohibiting any use of drugs or abuse of alcohol while employees are engaged in company business or while working at a company location. Excluded from this policy will be the use of alcohol as sanctioned by the Company at Company functions.

        All employees are subject to pre-employment, work-related accident, reasonable suspicion, periodic and/or random drug and alcohol testing. If you are taking a prescription drug which may interfere with your ability to perform your job, you must discuss the situation with your immediate supervisor or the Human Resources department.

Privacy

        Employee information and data is confidential and used only for valid business purposes. The Company complies with HIPAA Privacy Rule as issued by the Department of Health and Human Services. While the Company respects employee privacy, employees should not expect privacy when using company provided services and equipment. The Company reserves the right to inspect facilities and property including, but not limited to, computers, telephone records, lockers, email, internet usage, business documents, offices and other workplaces.

General

        Managers who receive employee complaints or inquiries are instructed to discuss, investigate and handle all concerns raised in this manner with the utmost discretion. Retaliation against individuals who report such violations of policy, or against those who provide information in an investigation of such violations, is also a violation of policy and will not be tolerated.

EMPLOYMENT IS "AT-WILL" AND MAY BE ENDED BY THE COMPANY OR THE EMPLOYEE AT ANY TIME FOR ANY REASON. THIS CODE OF CONDUCT AND ETHICS DOES NOT CONSTITUTE A CONTRACT OF EMPLOYMENT FOR ANY TERM. NOTHING IN THIS CODE OF CONDUCT AND ETHICS SHALL BE CONSTRUED TO CONSTITUTE A CONTRACT, AND NOTHING HEREIN LIMITS THE COMPANY'S RIGHTS TO TERMINATE EMPLOYMENT OR THE EMPLOYEE'S(S') RIGHTS TO TERMINATE EMPLOYMENT. ALL EMPLOYEES OF THE COMPANY ARE AT-WILL EMPLOYEES, EXCEPT AS MAY BE OTHERWISE DECLARED BY SEPARATE WRITTEN CONTRACT BETWEEN THE COMPANY AND THE EMPLOYEE.

        No representations of any kind by any officer or employee, and no action by the Company with respect to employee performance evaluations, promotions, compensation increases, granting of benefits or similar actions, is intended to modify the at-will nature of employment.

        The Company's policy statements and the conditions of employment may be changed and revised at the discretion of the Company; nothing contained therein should be considered or interpreted to confer any rights, privileges or entitlements on employees or any obligations on the Company.

Policy 11. Gifts/Business Entertainment

        Sales are the lifeblood of the organization, and the Company will market products and services fairly, vigorously and in accordance with applicable law based on their proven quality, integrity, reliability, delivery and value.

        The Company strictly prohibits bribes, kickbacks or any other form of improper payment, directly or indirectly, to any representative of a government, labor union, customer or supplier in order to obtain a contract, some other commercial benefit, or government action. The Company also strictly prohibits any employee from accepting such payments from anyone.

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        Except with regard to representatives of Government customers, reasonable business entertainment and customer gifts of nominal value are permitted, including traditional promotional events, as long as what is offered is consistent with usual business practice, cannot be construed as a bribe or a payoff, is not in violation of any law, and would not embarrass the Company or the individual if disclosed publicly. Customer entertainment and gifts should be discussed in advance with the appropriate supervisor. If there arises any question about the propriety of any entertainment or gift, a member of the Legal Department should be consulted.

        Where a customer or potential customer notifies the Company of a policy or preference to prohibit or limit gifts to the customer's employees, the Company will respect the customer's policy or preference.

        As noted in Policy 20, Special Considerations for Doing Business with the United States Government, if a government agency, whether federal, state or local, has adopted a more stringent policy than the Company's regarding gifts and gratuities, Company employees and representatives should comply with that more stringent policy. Company employees should contact a member of the Legal Department before providing anything of value to a representative of a government customer. Company employees should contact a member of the Legal Department for additional relevant corporate policies governing gifts and gratuities for government customers.

Policy 12. Insider Trading

        In the course of their work, directors, officers and employees may become aware of information that has not been made public and which, if publicly disclosed, could affect the market price of Force Protection common stock ("Company Stock") and enable the possessor of the information to realize a profit or avoid a loss by trading in Company Stock or a security whose value is determined by the value of Company Stock (such as puts, calls or other derivative securities). Such information is referred to herein as "Material Nonpublic Information."

        It is a violation of law for any person to purchase or sell Company Stock or related derivative securities, or to tip others who may purchase or sell Company Stock or related derivative securities, on the basis of Material Nonpublic Information known to that person. Violations can result in imprisonment and other sanctions. It is also against Company policy for any individual in the Company who may have nonpublic or unpublished knowledge about any customer or any other company to purchase or sell the securities of those companies.

        Examples of Material Nonpublic Information are dollar or unit sales volumes, backlogs, orders received, shipments, margins, profits, projections and business plans. This list is only illustrative of the many kinds of possible Material Nonpublic Information. If there is any question as to the materiality of information, please consult with the Company's Legal Department.

        To help to avoid the possible misuse of Material Nonpublic Information, the Company requires its employees to observe the following policies:

(a)

A director, officer or employee may not purchase or sell Company Stock or a related derivative security, and shall not cause members of his or her immediate family sharing the same household to purchase or sell Company Stock or a related derivative security, when that director, officer or employee has Material Nonpublic Information or during any Company Blackout Period.

The Company Blackout Period usually commences on the last day of any fiscal quarter and expires at the close of business on the second business day after the filing of a periodic report (Form 10-Q, Form 10-K or otherwise) with the SEC. However, the Company may announce an additional Blackout Period at any time due to business circumstances. Any additional Blackout Period will be announced by email and posted internally.

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The Company is required to file certain reports with the SEC. Typically, a Quarterly Report on Form 10-Q is filed within forty (40) days after the end of each calendar quarter, and an Annual Report on Form 10-K is filed within sixty (60) days after the end of the fiscal (calendar) year. The period commencing on the third business day after that filing and press release has been disseminated to the public, and ending on the last day of the next fiscal quarter, is often a good time for employees to effect transactions in Company Stock because much of what had been Material Nonpublic Information is disclosed in those releases. This period is generally used as a guide to set a "trading window" when directors, officers and employees may purchase or sell Company Stock, absent knowledge of Material Nonpublic Information. Further, an announcement about the commencement and termination dates for the "trading window" are distributed internally by email and posted internally and on the Company's intranet site.

However, even if within a "trading window" period, the Company's directors, officers, other Senior Leadership Team members, the Corporate Controller and other identified finance department employees must pre-clear all transactions in Company Stock. If an employee is uncertain about the legal rules involving the purchase or sale of Company Stock or any securities in companies that he or she is familiar with by virtue of his or her work for the Company, that employee should consult with the Company's Legal Department before making any such purchase or sale.

(b)

An employee may not reveal or disclose Material Nonpublic Information to anyone other than in the regular course and scope of his or her employment and then only on a "need to know" basis. When Material Nonpublic Information is communicated to another person, the employee should ensure that the recipient knows that the information is Material Nonpublic Information and is aware of the relevant requirements of the law and these policies.



(c)

Unless an employee has been assigned the task by the Chief Executive Officer, an employee shall not answer inquiries concerning Company affairs from analysts or other representatives of the financial community or representatives of news organizations or other media, but shall refer these inquiries to the Chief Executive Officer, Director of Investor Relations, or their delegate.

The following additional policies apply to Company directors, officers, other Senior Leadership Team members, the Company Controller and other identified finance department employees:

(a)

The Senior Leadership Team members will ensure that all employees who report to them are aware of the requirements of law and these policies relating to Material Nonpublic Information.



(b)

A director, officer, other Senior Leadership Team member, Company Controller, or other identified financial department employee may acquire Company Stock for investment but may not trade in Company Stock for short-term profit or purchase or sell derivative securities related to Company Stock.



(c)

A director, officer, other Senior Leadership Team member, Corporate Controller or other identified finance department employee may not recommend or express any opinion as to the desirability of purchasing, holding or selling Company Stock or a related derivative security.



(d)

All directors, officers, other Senior Leadership Team members, the Company Controller and other identified finance department employees must pre-clear any transaction in Company Stock. This means that a document clearing the transaction should be received from the Legal Department prior to the director, officer, other Senior Leadership Team member, Corporate Controller or other identified finance department employee initiating the proposed transaction in Company Stock. In order to obtain a pre-clearance, a request should be sent to the Legal

25

Department which includes the type of transaction, proposed date, Company Stock ownership information, broker (if any), and quantity of Company Stock. A written response will be provided for all requests. Information regarding the completed transaction must be communicated to the Legal Department not less than two business days (including, but not limited to, the transaction date, quantity of the transaction in Company Stock, ownership, and transaction price). Pre-clearance of a transaction is valid only for a 48-hour period. Company officers may request assistance through the Legal Department with the filing of Section 16 reports on Forms 3, 4 or 5 with the SEC.

        In addition to the foregoing policies of general application, Force Protection directors, executive officers and 10% stockholders are subject to the special reporting requirements and short-swing trading and short sale provisions of Section 16 of the Securities Exchange Act of 1934. These requirements and provisions are summarized in a memorandum which may be obtained from the Corporate Secretary.

Policy 13. International/Foreign Corrupt Practices Act

        Employees must comply fully with United States laws and regulations as well as all laws and regulations of the foreign countries in which the Company does business.

        In particular, under the U.S. Foreign Corrupt Practices Act ("FCPA"), 15 U.S.C. §§ 78dd-1, et seq. it is a crime for the Company or an officer, director, employee or agent of the Company to make any payment or promise to any foreign official, political party or official thereof, or any candidate for foreign political office for the purpose of:

(a)

influencing any act or decision by that official, party, party official or candidate in his or her or its official capacity, or inducing the foreign official, party, party official or candidate to do or omit to do any act in violation of his or her or its lawful duty; or



(b)

inducing such foreign official, party, party official or candidate to use his or her or its influence with a foreign government to influence any act or decision of the foreign government for the purpose of obtaining or retaining business for the Company, or directing business to any person.

        It is also a crime to make any payment or promise to any person while knowing that it will be used to make any such unlawful payment or promise. "Knowing" is defined to mean being aware that the person is engaging in such conduct, or being aware or having a firm belief that such circumstances exist or that such result is substantially certain to occur.

        The Company and its employees should strive to maintain the highest ethical and professional standards in all domestic and foreign business activities. In accordance with this standard, no Company employee shall engage in or facilitate conduct for the purpose of bribing foreign officials.

        Employees are expected to require foreign agents or consultants acting in connection with the affairs of the Company to observe the same requirements that would apply to employees of the Company, whether or not the Company would be responsible for the activities of such foreign agents or consultants under the FCPA. The Company will screen all foreign agents or consultants prior to engaging such agents or consultants and will also determine whether any additional regulatory filings are necessary (such as under the ITAR).

        The FCPA includes separate provisions that require the Company to keep accurate books and records of all expenditures. Failure to keep accurate books and records can trigger criminal and civil liability under the jurisdiction of the SEC.

        In addition, other statutes such as the mail and wire fraud statutes (18 U.S.C. § 1341, 1343) and the Travel Act (18 U.S.C. § 1952), which provide for federal prosecution of violations of state commercial bribery statutes, may also apply to such conduct.

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Policies and Procedures

        It is the policy of the Company to deal with its business partners in a fair and impartial manner; business should be won or lost on the merits of Company's products and services. A business courtesy may never be offered under circumstances that might create even the appearance of impropriety or cause embarrassment to the Company or the recipient.

        A business courtesy is a present, gift, gratuity, hospitality, or a favor. It may be tangible or intangible benefits, such as job offers, meals, drinks, entertainment, recreation, door prizes, honoraria, transportation, discounts, promotional items, or the use of time, materials, facilities, or equipment.

        While certain promises, payments, and provisions to foreign officials might be legal, they always present grave legal risks and problems with the appearance of impropriety. Therefore, Company employees are forbidden from paying, providing, or promising to pay or provide anything of value to foreign officials or their agents without first obtaining approval from an attorney in the Legal Department. All payments to foreign officials, whether directly or indirectly or through a third party, must be documented fully and accurately.

        It is the policy of the Company to form business relationships with reputable agents, consultants, and representatives. "Due diligence" requires a sufficient investigation to establish that the agent, consultant, or representative is reliable and will comply with all laws and Company policies. Due diligence must be undertaken before establishing these relationships, and records of that due diligence must be preserved fully and accurately. The Company must maintain evidence of such due diligence in its files.

        Company employees shall not delegate substantial discretionary authority to any person whom the Company has any reason to believe might have a propensity to engage in illegal activities.

        All Company contracts involving work in a foreign country must include anti-bribery provisions that both (a) require compliance with the FCPA and that (b) provide for termination should non-compliance with the FCPA be discovered. All agent, consultant, and representative contracts should include a provision that the contracting individual will not retain a subagent or representative without the Company's consent. Such contracts should also require agents, consultants, representatives, and subagents to allow the Company to audit their books.

        If a Company employee believes that this policy has or will imminently be violated, that employee should immediately report the matter to his or her supervisor, the Legal Department, or the Company Hotline.

Accounting

        The Company will maintain books, records and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company.

        The Company will also maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization; (b) transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (2) to maintain accountability for assets; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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Penalties

        In addition to disciplinary action by the Company, up to and including immediate termination of employment, violations of the FCPA could subject the Company and the employee to criminal action, including fines and/or imprisonment as prescribed by federal law.

        All employees would pay for a violation of the FCPA by another Company employee. The Company therefore strongly encourages its employees to come forward with allegations of a possible violation of the FCPA or this policy should a possible violation be observed. Company employees may address any questions regarding the applicability of this policy or a possible violation of the FCPA to the employee's supervisor or an attorney in the Legal Department. No employee should fear retribution from the Company for coming forward with an allegation of a possible FCPA violation, and no employee is required to go through the chain of command to report a possible violation of the law. Employees may report such observations directly to officers or the Company's Hotline.

        Employees observing a possible violation of the FCPA by another company should also report that observation to the employee's supervisor, the Legal Department, or the Company's Hotline. Failing to report or detect a violation of the FCPA or this policy may result in disciplinary measures, up to and including termination of employment.

FCPA Compliance Officer

        The Company's FCPA Compliance Officer, in consultation with the Company's officers, will be responsible for the investigation of any allegations of conduct in violation of the FCPA or this policy and will have the authority to retain outside counsel and independent auditors to facilitate such an investigation. This FCPA Compliance Officer will also be responsible for overseeing all FCPA-related due diligence, which should be conducted both prior to and after (a) the retention of any agent, consultant, or representative for the purposes of business development in a foreign jurisdiction; (b) the consummation of all contracts related thereto; and (c) agreeing to any joint ventures with foreign partners. The FCPA Compliance Officer will be responsible for maintaining full and accurate records of all due diligence undertaken with regard to all of the Company's FCPA issues.

Training

        The Company provides training concerning compliance with the FCPA and other countries' bribery laws for all of its employees who are responsible for business in foreign countries. All such employees, as well as the Company's agents, consultants, and representatives, are required to participate in such training as soon as is practicable and then periodically thereafter. No Company employee shall newly assume responsibility for overseas business without first having participated in this training session.

Facilitating Payments

        The provisions of the FCPA do not apply to any facilitating or expediting payment to a foreign official, political party or party official, the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party or party official. Examples of routine governmental actions are issuing permits to do business in a country, processing visas or work orders, picking up or delivering mail, scheduling inspections, providing phone service, loading and unloading goods and the like. Decisions to award new business or to continue business, or as to the terms of any such business, are not considered to be routine governmental actions. The U.S. Government construes the exception for facilitating or expediting payments narrowly, and no employee may rely upon this exception to make a payment without obtaining the explicit prior written approval of an attorney in the Legal Department.

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Anti-Bribery Provisions Abroad

        Other countries also have anti-bribery laws, and those laws may contain additional requirements to which all Company employees doing business both in those countries and with individuals from those countries must adhere. Where foreign laws are more restrictive than the FCPA, those foreign laws shall take precedence.

Policy 14. Litigation Authority

        Authority to bring any litigation, arbitration or other legal proceeding on behalf of the Company may be given only by the Chief Executive Officer, the General Counsel or a delegate appointed by same. Authority to retain legal counsel to conduct or defend any proposed, threatened or pending litigation, arbitration or other legal proceeding on behalf of the Company has been delegated by the Chief Executive Officer to the General Counsel.

Policy 15. Outside Activities of Employees

        The Senior Leadership Team members and other employees are compensated for devoting their primary interests and energies to the accomplishment of their work for the Company. Outside activities, including those discussed below, should not conflict with the proper performance of their duties or involve any other conflicts of interest. The Chief Executive Officer or a delegate appointed by same should be consulted before any Senior Leadership Team member or other employee undertakes any outside activity that may require the devotion of a substantial amount of time during business hours.

Corporate Directorships

        No Senior Leadership Team member may serve as a director, trustee or general partner of any business enterprise not affiliated with the Company except with the prior approval of the Chief Executive Officer or delegate. Because of the substantial amount of time and attention normally required to properly perform the duties incident to these positions, acceptance of them is discouraged and such approvals will be given only in special circumstances. In no case will approval be given unless the Chief Executive Officer or delegate is satisfied that the Company will have no responsibility in respect thereof and that the position will not involve any conflict with the interests of the Company.

Political and Governmental Activities

        Employees, as individual citizens, are encouraged to take part, on an entirely voluntary basis, in political and governmental affairs. The political party to which an employee belongs, his or her views on the candidates and issues, and the extent of financial support and activities are entirely matters of personal choice.

        Some employees may wish to run for public office or to hold appointive public office. Because of the federal, state and local laws which may be applicable and other considerations, employees are expected to consult with the General Counsel before undertaking any such activity.

        Because of legal considerations, no employee may use Company funds, equipment, supplies or facilities for the purpose of supporting any political party or candidate for public office or in connection with his or her own candidacy.

Other Public Service Activities

        In order to avoid any misunderstanding, the Company's letterhead is to be used only for correspondence on corporate business. It is not to be used, for example, for charitable solicitations or personal correspondence. Except as indicated above with respect to political and governmental activities, reasonable use may be made of corporate clerical facilities in connection with an individual

29

officer's or employee's participation in public service and other outside activities. This assistance is provided as a convenience and in the interest of general efficiency, rather than as anything in the nature of contributions in support of, or opposition to, any particular causes. It is assumed, of course, that the prior needs of the Company's business will be respected.

Policy 16. Political Contributions, Positions and Activities

        No political contributions may be made, directly or indirectly, on behalf of the Company to any federal election or issue campaign, or to any campaign in those States or other jurisdictions where the contributions would be unlawful. No Company funds, equipment, supplies or facilities may be used for the purpose of supporting any political party or candidate for public office. An action which presents, or may appear to present, the position of the Company with respect to any political or governmental matter may be taken only with the prior approval of the Chief Executive Officer and in conformity with any lobbying or other laws.

        Modest Company contributions may be made in appropriate cases to an occasional local initiative or referendum campaign where and in the manner permitted by law, but only with the prior approval of the Chief Executive Officer. As interested citizens, Company employees are free to make individual, personal contributions to candidates of their choice, as permitted by law.

        Entertainment and other acts of hospitality toward government or political officials should never compromise, or appear to compromise, the integrity or reputation of the official or the Company. When hospitality is extended it should be with the expectation that it could become a matter of public knowledge.

        As a matter of policy, the Company will not voluntarily permit lists of employees or stockholders to be used in connection with political campaigns.

Policy 17. Outside Ideas

        When an unsolicited idea is submitted to the Company by an outsider, care must be taken to ensure that the outsider signs an understanding form (available from the Legal Department) before the idea is disclosed to employees qualified to evaluate or use it. The purpose of this policy is to avoid the risk or allegation of unauthorized use of another's proprietary rights or ideas.

        Written submissions by outsiders should be forwarded, without any review or evaluation or making any notations on the document, to the Legal Department. A non-technical employee will return the material to the sender either with a rejection notice or with an understanding form and an appropriate explanation.

        Outsiders calling in person should be advised that it is the Company's policy to accept no disclosure until the understanding form has been executed and that a copy of the understanding form may be obtained from the Legal Department.

Policy 18. Records Management

        Force Protection respects the privacy of employees and therefore maintains only those employee personnel and medical records necessary for business, legal or contractual purposes. Access to those records and the information contained therein shall be limited to those with a need to know for a legitimate business purpose. The Company will not interfere in an employee's personal life unless the employee's conduct impairs his or her work performance or adversely affects the work environment or reputation of the Company.

        Directors, officers and employees should promote the accurate and reliable preparation and maintenance of the Company's financial and other records. Diligence in accurately preparing and

30

maintaining the Company's records allows the Company to fulfill its reporting obligations and to provide stockholders, Governmental authorities and the general public with full, fair, accurate, timely and understandable disclosure. In this regard, directors, officers and employees (where applicable) should: (a) accurately document and account for transactions on the books and records of the Company; and (b) diligently maintain reports, vouchers, bills, invoices, payroll and service records, business management and performance records and other essential data. Senior financial officers also are responsible for establishing and maintaining adequate disclosure controls and procedures, including procedures designed to promote full, fair, accurate, timely and understandable disclosure in reports filed with the SEC and other public communications.

        Records should be maintained to comply with applicable statutory, regulatory and contractual requirements, as well as to those pursuant to prudent business practices. Employees shall take all appropriate steps to comply with all legal requirements and the Company's document retention policy with respect to the preservation of documents in connection with the performance of any Government contract or any Company or Government investigation or litigation. Employees can contact the Legal Department for specific information on record retention.

Policy 19. Regulation FD/Disclosure Policy

        The Company is subject to regulations adopted by the SEC, including Regulation FD (Fair Disclosure), with respect to the disclosure of material information to the public. The Company is committed to fair disclosure to investors in compliance with all laws and regulations. The Company's policy, which reflects these legal requirements, is that no one associated with the Company may make any disclosure of Material Nonpublic Information (as defined in Policy 12, Insider Trading) about the Company to anyone outside the Company who trades in or may be expected to trade in Company securities, unless the information is disclosed to the public at the same time.

        Only the Chief Executive Officer, General Counsel, Executive Vice President—Customer Operations, the Director of Investor Relations, or other individuals expressly authorized by the Chief Executive Officer may discuss material information with analysts, financial professionals, stockholders and other members of the public. Any requests for such information regarding the Company should be forwarded to one of the officers listed above.

        Each director, officer or employee involved in the Company's disclosure process, including the Chief Executive Officer, the Chief Financial Officer and Company Controller ("Senior Financial Officers"), is required to be familiar with and comply with the Company's disclosure controls and procedures and internal controls over financial reporting, to the extent relevant to his or her area of responsibility, so that the Company's public reports and documents filed with the SEC comply in all material respects with the applicable securities laws and rules. In addition, each such person having direct or supervisory authority regarding these filings or the Company's other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

        Each director, officer or employee who is involved in the Company's disclosure process, including without limitation the Senior Financial Officers, must:

•

Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.



•

Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, Governmental regulators and self-regulatory organizations.

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•

Properly review and critically analyze proposed disclosure for accuracy and completeness (or, where appropriate, delegate this task to others).

Policy 20. Special Considerations for Doing Business with the United States Government

Working with the United States Government

        The Company is committed to principles of business ethics and conduct that acknowledge and address its corporate responsibility to the U.S. Government and the public under federal laws. The Company believes that compliance with federal, state, and local laws is the responsibility of every company and employee doing business with the Government. All employees are required to follow federal, state, and local procurement laws and regulations.

        Failure to comply with applicable laws, regulations, and contract requirements may result in criminal, civil, contractual, and administrative penalties being assessed against the Company and individual employees.

Laws That Can Impose Civil and Criminal Liability On Government Contractors

        The Government has available to it numerous statutes under which it can seek to impose criminal and civil liability on Government contractors. These statutes criminalize a wide range of activity and can result in substantial criminal fines and civil penalties on convicted contractors and individuals. The most commonly used of these statutes are described below. Policies and procedures related to compliance with some of these statutes will be discussed in more detail in later sections of this Policy 20.

Criminal False Statements Act

        This statute (18 U.S.C. § 1001) punishes knowing and willful false statements or representations made with respect to any matter within the jurisdiction of a federal Government agency. Because the Government need not prove that the contractor made the false statement in connection with a "claim" for money or property under a Government contract, criminal false statement prosecutions are usually preferred over actions brought under the Criminal False Claims Act. The penalty is imprisonment of up to five years and/or fines.

Criminal False Claims Act

        This statute (18 U.S.C. § 287) provides for criminal liability in the event a person knowingly makes false claims to a Government agency. Because this statute applies only to attempts to secure money or property, it is not as broad as Section 1001 and is therefore not as frequently applied. However, a false statement made in connection with a Government contract usually can give rise to a false claims charge as well. The penalty for violation of this statute is imprisonment of up to five years and/or fines.

Obstructing a Federal Audit

        This statute (18 U.S.C. § 1516) makes it illegal to "obstruct or impede" a federal audit with an "intent to deceive or defraud" the Government. Violation of this statute can result in imprisonment of up to five years and/or fines.

Bribery

        The bribery statute (18 U.S.C. § 201(b)) makes illegal any offer or promise (direct or indirect) of anything of value to a public official, with the corrupt intent to influence an official act or to influence the public official to allow a fraud on the United States. The penalty for violation of this statute is imprisonment of up to fifteen (15) years and/or a fine up to three times the bribe.

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Illegal Gratuities

        The Illegal Gratuities Statute (18 U.S.C. § 201(c)) prohibits any offer or promise (direct or indirect) to a public official (or former public official) of anything of value, for or because of any official act performed or to be performed by the official. As a practical matter, this statute prohibits all gifts to public officials for acts that they would have performed regardless of the gift. Violation of this statute can result in imprisonment of up to two years and/or a fine.

Major Fraud Act of 1988

        The Major Fraud Act of 1988 (18 U.S.C. § 1031) makes it a criminal offense to knowingly execute, or attempt to execute, any scheme with the intent to defraud the United States, or any attempt to obtain money or property by means of false pretenses with respect to any Government contract valued at $1,000,000 or more. The penalty for violation of this statute is imprisonment of up to ten years and a fine of up to $1,000,000.

Truth in Negotiations Act

        The Truth in Negotiations Act ("TINA") (10 U.S.C. § 2306a) imposes a duty upon Government contractors and subcontractors to submit cost or pricing data and to certify that the data submitted is accurate, complete, and current when negotiating with the Government for award of negotiated contracts with an expected total cost in excess of $650,000. Normally, the remedy for defective pricing is a price reduction equaling the amount by which the contract price was increased (as well as interest and penalties for certain overpayments). However, any evidence of wrongdoing under TINA may be viewed as fraudulent under the Civil and Criminal False Claims Acts and the False Statements Statute. Additional information on TINA is set forth below.

Civil False Claims Act

        The Civil False Claims Act (31 U.S.C. § 3729) establishes civil liability for: (a) the submission of false claims, (b) the submission of false statements in support of a claim, or (c) a conspiracy to defraud the Government regarding a claim. The Government may base liability upon proof of a contractor's actual knowledge of the falsity of the claim or upon its reckless disregard of the truth or falsity of the claim, rather than on a finding of specific intent to defraud the Government. For a violation of this statute, the Government can recover: (a) the costs of the lawsuit; (b) triple the amount of its actual damages; and (c) a civil penalty of between $5,500 and $11,000 for each violation, regardless of whether the Government suffered any damages.

        The qui tam statute (31 U.S.C. § 3730) authorizes private individuals to bring actions for violations of the Civil False Claims Act in the name of the U.S. Government. The Government has sixty (60) days to determine whether to take over the prosecution. The qui tam plaintiff is entitled to share in the proceeds of the action or settlement of the claim. The potential penalties in a qui tam are the same as in a traditional Civil False Claims Act case.

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Procurement Integrity Act

        The Procurement Integrity Act ("PIA") (41 U.S.C. § 423) restricts contact and the scope of permissible communications between competing contractors and federal employees. The PIA and the corresponding Federal Acquisitions Regulations ("FAR") prohibit the unauthorized release by any person—both Government officials and contractors—at any time (i.e., before or after contract award), of either source selection information or contractor bid or proposal information related to a competitive procurement. During any federal agency procurement, a competing contractor may not knowingly: (a) discuss with or make offers of employment or business opportunities to any procurement official; (b) offer or give, or promise to offer or give, any money, gratuity, or other thing of value to any procurement official; or (c) solicit or obtain, prior to award, any proprietary or source selection information from any officer or employee of a procuring agency. A broad range of civil and criminal penalties can be imposed for violation of this statute, including termination of existing contracts, loss of the right to compete for new contracts, and monetary penalties. To impose criminal penalties, the contractor must knowingly and willfully solicit or obtain proprietary or source selection information. Criminal penalties can include imprisonment for up to five years and/or a fine.

        The Contracts Department will review all Government and Government-related solicitations, contracts, and orders to determine if they contain FAR 52.203-8, "Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity," or FAR 52.203-10, "Price or Fee Adjustment for Illegal or Improper Activity," and if so, notify the individual(s) responsible for preparing the offer that the procurement is subject to the PIA. Timely reporting of violations or possible violations of procurement integrity prohibitions is a key responsibility of all officers, employees, agents, representatives, and consultants of the Company and should be reported immediately to the Compliance Officer, the Legal Department or the Company Hotline.

Byrd Amendment

        The statute commonly referred to as the "Byrd Amendment" (31 U.S.C. § 1352) imposes two obligations on Government contractors. First, subject to certain exceptions, it prohibits any appropriated funds from being spent to influence or attempt to influence a member of Congress or any executive employee to obtain award of a U.S. Government contract, grant or loan. Second, it imposes certain reporting and certification requirements with respect to a Government contractor's "influencing" activities. Any contractor that that violates the Byrd Amendment may be subject to civil penalties of between $10,000 and $100,000 per violation. In addition, imposition of the civil penalty does not prevent the Government from seeking any other remedy that may be appropriate under another statute. The Byrd Amendment and its supporting regulations are discussed more fully below.

Anti-Kickback Act

        The Anti-Kickback Act of 1986 (41 U.S.C. §§ 51-58) was passed to deter subcontractors from making payments and prime contractors from accepting payments for the purpose of improperly obtaining or rewarding favorable treatment in connection with Government prime contracts or subcontracts. The Company will report in writing to the Government any possible violations of the Anti-Kickback Act when it has reasonable grounds to believe that a violation may have occurred (See, FAR 52.203-7). The Compliance Officer and the Legal Department will ensure that a thorough and complete investigation of any report of a possible violation of the Anti-Kickback Act is conducted and concluded promptly. The act provides for criminal and civil penalties.

        The Purchasing Department and the Compliance Officer will ensure that procedures are implemented to require that consultants, agents, subcontractors, and vendors comply with the Company's anti-kickback procedures. The Purchasing Department should ensure that the substance of

34

the act's provisions and FAR 52.203-7 are included in any subcontract or purchase order that is in direct support of a Government contract

Suspension and Debarment from Government Contracting

        A sanction that can have even more severe consequences than a criminal conviction in the Government procurement area is the possibility of suspension or debarment from Government contracting for a period commensurate with the seriousness of the cause(s) (See, generally, FAR Subpart 9.4). A contractor may be debarred for, among other causes, any criminal conviction or commission of any other conduct indicating a lack of business integrity or business honesty that seriously affects the contractor's "present responsibility" as a Government contractor or subcontractor. Suspension generally follows any indictment for a criminal offense, especially one that relates to the contractor's Government business or that reflects adversely on the contractor's "present responsibility."

Policies and Procedures

Truth in Negotiations Act: Cost or Pricing Data Submission Requirements

        As noted above, TINA requires that, in certain types of procurements, the Company submit certified cost or pricing data in support of its proposals to the Government, Government prime contractors, or higher-tier subcontractors. Typical conditions requiring the Company's submission of cost and pricing data are negotiated or sole-source procurements in excess of $650,000. "Cost or pricing data" is defined to mean all facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly—all the facts that contribute to the soundness of estimates of future costs and to the validity of incurred costs (See, FAR 15.401). The Company must certify that, to the best of its knowledge, its cost or pricing data are accurate, current, and complete as of the date of agreement on price. The Government has the right to audit the Company's records to ensure that cost or pricing data are current, accurate, and complete. Contracts in which the prices are based on adequate price competition are exempt from TINA, which means the Company does not have to submit certified cost or pricing data for competitively-awarded contracts.

        The Company may be required to obtain cost or pricing data from its subcontractors. The Contracts Department will ensure that such data are requested and obtained from subcontractors as required. Subcontractors must submit their cost or pricing data, or their claim for exception from the requirement to submit cost or pricing data, to the Company's Contracts Departments (or directly to the Government).

        The Finance Department will provide verifiable cost or pricing data that has been reviewed to ensure that the data and disclosure are current, accurate, and complete. In order to ensure consistency in the Company's pricing proposals, proposals covered by TINA will be prepared in accordance with the Company's estimating systems procedures. The Contracts and Finance Departments are responsible for gathering and filing key documents, preparing and consolidating all cost or pricing data, coordinating any audit activity, adhering to review procedures, and retaining appropriate documents.

Gifts and Gratuities to Government Representatives

        Federal law prohibits any Government employee (not limited to Government procurement officials, but including, for example, Government inspectors) from soliciting or accepting any gratuity, gift, entertainment, or anything of monetary value from anyone who has or is seeking business from the employee's agency or has interests that may be substantially affected by the employee's official duties. Similarly, offering or providing such gratuities is improper. Also, giving any money, gratuity, or other thing of value to any Government procurement official during the course of a procurement is prohibited.

35

        Although there may be limited exceptions to these prohibitions in some circumstances, Company employees are prohibited from offering or providing anything of monetary value to Government employees without approval in advance from the Legal Department. Company employees should contact a member of the Legal Department for additional relevant corporate policies governing gifts and gratuities for Government customers. If a government agency, whether federal, state or local, has adopted a more stringent policy than the Company's regarding gifts and gratuities, Company employees and representatives should comply with that more stringent policy.

Restrictions on Recruiting and Employing U.S. Government Employees

        Federal criminal and civil laws and regulations prohibit or restrict employment discussions with certain Government employees. These laws and regulations also prohibit permanently, or limit for a certain period of time, the type of work that may be performed by a former Government employee. No Company employee shall have any discussions regarding employment opportunities with any Government procurement official on a procurement for which the company is a competing contractor or any Government employee who is participating in a matter in which the Company has a financial interest. Company employees who were formerly employed by the U.S. Government are responsible for complying with all applicable post-retirement or post-employment restrictions established by federal statute or regulation.

        Any Company employee contacted by a U.S. Government or U.S. Government contractor employee about potential employment with the Company should refer the inquiry to the Human Resources Department. No employee should discuss future employment or business opportunities with such individuals before the Human Resources Department provides approval.

The Byrd Amendment and Other Lobbying Laws

        As noted above, the Byrd Amendment prohibits any appropriated funds from being spent to influence or attempt to influence a member of Congress or any executive employee to obtain award of a U.S. Government contract, grant or loan. It also requires that the Company file a statement in connection with each individual Government contract award containing: (a) the name of any registered lobbyist who has made lobbying contacts on behalf of the company with respect to the contract, and (b) a certification that the person making the declaration has not made and will not make any prohibited payment. The Contracts Department will ensure that no costs associated with activity prohibited under the Byrd Amendment are charged to the federal Government and that any required disclosure regarding the use of non-appropriated funds for lobbying is made to the Government.

        In addition, there are complex federal, state, and local laws and regulations that regulate lobbying by or on behalf of the Company. No one acting on behalf of the Company should make contact with federal, state, or local officials in connection with legislative or administrative decision-making without prior approval of the Legal Department.

Record Retention Requirements Under U.S. Government Contracts

        Record retention requirements under Government contracts—as with any other contractual requirements—may vary from contract to contract, depending on a number of factors. These factors include the manner in which the contract was awarded and the type of contract (fixed-price vs. cost-reimbursement). The majority of the Company's Government contracts are negotiated, fixed-price supply contracts. Under these types of contracts, a contractor must retain all documents related to a contract for three years after final payment under the contract (See, FAR 52.215-2(d)). In the event of a dispute, appeal or other litigation under a contract, the contractor is required to retain the specified records at least until final disposition of the matter (See, FAR 52.215-2(d)). The contractor must also retain records for longer than three years whenever a contract clause so specifies (See, FAR

36

4.703(b)(1)). Similar requirements can be found in other contract clauses, such as FAR 52.246-2, "Inspection of Supplies—Fixed-Price," which requires the contractor to maintain records of all of its inspections "during contract performance and for as long afterwards as the contract requires" (See, FAR 52.246-2(b)).

        The Compliance Officer is responsible for ensuring that the appropriate departments understand their responsibilities for retaining records under Government contracts. The Purchasing Department will be responsible for retaining all records related to the Company's bids and proposals and all records related to the Company's performance of its Government contracts (including inspections); and the Purchasing Department be responsible for retaining documents related to the Company's subcontracting activities.

Subcontracting, Including Subcontracting With Small Businesses, Small Disadvantaged Businesses and Women-Owned Small Businesses

        As a Government contractor, the Company must comply with U.S. laws, regulations, and other requirements that pertain to subcontracting, including the requirement to subcontract with small businesses ("SB"), small disadvantaged businesses ("SDB"), and woman-owned businesses ("WOB"). Small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals or by women will have the maximum opportunity practicable to participate as subcontractors under the Company's Government prime contracts. The Company will award subcontracts to such concerns to the fullest extent practicable, consistent with the merits of suppliers' offerings and the efficient and economical conduct of the Company's operations. In addition, because the Company has Government contracts exceeding $500,000 that have subcontracting possibilities, federal regulations require submission of a written Small Business, Small Disadvantaged Business, and Women-Owned Small Business Subcontracting Plan ("Plan") pursuant to FAR 19.702 and 19.794.

        The Purchasing Department is responsible for preparing the Company's Plan; establishing and maintaining records in support of the Plan; conducting a certification survey to determine the status of current suppliers; searching diligently for qualified SB, SDB and WOB concerns through appropriate sources; preparing and submitting such forms as may be required by the Office of Federal Procurement Policy, the Small Business Administration, Defense Contract Management Command or other Governmental entities; and assembling information identifying the amount of purchasing activity with SBs, SDBs, and WOBs.

Subcontracting with Debarred or Suspended Contractors

        FAR 52.209-6 prohibits contractors from entering into any subcontract in excess of $30,000 with a person that has been debarred, suspended, or proposed for debarment unless there is a compelling reason to do so. The clause further provides that the contract require its first tier subcontractors to disclose to the contractor, in writing, whether, as of the time of award of the subcontract, the subcontractor, or any of its principals, is or is not debarred, suspended, or proposed for debarment. Prior to entering into a subcontract with a person that is debarred, suspended, or proposed for debarment, the contractor must notify the Government contracting officer.

        The Compliance Officer will ensure that purchasing procedures are implemented to assure that the Company complies with U.S. Government requirements regarding subcontracting, in direct support of Company Government business, with persons or entities that are debarred, suspended, or proposed for debarment. The Purchasing Department will ensure that all covered subcontracts contain a clause that requires its subcontractors to disclose to the Company, in writing, whether, as of the time of award of the subcontract, the subcontractor, or any of its principals, is or is not debarred, suspended, or proposed for debarment.

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Certificate of Independent Price Determination

        The Company must comply with all laws, regulations, and other requirements that prohibit collusive bidding practices in Government procurement. The Government places great emphasis on discovering and punishing collusive bidding. Through the Certificate of Independent Price Determination, the Government can impose penalties on contractors for violations, in addition to those that might be available generally under the antitrust laws. The Contracts Department will ensure that the Company complies with the prohibition on collusive bidding practices and that its certifications of compliance are appropriate.

General Practices under Government Contracts

        It is the Company's policy to use consultants, sales agents or other professional service independent contractors only for legitimate, legal purposes.

        With respect to Government contracts, only costs properly chargeable to the Government contract will be billed to the Government. Care must be taken to avoid mischarging of costs, including cross-charging of costs between contracts, charging direct costs as indirect costs or any other similar mischarging. Employees should be particularly diligent in recording their time, correctly indicating hours worked and the projects to which time is charged. All employees whose costs are allocated to Government contracts or subcontracts should identify any expenses that are not allowable, paying special attention to categories such as alcohol, business meals and entertainment.

        In any Government procurement process, the Company will not improperly obtain, use or disclose Government source selection or proprietary information, such as sealed bid prices, technical evaluation plans, competitive range determinations or ranking of proposals.

        The Company will not accept nor retain Government classified materials to which the Company is not entitled or for which there is no legitimate business need. The Company maintains those materials in accordance with the laws pertaining to those materials. In the United States, Government classified information may be received and maintained only at "cleared" facilities, locations specifically covered by a Security Agreement. Employees with Government security clearances who have access to classified data must safeguard that data according to Government regulations, including applicable agency procedures. Should an improper practice or irregularity occur within the Company, Force Protection is committed to making all necessary corrections and taking prompt remedial action to prevent recurrence.

Training

        The Company provides appropriate training concerning compliance with the requirements for doing business with the U.S. Government for all employees who have responsibilities in the relevant areas. All such employees, as well as Company's agents, consultants, and representatives, are required to participate in such training as soon as is practicable and then periodically thereafter. No Company employee shall newly assume responsibility for doing business with the U.S. Government without first having participated in this training session.

Policy 21. Working with Suppliers

        It is the Company's philosophy to build long-term relationships with suppliers and award business based on their ability to meet the Company's needs and commitments; their reputations for service, integrity and compliance; and their high standards for quality and delivery and their prices. The Company will not be influenced by gifts or favors of any kind from a supplier or potential supplier. The Company expects each employee to exercise reasonable judgment and discretion in accepting any gratuity or gift offered to the employee in connection with employment at Force Protection. In no event should a gift be accepted from a supplier or potential supplier during, or in connection with, contract negotiations.

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        It is the Company's policy to discourage the receipt of gifts either directly or indirectly by employees as any gift may be misconstrued as an attempt to influence business decisions. This does not apply to unsolicited promotional materials of a general advertising nature, such as imprinted pencils, memo pads and calendars so long as what is given is accepted without any express or implied understanding that the recipient is in any way obligated. Gifts of a nominal value are permitted, provided they are given as a gesture of professional friendship and do not involve a Company commitment having to do with the transaction of business. Such gifts should be reported to the recipient's supervisor. If there are any questions regarding the propriety of accepting a gift, a member of the Legal Department should be consulted.

        Presentations of a ceremonial nature in keeping with national custom may be permitted as long as what is accepted is not in violation of any law, cannot be construed as a bribe or a payoff and would not embarrass the Company or individual if disclosed publicly.

        An occasional meal or entertainment in the ordinary course of business relations, paid for by a supplier or potential supplier, is permitted provided that a representative of the supplier is in attendance and such hospitality is not excessive or unusual in nature. When practical, hospitality should be reciprocated.

        Where a supplier or potential supplier notified Force Protection of a policy or preference to prohibit or limit gifts to the supplier's employees, the Company will respect the supplier's policy or preference.

        As noted in Policy 20, Special Considerations for Doing Business with the United States Government, federal laws forbid offering, soliciting, or accepting any kickback, or including the amount of any kickback in a Government or other contract. A kickback is any money, fee, commission, credit, gift, gratuity, item of value, or compensation of any kind that is provided for the purpose of improperly obtaining or rewarding favorable treatment in connection with a contract. Accepting a kickback from any employee, vendor, or subcontractor is grounds for immediate discharge and may result in criminal prosecution.

        It is never acceptable to solicit gifts, gratuities, or business courtesies for the benefit of a Force Protection employee, family member or friend. In addition, gifts shall not be solicited from suppliers for Force Protection functions or employee awards.

Policy 22. Technology/Intellectual Property Developed During Course of Employment

        All inventions, discoveries and improvements that an employee conceives or makes during the course of his or her employment relating to the Company's business or arising out of or resulting from such employment become the property of the Company. All exempt employees are required to sign an agreement to this effect. The agreement also confirms the responsibility of employees to keep corporate information confidential.

Waivers of the Code of Conduct

        From time to time, the Company may waive some provisions of this Code. Any director, officer or employee who believes that a waiver may be called for should contact the Compliance Officer. Any waiver of the Code for officers or members of the Board may be made only in writing by the Audit Committee and should promptly be disclosed to shareholders, along with the reasons for the waiver. Any waiver for other employees may be made only in writing by the Compliance Officer.

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©Force Protection, Inc., 2008. ALL RIGHTS RESERVED.

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Exhibit 14.1

EX-21.1

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Exhibit 21.1

Force Protection, Inc. Subsidiaries

Name of Subsidiary	Jurisdiction		Ownership Percentage
Force Protection Technologies, Inc.		Nevada		100%
Force Protection Industries, Inc.		Nevada		100%
Force Dynamics LLC		Delaware		50%

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Exhibit 21.1

EX-23.1

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We have issued our reports dated September 13, 2008 with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of Force Protection, Inc. on Form 10-K for the year ended December 31, 2007. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Force Protection, Inc. on Forms S-8 (File No. 333-110341, effective November 7, 2003, File No. 333-82534, effective February 11, 2002, File No. 333-60603, effective August 4, 1998, File No. 333-137872, effective October 6, 2006, File No. 333-139977, effective January 12, 2007, and File No. 333-143495, effective June 4, 2007).

/s/ GRANT THORNTON LLP

Columbia, SC
September 13, 2008

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-23.2

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Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Force Protection, Inc.
Ladson, South Carolina

        We hereby consent to the inclusion in the annual report of Force Protection, Inc. on Form 10K for the year ended December, 2007, of our report dated June 5, 2007 regarding the consolidated financial statements of Force Protection, Inc. as of and for the years ended December 31, 2006 and 2005.

/s/ Jasper + Hall, PC
Denver, Colorado
September 13, 2008

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Exhibit 23.2

EX-31.1

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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Moody, certify that:

1.

I have reviewed this annual report on Form 10-K of Force Protection, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 15, 2008
	/s/ MICHAEL MOODY Michael Moody President and Chief Executive Officer

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Exhibit 31.1

EX-31.2

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Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Francis E. Scheuerell, Jr. certify that:

1.

I have reviewed this annual report on Form 10-K of Force Protection, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 15, 2008
	/s/ FRANCIS E. SCHEUERELL, JR. Francis E. Scheuerell, Jr. Interim Chief Financial Officer

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Exhibit 31.2

EX-32.1

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Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Force Protection, Inc. (the "Company"), that, to his knowledge, the Annual Report of the Company on Form 10-K for the period ended December 31, 2007, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. § 78m or 78o(d)) and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-K. A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: September 15, 2008	/s/ MICHAEL MOODY Michael Moody President and Chief Executive Officer
Date: September 15, 2008	/s/ FRANCIS E. SCHEUERELL, JR. Francis E. Scheuerell, Jr. Interim Chief Financial Officer

        This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

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Exhibit 32.1