JOINT VENTURE AGREEMENT

Joint Venture JV Agreement

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FORCE PROTECTION INC | Force Protection Industries, Inc | NP Aerospace Limited

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Title: JOINT VENTURE AGREEMENT
Date: 5/11/2009
Industry: Aerospace and Defense Law Firm: DLA Piper Sector: Capital Goods

JOINT VENTURE AGREEMENT, Parties: force protection inc , force protection industries inc , np aerospace limited

Exhibit 10.3

[***] 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.

JOINT VENTURE AGREEMENT

Force Protection Advanced Solutions Limited	(1	)
Force Protection Industries, Inc.	(2	)
NP Aerospace Limited	(3	)
Integrated Survivability Technologies Limited	(4	)

TABLE OF CONTENTS

		Page

1.	INTERPRETATION	1
2.	THE BUSINESS OF IST	7
3.	TERM	11
4.	COMPLETION	11
5.	COVENANTS	16
6.	DIRECTORS AND MANAGEMENT	18
7.	RESTRICTIONS ON THE PARTIES	22
8.	GUARANTEES AND INDEMNITIES	23
9.	THE BUSINESS PLAN	29
10.	FINANCING OF IST	30
11.	ACCOUNTING	30
12.	DEADLOCK	31
13.	RESOLUTION OF DEADLOCK	32
14.	TRANSFER OF SHARES	35
15.	OBLIGATORY TRANSFER EVENT	35
16.	TRANSFER FOLLOWING OBLIGATORY TRANSFER EVENT	36
17.	EXPERT	38
18.	TERMINATION AND LIQUIDATION	39
19.	COMPLETION OF THE SALE AND PURCHASE OF SHARES IN IST	41
20.	STATUS OF AGREEMENT	42
21.	INTELLECTUAL PROPERTY RIGHTS	43
22.	CONFIDENTIALITY	43
23.	PUBLICITY	45
24.	DATA PROTECTION	46
25.	FREEDOM OF INFORMATION	46
26.	WARRANTY	46
27.	WHOLE AGREEMENT	46

TABLE OF CONTENTS

(continued)

		Page

28.	ASSIGNMENTS	46
29.	VARIATION AND WAIVER	47
30.	COSTS	47
31.	NO PARTNERSHIP	47
32.	THIRD PARTY RIGHTS	47
33.	NOTICE	48
34.	INTEREST ON LATE PAYMENT	49
35.	SEVERANCE	50
36.	FURTHER ASSURANCE	50
37.	COUNTERPARTS	50
38.	AGREEMENT SURVIVES COMPLETION	50
39.	GOVERNING LAW AND JURISDICTION	51
Schedule 1 - Matters reserved for shareholder approval		51
Schedule 2 - Covenants		55
Schedule 3		56

THIS AGREEMENT is dated 31 March 2009

PARTIES

(1) FORCE PROTECTION ADVANCED SOLUTIONS LIMITED, a company incorporated and registered in England and Wales with company number 06681502 whose registered office is at Narrow Quay House, Narrow Quay, Bristol, BS1 4AH ( FPAS ).

(2) FORCE PROTECTION INDUSTRIES, INC., a company incorporated in the State of Nevada in the United States of America with employee identification number (EIN) 88-0361514 with a principal place of business at 9801 Highway 78, Ladson, South Carolina 29456 and whose registered agent is Corporation Service Company, 1703 Laurel Street, Columbia, South Carolina 29201 ( FPII ).

(3) NP AEROSPACE LIMITED, a company incorporated and registered in England and Wales with company number 3472480 whose registered office is at 473 Foleshill Road, Coventry, West Midlands, CV6 5AQ ( NPA ).

(4) INTEGRATED SURVIVABILITY TECHNOLOGIES LIMITED a company incorporated and registered in England and Wales with company number 06805545 whose registered office is at Narrow Quay House, Narrow Quay, Bristol, BS1 4AH ( IST ).

Each a “ party ” and references to “ parties ” are references to all of them.

BACKGROUND

(A) FPAS and NPA are to each hold shares in IST (as defined below).

(B) IST shall carry on business in accordance with the terms and conditions of this Agreement.

(C) FPAS and NPA shall exercise their rights in relation to IST in accordance with the terms and conditions of this Agreement.

AGREED TERMS

1. INTERPRETATION

1.1 The definitions and rules of interpretation in this Clause apply in this Agreement.

Approvals Matrix: the approvals matrix of the Company in the agreed form;

Articles: the articles of association of IST in the agreed form to be adopted on or prior to Completion as amended or superseded from time to time;

Base Vehicle: means a vehicle comprised of those parts of a Relevant Vehicle which are not supplied by an NPA Group Company;

Board: the board of directors of IST as constituted from time to time;

Business: has the meaning given in Clause 2;

Business Day: a day (other than a Saturday or Sunday) when banks in the City of London are open for business;

Business Plan: has the meaning given in Clause 9;

Chairman: means the chairman of IST;

Companies Acts: the Companies Act 1985 and the Companies Act 2006;

Completion: the performance of all the obligations of the parties to this Agreement set out in Clause 4;

Completion Date: means the date of this Agreement;

Confidential Information: has the meaning given in Clause 22;

Control: in relation to a body corporate, means the power of a person to secure that the affairs of the body corporate are conducted in accordance with the wishes of that person:

(a) by means of the holding of shares, or the possession of voting power, in or in relation to that or any other body corporate; or

(b) by virtue of any powers conferred by the articles of association, or any other document, regulating that or any other body corporate,

and a Change of Control occurs if a person who controls any body corporate ceases to do so or if another person acquires control of it, but, for the avoidance of doubt, provided that:

(i) in the case of NPA, Morgan Crucible remains the ultimate parent company of NPA; or

(ii) in the case of FPAS, FPI remains the ultimate parent company of FPAS,

there will not be a Change of Control;

Covenants: means the covenants set out in Schedule 2;

Deadlock Notice: has the meaning given in Clause 12.3;

Deadlock Resolution Notice: has the meaning given in Clause 13.1;

DoD: means the United States Department of Defense;

Effective Date: means the date of this Agreement;

Equity Shares: means the FPAS Shares and the NPA Shares;

Encumbrance: includes any mortgage, charge (fixed or floating), pledge, lien, hypothecation, guarantee, trust, right of set-off or other third party right or interest (legal or equitable) including any assignment by way of security, reservation of title or other security interest of any kind, howsoever created or arising, or any other agreement or arrangement (including a sale and repurchase agreement) having similar effect;

Existing FPI FMS Contracts: the contracts entered into by any FP Group Company prior to the date of this Agreement for the supply of vehicles to UK MOD through the DOD’s foreign military sales structure;

Existing NPA Spares Contract: the contract dated 1 April 2008 between NPA and UK MOD;

Expert: a person appointed in accordance with Clause 17 to resolve a matter under this Agreement;

Fair Value: means the value of any shares determined in accordance with Clause 16;

FD: means the finance director of IST;

Financial Year: in relation to IST, means a financial accounting period of 12 months ending on the date given in Clause 4.2(f) but, in the first year in which IST is formed, means the period starting with the day IST is formed and ending on the date given in Clause 4.2(f);

FPAS Director: any director appointed to the Board by FPAS;

FPII IPR: all Intellectual Property Rights identified in the relevant FPII Sub-contract and owned by or licensed to FPII;

FPAS Share: an ordinary share of £1 in the capital of IST designated as an FPAS Share;

FPI: Force Protection, Inc., a company incorporated in the State of Nevada in the United States of America with employee identification number (EIN) 84-1383888 with a principal place of business at 9801 Highway 78, Ladson, South Carolina 29456 and whose registered agent is Corporation Service Company, 1703 Laurel Street, Columbia, South Carolina 29201;

FPII Sub-contract: any sub-contract between FPII and IST for the supply by FPII of Relevant Vehicles and/or Other Vehicles and Products;

FP Group Company: FPI and any member of its Group;

Group: in relation to a company (wherever incorporated), that company, any company of which it is a Subsidiary (its holding company) and any other Subsidiaries of any such holding company; and each company in a Group is a member of the Group. Unless the context otherwise requires, the application of the definition of Group to any company at any time shall apply to the company as it is at that time;

Intellectual Property Rights means all intellectual property rights and includes copyrights, patents, trade marks, service marks, database rights and rights to extract data, registered and unregistered designs, rights in circuit layouts and semi-conductor topography rights, trade secrets, rights of confidence, all whether registered or not,

applications for any of the foregoing, the right to apply for any of the foregoing and all other intellectual property rights and equivalent or similar rights or forms of protection recognised in any part of the world;

Material Contract: means a contract having a contract value in excess of £ [***] ;

MD: means the managing director of IST;

Morgan Crucible: The Morgan Crucible Company PLC, a company incorporated and registered in England and Wales with company number 00286773 whose registered office is at Quadrant, 55-57 High Street, Windsor, Berkshire SL4 1LP;

NPA Director: any director appointed to the Board by NPA;

NPA Group Company: NPA and any member of its Group;

NPA IPR means all Intellectual Property Rights identified in the relevant NPA Sub-Contract and owned by or licensed to NPA;

NPA Share: an ordinary share of £1 in the capital of IST designated as a NPA Share;

NPA Sub-contract: any sub-contract between NPA and IST for the integration of equipment onto the Relevant Vehicles and Other Vehicles and Products and any other services to be provided by NPA to IST;

Obligatory Transfer Event: in relation to a party, any event specified in Clause 15 that happens to that party or any member of its Group;

Other Vehicles and Products: has the meaning given in Clause 2.1;

Relevant Vehicles: has the meaning given in Clause 2.1;

Reserved Matters: the matters listed in Schedule 1;

Shareholders: the holders of Equity Shares;

Subsidiary: in relation to a company wherever incorporated (a holding company) means a “subsidiary” as defined in section 1159 of the Companies Act 2006 and any other

company which is a subsidiary (as so defined) of a company which is itself a subsidiary of such holding company. Unless the context otherwise requires, the application of the definition of Subsidiary to any company at any time shall apply to the company as it is at that time;

Taxes Act 1988: the Income and Corporation Taxes Act 1988;

Term: the term of the agreement as set out in Clause 3;

UK MOD: means the United Kingdom Ministry of Defence;

UK MOD Contract: any contract between IST and UK MOD in the terms entered into prior to termination of this Agreement;

US: United States of America;

1.2 Clause, Schedule and paragraph headings do not affect the interpretation of this Agreement.

1.3 A reference to a Clause or a Schedule is a reference to a Clause of, or Schedule to, this
Agreement. A reference to a paragraph is to a paragraph of the relevant Schedule.

1.4 A person includes a natural person, a corporate or unincorporated body (whether or not having a separate legal personality).

1.5 Words in the singular include the plural and in the plural include the singular.

1.6 A reference to one gender includes a reference to the other gender.

1.7 A reference to a particular statute, statutory provision or subordinate legislation is a reference to it as it is in force at the date of this Agreement taking account of any amendment or re-enactment and includes any statute, statutory provision or subordinate legislation which it amends or re-enacts and subordinate legislation for the time being in force made under it provided that, as between the parties, no such amendment or re-enactment shall apply for the purposes of this Agreement to the extent that it would impose any new or extended obligation, liability or restriction on, or otherwise adversely affect the rights of, any party.

1.8 A reference to writing or written includes faxes but not e-mail.

1.9 Documents in agreed form are the documents listed in Schedule 3 in the form agreed by the parties to this Agreement and initialled by them or on their behalf for identification.

1.10 A reference in this Agreement to a document is a reference to the document whether in paper or electronic form.

1.11 Where the words include(s), including or in particular are used in this Agreement, they are deemed to have the words “without limitation” following them.

1.12 Any obligation in this Agreement on a person not to do something includes an obligation not to agree or allow that thing to be done.

1.13 Where the context permits, other and otherwise are illustrative and shall not limit the sense of the words preceding them.

2. THE BUSINESS OF IST

2.1 The business of IST (the Business ) is:

(a) the design, development, manufacture, forward-integration and delivery, with IST acting as the contracting entity on a prime contractor basis, of:

(i) FPII’s Wolfhound, Buffalo, Mastiff and Ridgback vehicles as at the date of this Agreement and vehicles which are based on those vehicles ( Relevant Vehicles ) to the UK MOD;

(ii) other innovative, fully-integrated vehicles and other products to be agreed by the Shareholders in writing ( Other Vehicles and Products );

(b) the provision of whole life support (including spares, field service repairs and product upgrades) to UK MOD in relation to the Relevant Vehicles;

(i) the use of UK sub-contractors, where appropriate;

(ii) forming a long-term partnering relationship with UK MOD;

(iii) continually seeking to develop design enhancements that create real value for UK MOD and working with FPII, NPA and other sub-contractors to incorporate such enhancements within the scope of work of each sub-contract;

(iv) finding innovative and flexible solutions for UK MOD such as availability-based procurement, integrated product delivery and through-life support packages and priced options; and

(v) engendering a culture of openness and transparency as demonstrated by open-book accounting and raising problems at an early stage when they can be resolved effectively,

all of which should enable IST to provide UK MOD with a value for money through-life solution on time and on budget; and

(d) entering into sub-contracts with FPII, NPA and third parties for the supply of goods and services to enable IST to perform its obligations.

2.2 IST and each of the Shareholders agree as follows:

(a) Each Shareholder shall use its reasonable endeavours to promote and develop the business of IST to the best advantage of IST;

(b) IST and the Shareholders shall use their reasonable endeavours to ensure that:

(i) the formation and operation of IST adds value to both of the Shareholders; and

(ii) IST becomes a viable and profitable company.

2.3 IST shall have places of business in both Bristol and Coventry, or in such other places as may be agreed by the parties from time to time.

Non-IST Supply

2.4 Subject to Clause 2.17, no FP Group Company shall supply Relevant Vehicles to UK MOD otherwise than through IST.

2.5 Subject to Clause 2.17, IST shall sub-contract with NPA for all integration work in relation to Relevant Vehicles it supplies to UK MOD, except in such cases where all FPAS Directors and all NPA Directors unanimously resolve that:

(a) NPA does not have the necessary expertise, capacity or resources to fulfil the relevant requirement; or

(b) it is in the best interests of IST to contract with a party other than NPA,

in which case IST shall be entitled to contract with a sub-contractor or supplier other than NPA. Where reasonably possible, IST shall contract with an entity based in the United Kingdom.

2.6 IST, FPII, FPAS and NPA will work to develop a contractual structure and specifications which maximise efficiency and avoid redundant activities and duplication of effort between contractors.

2.7 The parties acknowledge that UK MOD may decide to procure Relevant Vehicles otherwise than through IST. In such circumstances, FPII shall be entitled to supply the Relevant Vehicles to UK MOD directly or through an entity nominated by the DoD and such supply shall not be though IST. FPII shall not be required to account to IST for any revenue generated by that contract. For the avoidance of doubt, FPII may complete its Existing FPI FMS Contracts.

2.8 Where UK MOD purchases the Relevant Vehicles otherwise than through IST and awards any integration work to NPA, NPA will be entitled to perform such contract directly and shall not be required to account to IST for any revenue generated by that contract.

2.9 Where UK MOD purchases Relevant Vehicles otherwise than through IST, the parties anticipate that IST will only be party to a contract with UK MOD if UK MOD elects to engage IST to co-ordinate integration or through-life support.

2.10 FPAS and FPII will use reasonable endeavours to assist IST in obtaining integration work in relation to any Relevant Vehicles supplied to UK MOD otherwise than through IST.

2.11 Subject to NPA’s rights pursuant to Clauses 2.12 to 2.15 below, all companies in the NPA Group will use reasonable endeavours to assist IST in supplying Relevant Vehicles to UK MOD.

Whole life support

2.12 Subject to Clause 2.17, FPII and NPA (and members of their Groups) shall not bid for whole-life support (including spares, enhancements and modifications) work in relation to Relevant Vehicles for UK MOD other than through IST, except with the consent of the other Shareholder, not to be unreasonably withheld or delayed, provided that NPA may continue to provide spares to UK MOD under the Existing NPA Spares Contract.

Competitive Bids

2.13 Subject to Clause 2.17, where FPII is competing to supply a Relevant Vehicle otherwise than through IST to UK MOD then:

(a) NPA shall not form part of, or provide sub-contract services to, a competing bidding group or consortium, save that

(b) NPA may act as a sub-contractor to a competing bidding group or consortium on no better terms than those offered to IST, PROVIDED THAT, NPA commits no less resources to any IST proposal to provide integration services in respect of that Relevant Vehicle than the resources it provides to any competing bidding group or consortium.

2.14 Subject to Clause 2.17, where in respect of a requirement published by UK MOD:

(a) FPII does not notify NPA within 30 days of a request by NPA that an FP Group Company will bid to supply a Relevant Vehicle to UK MOD otherwise than through IST; or

(b) MOD has directed that the vehicle to be supplied should not be a Relevant Vehicle (either by reason of choosing sole source procurement or excluding the

Relevant Vehicle from the competition at any time) (whether when inviting tenders or following completion of the competition); and

then any NPA Group Company may form part of a competing bidding group or consortium (either as shareholder or sub-contractor) using a platform which is not a Base Vehicle.

2.15 Subject to Clause 2.17, where IST or an FP Group Company has entered but has failed to win any competition to supply any Relevant Vehicle to UK MOD, NPA may supply any goods and/or services to the successful bidding group or consortium except those goods and services which uniquely relate to any Relevant Vehicle.

2.16 Each of FPII and NPA shall procure that the members of their respective Groups comply with the provisions of this Agreement

No restriction on UK MOD

2.17 Nothing in this Agreement (including but not limited to Clauses 2.4, 2.5 and 2.12 to 2.15) shall prevent any FP Group Company or any NPA Group Company from:

(a) supplying any goods or services to UK MOD; or

(b) competing to supply any goods or services to UK MOD,

otherwise than through IST, whether directly or through a consortium arrangement, joint venture or other entity or structure, if so required by UK MOD.

UK MOD as priority customer

2.18 Each of the Parties agrees that:

(a) UK MOD will be the highest priority customer for IST; and

(b) where IST receives orders from UK MOD and other customers to perform work and IST would be unable to satisfy all such orders, IST shall give priority to UK MOD’s orders,

provided that this priority shall not require IST to breach any existing contractual arrangements.

3. TERM

3.1 This Agreement shall come into effect on the Effective Date and shall continue in force unless and until terminated in accordance with its terms.

4. COMPLETION

4.1 Completion shall take place on the Completion Date at:

(a) the offices of DLA Piper UK. LLP at Victoria Square House, Victoria Square, Birmingham B2 4DL; or

(b) any other place agreed in writing by the parties.

4.2 At Completion the parties shall procure that such shareholder and board meetings of IST are held as may be necessary to:

(a) increase the authorised share capital of IST to £1,000,000, divided into 1,000,000 ordinary shares of £1 each and re-designate the shares held in IST by FPAS as FPAS Shares and shares held in it by NPA as NPA Shares, in each case to be subscribed for in accordance with Clauses 4.3 and 4.4;

(b) appoint:

(i) Michael Moody as FPAS Director and Chairman

(ii) David Hind as FPAS Director;

(iii) Lenna Macdonald as FPAS Director;

(iv) Michael Linton as NPA Director and MD;

(v) Roger Medwell as NPA Director; and

(vi) Andrew Riley as NPA Director;

(d) appoint Grant Thornton UK LLP as the auditors of IST ( Auditors );

(e) appoint Barclays Bank plc as the principal bankers to IST; and

(f) resolve that IST’s financial year shall end on 31 December in each year.

4.3 At Completion:

(a) FPAS and NPA shall procure that IST shall issue credited as fully paid 299,999 FPAS Shares to FPAS and enter FPAS in the register of members of IST as the holder of such FPAS Shares and issue a share certificate to FPAS in respect of all such shares;

(b) in consideration for the issue of FPAS Shares, FPAS shall pay £1,499,995 by telegraphic transfer to IST; and

(c) FPAS and NPA shall procure that IST shall issue credited as fully paid 300,000 NPA Shares to NPA and enter NPA in the register of members of IST as the holder of such NPA Shares and issue a share certificate to NPA in respect of all such shares; and

(d) in consideration for the issue of NPA Shares, NPA shall pay £1,499,995 by telegraphic transfer to IST.

4.4 Further subscription for shares:

(a) Subject to the terms of this Agreement:

(i) FPAS shall apply for the allotment and issue to it of 200,000 additional Equity Shares on 6 July 2009, such shares to be designated as FPAS Shares;

(ii) NPA shall apply for the allotment and issue to it of 200,000 additional Equity Shares on 6 July 2009, such shares to be designated as NPA Shares,

(the Further Subscription Shares) in each case at a subscription price of £5 per Equity Share (the Share Subscription Price).

(b) IST shall accept such applications for Further Subscription Shares.

(c) Upon receipt of the aggregate Subscription Price for the number of Further Subscription Shares subscribed for by and from each of FPAS and NPA, IST shall issue the number of Further Subscription Shares subscribed and paid for by each of FPAS and NPA fully paid and designated as FPAS Shares and NPA Shares (as appropriate) and shall procure that their names be entered in the register of members of IST as the respective holders of the number of Further Subscription Shares so allotted and issued to them and shall forthwith issue to each of them an appropriate definitive share certificate executed by IST.

(d) If the Subscription Price is not received from either FPAS or NPA (the Defaulting Subscriber) on 6 July 2009 or such later date as may be agreed by the Shareholders (the Subscription Date) IST shall notify the Defaulting Subscriber that it is in default of its obligation to subscribe for Further Subscription Shares and shall give the Defaulting Subscriber notice (the Default Notice) that the Defaulting Subscriber must subscribe in cleared funds for Further Subscription Shares within 10 Business Days from the Subscription Date (the Long Stop Date). Failure by IST to give a Default Notice in accordance with this Clause 4 shall not relieve the Defaulting Subscriber from any obligation or liability arising under this Clause 4.4 and shall not invalidate any action of IST taken pursuant to it.

(e) If a Defaulting Subscriber has not subscribed in cleared funds for Further Subscription Shares by the Long Stop Date, IST shall notify whichever of FPAS or NPA is not the Defaulting Subscriber (the Non-Defaulting Subscriber) of such failure within five Business Days of the Long Stop Date and shall invite the Non-Defaulting Subscriber to subscribe for Further Subscription Shares in respect of the Further Subscription Shares which are the subject of the Default Notice (a Defaulted Shares Application) within 30 Business Days of the Long Stop Date.

(f) A Non-Defaulting Subscriber shall have the right but not the obligation to subscribe for the Further Subscription Shares which are the subject of the Default Notice within 30 Business Days of the Long Stop Date.

(g) Upon receipt of the aggregate Subscription Price for the number of Further Subscription Shares subscribed for by and from the Non-Defaulting Subscriber, IST shall accept such Defaulted Shares Application and issue the number of Further Subscription Shares subscribed and paid for by the Non-Defaulting Subscriber fully paid and designated as either FPAS Shares and NPA Shares (as appropriate) and shall procure that the name of the Non-Defaulting Subscriber be entered in the register of members of IST as the holder of the number of Further Subscription Shares so allotted and issued to it and shall forthwith issue to it an appropriate definitive share certificate by IST.

(h) Notwithstanding any other provision of this Agreement, in the event that FPAS or NPA is in default of its obligations under this Clause 4.4 and does not subscribe in full in accordance with Clause 4.4 on or before the Long Stop Date, the following shall apply:

(i) the Reserved Matters referred to in Schedule 1 shall be deemed to be limited to the following only and Clause 5 and Clause 6.6 shall be qualified accordingly:

(A) no shares shall be issued to any person (save pursuant to employees or officers pursuant to a share incentive scheme approved by the Board) other than on a pre-emptive basis in accordance with the Articles;

(B) any contract to be entered into between IST and any FP Group Company or NPA Group Company shall be on arm’s length terms;

(C) no alteration shall be made to the rights attaching to any class of Equity Shares which does not apply to all classes of Equity Shares;

(ii) the restrictions in Clause 2 shall not apply to the Non-Defaulting Subscriber;

(iii) the Non-Defaulting Subscriber shall be entitled to remove the current Chairman and appoint a replacement.

(iv) the requirement for the consent of any Director of IST appointed by the Defaulting Shareholders pursuant to Clauses 2.5 and 6.8 shall not apply;

(v) the Defaulting Subscriber shall be entitled to appoint no more than one director to the Board in aggregate; and

(vi) Clause 7.2 shall not apply.

4.5 At Completion FPAS and NPA shall procure that IST shall adopt the Business Plan that has been prepared for the Financial Year and which is in agreed form.

4.6 FPAS and NPA waive, or agree to procure the waiver of, any rights or restrictions which may exist in the Articles or otherwise which might prevent the allotment and issue of the FPAS Shares and NPA Shares pursuant to Clause 4.3, Clause 4.4 and Schedule 1.

4.7 The Shareholders shall procure that:

(a) the Auditors shall, at the expense of the Company, be instructed to certify the amount of the profits for each accounting reference period which are available for distribution by the Company at the same time as they sign their report on the audited accounts of the Company for the accounting reference period in question; and

(b) (insofar as is lawful) [***] % of the amount of the Company’s profits available for distribution in respect of each financial year during the term of this agreement shall be distributed by the Company to the Shareholders by way of dividend pro-rata to the proportion of issued Shares held by that Shareholder (subject to the restriction that no payment of any dividend will reduce the balance of the cash held at the Company’s bank to below £ [***] on the day of payment).

5. COVENANTS

Reserved Matters

5.1 Each Shareholder covenants with the other Shareholder to take such steps as it is reasonably able to take to procure that IST does not, and each Shareholder will procure that each of its respective appointed directors of IST shall not (so far as such directors are lawfully able), transact any business that is the subject of a Reserved Matter without the prior consent of all other Shareholders.

5.2 IST covenants with the Shareholders that it shall not transact any business the subject of a Reserved Matter without the prior consent of all Shareholders.

5.3 For the avoidance of doubt, where this Agreement provides for the delegation of powers to IST or to any of the directors of IST, such delegation and such powers remain subject to the provisions of Clause 5.1 and Clause 5.2.

5.4 For the avoidance of doubt, where this Agreement provides certain rights to FPAS and NPA, unless otherwise stated, the exercise of any such rights remain subject to the provisions of Clause 5.1 and Clause 5.2.

5.5 Where all FPAS Directors and all NPA Directors in office unanimously approve a matter which would otherwise fall within paragraph 26, 27, 29, 31 and 34 of Schedule 1, the provisions of Clauses 5.1 and 5.2 shall not apply in respect of such matter.

Consents

5.6 Where any consent or approval of the Shareholders is required or sought in respect of any provision of this Agreement the Shareholders shall have a complete and unfettered discretion as to whether or not to give the consent or approval and whether or not to impose any terms, conditions or limitations on any such consent or approval.

5.7 No consent or approval to be given by the Shareholders in this Agreement shall be valid unless given in writing or in accordance with Clause 5.8.

5.8 Where the consent or approval of a Shareholder is required under this Agreement, it shall not be valid unless:

(a) in the case of FPAS:

(i) it is given by a FPAS Director voting in favour of a resolution of the Board in respect of the matter in question and evidenced by the signed minutes of the appropriate Board meeting or a duly signed written directors’ resolution or some other document in which the relevant matter is approved; or

(ii) if a FPAS Director declines to give a decision on the matter (which he is entitled to do at his discretion), FPAS gives its consent or approval in writing.

(b) in the case of NPA it is given by all NPA Directors voting in favour of a resolution of the Board in respect of the matter in question and evidenced by the signed minutes of the appropriate Board meeting or a written directors’ resolution duly signed by all such persons or some other document in which the relevant matter is approved; or

5.9 IST shall promptly supply to the Shareholders and/or the FPAS Directors and Chairman and the NPA Directors and MD, as the case may be, all information and documents necessary to enable them to give proper consideration to any matter on which their consent or approval is sought.

5.10 Each Shareholder covenants with the other Shareholders and IST in the terms of the Covenants.

5.11 IST covenants with each of the parties (save for itself) in the terms of the Covenants.

5.12 The Reserved Matters and the Covenants shall bind the Shareholders and IST respectively during such time as any Shareholder or their valid successors and assigns are the registered holder or beneficial owner of any share capital in IST.

5.13 Each of the Reserved Matters and Covenants shall be construed independently of each of the others so that if one or more of them shall be held to be invalid as an unreasonable

restraint of trade or for any other reason whatsoever then the remaining Reserved Matters and Covenants shall be valid to the extent that they are not held to be so invalid.

6. DIRECTORS AND MANAGEMENT

Directors and the Board

6.1 IST shall be managed by a board of six directors (the Board ) consisting of:

(a) a Chairman nominated by FPAS;

(b) the MD nominated by NPA.

(d) two additional Directors nominated by NPA.

6.2 The terms of appointment of all Directors (including any remuneration) must be approved by all of the Shareholders.

6.3 The Board shall delegate to the MID all necessary power and authority to undertake, conduct and carry-on the day-to-day management and operations of IST. The MD shall report to and take strategic direction from the Board.

6.4 The FD will work closely with the MD as FPAS’s key contact for day-to-day operational issues. The FD’s approval, not to be unreasonably withheld or delayed, shall be required for all material financial transactions in accordance with the Approvals Matrix agreed between FPAS and NPA from time to time.

6.5 The MD, FD and other senior management roles identified in this Agreement shall be full-time appointments and each party shall permit any relevant individual previously or concurrently employed by it to devote 100% of his time to his role within IST during the term of his employment or secondment to IST.

6.6 The Board has responsibility for the supervision and management of IST and its business but shall obtain the approval of the Shareholders in accordance with Clause 5.8 before taking any decision in relation to any Reserved Matter.

6.7 Subject to Clause 6.1, each Shareholder may nominate a director, and remove a director whom it nominated (in each case as a director) by giving notice to IST and the other Shareholder. The appointment or removal takes effect on the date on which the notice is received by IST or, if a later date is given in the notice, on that date. Each Shareholder will consult with the other prior to any appointment or removal of a director provided that no Shareholder may so remove a director prior to the expiry of a contract relating to the provision of his or her services in place with IST, without the consent of the other Shareholders.

6.8 The Shareholder removing a Director shall indemnify and keep indemnified IST against any claim connected with the Director’s removal from office.

6.9 The MD and the FD (or in the absence of either of such persons another director of IST appointed by the appointer of such person) shall have responsibility for considering whether any amendment, variation or extension of any Material Contract (including without limitation the MOD Contract, the FP Subcontract and the NPA Subcontract) shall require approval by the Board or the Shareholders. In the event that such parties are unable to reach agreement within five Business Days of commencing discussion of the same, such matter shall be referred to the Board and shall require unanimous approval of all FPAS Directors and NPA Directors in office to be effected and in the absence of such agreement shall be a Reserved Matter (subject always to Clause 4.4(h)). In the event that such amendment, variation or exclusion shall give rise to additional contract value in excess of £ [***] , such amendment, variation or extension shall require unanimous approval of all FPAS Directors and NPA Directors in office to be effected and in the absence of such agreement shall be a Reserved Matter (subject always to Clause 4.4(h)).

Board meetings

6.10 The Board shall meet at least once a quarter to be held at a location to be agreed.

6.11 A director may, and at the request of a director or the company secretary shall, call a meeting of directors at any time.

6.12 IST shall ensure that at least seven days’ written notice of a meeting of directors is given to all directors entitled to receive notice accompanied by:

(a) an agenda specifying in reasonable detail the matters to be raised at the meeting; and

(b) copies of any papers to be discussed at the meeting.

6.13 A shorter period of notice of a meeting of directors may be given if at least one FPAS Director and all NPA Directors agree in writing.

6.14 Matters not on the agenda, or business conducted in relation to those matters, may not be raised at a meeting of directors unless all the directors agree in writing.

6.15 The quorum at any meeting of directors is:

(a) for any business that is the subject of a Reserved Matter, all directors or their alternates; and

(b) for any other business, one FPAS Director (or his alternate) and one NPA Director (or his alternate) (in each case provided one is in office).

6.16 Where a meeting is adjourned under Clause 6.19, the quorum for the adjourned meeting shall be any two directors.

6.17 No business shall be conducted at any meeting of directors unless a quorum is present at the beginning of the meeting and at the time when there is to be voting on any business.

6.18 If the Chairman for the time being is unable to attend any meeting of the Board the Shareholder who appointed him shall be entitled to appoint another Director appointed by it to act as Chairman at the meeting.

6.19 If a quorum is not present within 30 minutes after the time specified for a directors’ meeting in the notice of the meeting then it shall be adjourned for five (5) Business Days at the same time and place.

6.20 A meeting of directors shall be adjourned to another time or date at the request of all the FPAS Directors or all the NPA Directors present at the meeting. No business may be

conducted at a meeting after such a request has been made. No more than one such adjournment may be made in respect of a meeting.

6.21 Meetings of directors shall make decisions by passing resolutions:

(a) for any business that is the subject of a Reserved Matter, if all Directors cast their vote for it; and

(b) for any other business, if more votes are cast for it than against it provided that if an equal number of votes are cast for and against the resolution, the Chairman shall use his best efforts to reconcile the different opinions of the directors. If he is unsuccessful, the matter shall be decided by use of the Chairman’s additional vote, to be exercised at his discretion.

6.22 Except as provided by Clauses 6.21 and 6.24, at a meeting of directors, each director has one vote.

6.23 An FPAS Director or a NPA Director absent from a meeting may appoint any person (except an existing director representing the other class of shares) to act as his alternate at the meeting. For the purposes of the meeting the alternate director:

(a) shall be the FPAS Director or NPA Director by whom he is appointed and may vote in place of the FPAS Director or NPA Director; and

(b) where the person appointed as an alternate is already a director of IST in his own right, shall also be a director (and may vote) in his own right.

6.24 If each of the Shareholders is not represented at any meeting of the Board by the maximum number of FPAS Directors and NPA Directors which such Shareholder is entitled to appoint (whether present in person or by alternate), then one of the directors so nominated by the Shareholder which is represented by fewer directors shall be entitled at that meeting to such additional vote or votes as shall result in the directors so present representing each Shareholder having in aggregate the number of votes which could have been exercised by such maximum number of directors.

6.25 The directors participate in a directors’ meeting, or part of a director’s meeting, when:

(a) the meeting has been called and takes place in accordance with this Agreement; and

(b) they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting.

6.26 In determining whether directors are participating in a directors’ meeting, it is irrelevant where any director is or how they communicate with each other.

6.27 If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is.

Organisational matters

6.28 The parties agree that it is essential that IST has a high-calibre, dedicated management team (the Management Team ) which understands the FPAS and NPA cultures (as well as the culture of UK MOD) and is focused on building up IST into a substantial company within the UK and international defence manufacturing sector.

6.29 Where FPAS and NPA transfer personnel to IST, they will ensure that such personnel are replaced in their previous roles within FPAS and NPA so as to enable them to be fully committed to IST. FPAS and NPA will ensure that the establishment and management of IST does not result in disruption to existing contractual obligations to the UK MOD.

6.30 Subject to Clause 5 and Schedule 1, senior management shall be recruited by the MD and David Hind (or any replacement or successor to David Hind, as nominated by FPAS), who will work together in the recruitment process

6.31 The roles, responsibilities and terms of employment of all senior management and the organisational structure of IST must be approved by both Shareholders.

6.32 The Shareholders agree that one senior manager of IST will be selected to ensure compliance with all export control requirements, including but not limited to technical assistance agreements, manufacturing licence agreements and any other related complian

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