UNDERSEA SYSTEMS INTERNATIONAL, INC., DBA OCEAN TECHNOLOGY SYSTEMS (“OTS”)

GENERAL TERMS AND CONDITIONS OF PURCHASE BETWEEN OTS AND SELLER

1. ACCEPTANCE OF PURCHASE ORDER:        
   This Purchase Order is OTS’s offer to purchase the goods and/or services specified according to the terms and conditions specified herein (“General Terms and Conditions”). The Purchase Order together with any attachments specifically incorporated or referenced on the Purchase Order along with these General Terms and Conditions (“Agreement”) constitutes the entire understanding between OTS and Seller (“Parties”) and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. This Agreement may be amended, modified, or supplemented only by a written instrument signed by OTS and the Seller. This Agreement shall be binding upon the successors and assigns of the parties. In the event that any OTS Purchase Order does not state a price or delivery date, OTS will not be bound to any price or delivery date to which it has not specifically agreed in writing.

2. REFERENCE DOCUMENTS:  
   When industry, military and/or regulatory standards are specified on the OTS Purchase Order, the manufacturing and/or processing of the goods shall be in accordance with the current issue of the cited standards in effect as of the date of the Purchase Order. Note that if a specific revision is indicated on the Purchase Order, the requirements of the specification at that revision level shall be imposed; and may reflect an older revision of the specification. However, nothing supersedes applicable laws and regulations unless a specific exemption has been obtained.

3. ORDER NUMBERS:        
   OTS will communicate a purchase order number (the  “Purchase Order Number”) to Seller by telephone,  fax or e-mail.  Seller  shall include  the Purchase Order Number on every packing sheet, invoice and every other communication related to this

4. PACKING AND SHIPPING:       
   All items must be properly prepared for shipment and  comply  with carrier regulations and be in suitable containers for protection in shipment and storage. No charges will  be paid by OTS for packing, crating, or cartage unless so stated in the  All shipments to be forwarded  on one day via one route must be consolidated. To the extent practicable, items ordered under separate Purchase Order Numbers shall be segregated within the pallet, box or  shipping container.  A separate packing sheet for each order included in a shipment, showing Purchase Order Number, must be included with each shipment.

5. SHIPMENT  OR DELIVERY:         
   Time is of the essence for shipment  or delivery and to any other performance  required  of Seller.   Shipment  or delivery shall be in accordance  with the schedule set out in the purchase  order and in exact quantities  ordered.   If it appears  Seller  will not meet such schedule  or if Seller fails to meet such schedule, Seller shall, upon request of OTS and in addition to any other rights or remedies provided  to OTS  by law or  under  this purchase  order, ship  via expedited  routing  necessary either to meet such schedule or to recover the maximum possible time lost by failure to ship or deliver on schedule,  and the difference  between  the expedited  routing and the purchase  order routing cost shall be borne by Seller.  OTS reserves  the right, at Seller ‘s expense,  to return any goods shipped  in advance  of the schedule set out in the purchase order.

6. INSPECTION / ACCEPTANCE AND QUALITY CONTROL:         
   All goods ordered are subject to  final  inspection and acceptance by OTS at the destination notwithstanding any prior payment or inspection at the source. Acceptance of any items by OTS shall not be deemed to alter the obligations of Seller or the rights of OTS and its customers under the Warranty clause or any other provision of this purchase order OTS may reject and hold at Seller’s expense, subject to Seller’s disposal or return to Seller at Seller’s expense, all goods and/or services not conforming to applicable drawings, specifications, samples, or as defined in the Purchase Seller agrees to replace at its expense or, at OTS’s option, to refund the price of any goods and/or services which fail to meet the requirements of applicable drawings, specifications, samples, or descriptions as ordered. The Seller is cautioned to examine carefully all referenced documentation that in total describes the goods and/or services, the quality, the records and the controls that are required for adequate conformance. Unless otherwise expressly waived by OTS in writing, Seller shall comply with all of the requirements of this Agreement specified and/or referenced herein, as well as any other supplemental requirements specified on the face of the Purchase Order to the extent required by OTS for the provision of goods and/or services hereunder. Parts and materials furnished as part of the delivered goods or, in the case of distributors, furnished as the delivered goods shall have been purchased in a manner that ensures conformance to the applicable specifications and is subject to adequate controls. All supplied paperwork (certifications, shippers, etc.) must all reference back to the Purchase Order number, regardless of origin of paperwork. The Seller must tie all paperwork together by referencing the relevant Purchase Order number.

7. REJECTION:             
   OTS  shall  notify Seller  if any  items delivered  hereunder  are rejected for being nonconforming, and, at OTS’s election and Seller’s risk and expense, such items may be returned to Seller. Seller shall issue OTS a credit for all costs and expenses  with respect  to such rejected  items or replace or correct rejected items, at OTS’s election.

8. WARRANTY:            
   Seller warrants that all goods delivered  hereunder  shall  be merchantable,  fit for their particular  purpose,  free  from defects in material and workmanship,  whether  latent or apparent,  conform to specifications, drawings, samples, descriptions and all other requirements of the Purchase Order, be free from liens and encumbrances, and, if of Seller’s design, will be free from design defects. Seller  warrants  that all services performed  hereunder  shall  be performed  in a good and workmanlike  manner by qualified, trained personnel, free from errors.   Seller’s  warranties shall be enforceable  by OTS and shall run to OTS’s customer(s).  If any non-conformity with goods and/or services appears, Seller shall promptly repair, replace the goods, or re-perform the services at its sole expense. If repair or replacement of the goods or re-performance of services is not timely, OTS may elect to return the nonconforming goods and/or services, or repair or replace the nonconforming goods or re-procure the nonconforming services at Seller’s expense. Such warranties shall be in addition to any other warranty or service guarantee of Seller and any warranties imposed by law. All warranties and service guarantees shall run to OTS and OTS customer(s) at any tier.

9. CHANGES:           
    OTS may make changes to any services to be performed or to any goods to be specifically manufactured, but no change shall be effective, nor shall OTS be obligated to pay any increase in compensation as a result of a change, unless OTS issues a written change order. Changes which increase or decrease pricing shall be revised as mutually agreed to in writing.

10. RESPONSIBILITY FOR PROPERTY:            
    Seller shall be responsible for all goods covered by this Purchase Order until delivery to specified delivery point and shall bear all risks for rejected goods after notice of rejection. Seller shall: be liable for any loss or destruction of, or damage to, property furnished to Seller by OTS or OTS’s Customer(s); not use such property except for performance of this Purchase Order or as authorized by OTS in writing; indemnify, defend and hold OTS harmless against any and all liens and claims related to such property regardless of the cause; and be responsible for returning any such property in as good condition as when received, except for reasonable wear and tear, or for the utilization of such property in accordance with the provisions of this Purchase Order. Any property furnished to Seller hereunder shall carry no guarantee or warranty, express or implied. With respect to Government property, Seller agrees to comply with Federal Acquisition Regulation 52.245-1 (Government Property). Seller shall provide evidence of compliance, including flow down to all sub-tier suppliers, when requested by OTS or OTS’s Customer(s).

11. INVOICES/PAYMENT:            
    A separate invoice shall be issued for each shipment and for each Purchase Order Number, with the Purchase Order Number stated on the face of the invoice. Unless freight and other charges are itemized, any discount will be taken on full invoice amount. Payments are subject to adjustment for shortage/rejection. Payment terms are net thirty (30) days, after the date Seller’s correct invoice is received  by OTS. All invoices shall include OTS’ Purchase Order number, part number and description and unit price. No invoice shall be issued prior to shipment of goods, and no payment shall be made prior to receipt and acceptance of conforming goods and invoice.   Payment terms commence  upon receipt of a  correct invoice.    Seller shall receive electronic purchase orders and OTS shall receive electronic invoices via such marketplace.

12. INDEMNITY:         
    Seller shall indemnify, hold harmless, and defend OTS, its Affiliates and their respective officers, directors, agents,  representatives,  employees, subcontractors, customers, users of Seller’s goods  and  services from any  and  all claims (including, without limitation, claims by vendees of OTS), liabilities, damages and expenses (including attorneys’ fees) arising from or related to (i) the negligence (including strict liability), gross negligence or willful misconduct of Seller, its affiliates and their respective employees, contractors, subcontractors, vendors and agents (the “Seller Parties”),  (ii)  contamination  of  or adverse effect on the environment, (iii) violation of any law or regulation, or (iv) alleged infringement of any patent, copyright or trademark or violation of any other  intellectual property right of a third party.   This indemnity shall apply without regard to whether the claim, damage, liability or expense is based on breach of contract, breach of warranty, negligence, strict liability, or other tort.   This indemnity shall survive delivery and acceptance of goods or services. In any interparty dispute, the prevailing party shall be entitled to reasonable legal costs and expenses, including attorneys’ fees.

13. INSURANCE:            
    Seller shall maintain, at its sole cost, and shall require any subcontractors it may engage to maintain at all times while transacting business with OTS and for two (2) years following acceptance of goods and services hereunder, the insurance coverage set forth below, with one or more insurance companies licensed to do business in the state where the work is performed and with a rating of not less than A, X or better as shown in the most current issue of the A.M. Best Rating Guide:

• • (a) Workers’ Compensation Insurance as required by laws and regulations applicable to and covering any subcontractor’s employees performing in connection with Seller’s obligations hereunder at any OTS location, and all employees of Seller engaged in Seller’s performance of its obligations hereunder.
  • (b) Employers’ Liability Insurance protecting Seller against common law liability in the absence of statutory liability, for employee bodily injury arising out of the master-servant relationship with a limit of not less than$1,000,000.
  • (c) Commercial General Liability Insurance including coverages for premises/operations, products/completed operations, bodily injury, property damage, independent contractors and coverage for insured contracts specifically in support of the contractual obligations of Seller including, without limitation, any indemnity obligations hereunder, with limits of liability of not less than $1,000,000 per occurrence and $2,000,000 in the annual aggregate and naming OTS and its Affiliates as an additional insureds.
  • (d) Automobile Liability Insurance including non-owned and hired vehicle coverage with limits of liability of not less than $1,000,000 per occurrence combined single limit and naming OTS and its Affiliates as an additional insureds.
  • Seller shall provide a certificate of insurance evidencing such insurance coverage that shall provide that the insurance carrier will give OTS thirty (30) days’ prior written notice of any cancellation or non-renewal of any policy or policies identified in such certificate.

14. 14. PATENTS AND TRADEMARKS:         
    Seller warrants that all goods and services supplied under this purchase order shall not infringe on any third party’s patent, copyright, trade secret, trade name, trademark or service mark, or other proprietary

15. 15. TITLE AND RISK OF LOSS:           
    Seller warrants title to all goods sold and bears the risk of loss or damages to the items purchased under this purchase order until they are delivered in conformity with this purchase order at OTS’s delivery point specified in this purchase order or installed, as required pursuant to the purchase order, and, upon such delivery or installation, title shall pass to  Passing of title shall not constitute acceptance of the items by OTS.

16. 1 CONFIDENTIALITY:        
    Seller    shall    keep    confidential    all    information designated as confidential  by  OTS  or  reasonable  known  to  be confidential,  including,  but  not  limited  to, designs, processes,   drawings, specifications,  reports, data and other technical or proprietary information and the features of all parts, equipment, tools, gauges, patterns and other items furnished or disclosed to the Seller by OTS in connection with this purchase order (“OTS’s Confidential Information”).  Seller shall not disclosure such information to any third party without the written consent of OTS and shall not use OTS’s Confidential Information except as contemplated in this purchase order.  Upon completion or termination of this purchase order, Seller shall return all OTS’s Confidential Information to OTS or make such other disposition thereof as may be directed and approved by OTS and shall certify to such return or destruction.

17. 17. COMPLIANCE WITH LAW:  

• Seller warrants that all goods and/or services provided under this Purchase Order conform to all relevant Federal, State, local laws, rules, regulations and ordinances in effect at the time of delivery or performance, including, but not limited Occupational Safety & Health Administration (OSHA) and other worker safety

• Seller warrants that in the performance  of this Purchase  Order, it will comply  with all applicable  S. Department  of Transportation  regulations  on hazardous  materials,  and any other pertinent federal, state or local statutes, laws, rules or regulations, and Seller further agrees to hold OTS harmless from any loss, damage, fine, penalty, or expense whatsoever that OTS may suffer as a result of Seller’s failure to comply with this warranty.

• Seller warrants that it has complied with the Anti-Kickback Act of 1986 and has not offered or given and will not offer or give to any employee,  agent, or representative of OTS any gratuity or any kickback within the meaning  of the Anti­ Kickback Act of Any breach of this warranty shall be a material breach of this Agreement and shall entitle OTS to terminate each and every contract between OTS and Seller for default.

• Seller certifies that the goods furnished hereunder have been or will be produced in compliance with applicable requirements  under the Fair Labor Standards  Act, as amended, and regulations and applicable orders of the United States Department of
  • (e)Pursuant to the terms and conditions of OTS’s higher tier /overarching contracts with prime U.S. government contractors, Seller shall comply with the Federal Acquisition  Regulation  (“FAR”)  clauses,  Department of Defense Federal  Acquisition  Regulation  Supplement  (DFARS)  clauses  and Code(s)  of Federal  Regulations  (“CFR”)  listed on Exhibit A attached hereto. Seller shall flow down all such requirements to any and all subcontractors.

• Seller warrants that in the performance of this Agreement and/or Purchase Order, it will comply with all applicable  S. export control regulations including, without limitation, ITAR and EAR, and Seller further agrees to indemnify  and hold OTS harmless from any loss, damage, fine, penalty, or expense whatsoever that OTS may suffer as a result of Seller’s failure to comply with this warrant.

18. TERMINATION:             
    OTS may terminate all or any portion of this purchase order at any time by giving notice to Seller.  In the event of termination without cause, OTS’s liability shall be the lesser of: (a) a reasonable price for raw materials, components, work in progress, and any finished units on hand; or (b) the contract price per finished unit, after giving effect to any discount OTS would otherwise be entitled to. In the event of termination without cause of any separate services specifically ordered, liability shall be the lesser of: (a) a reasonable price for properly performed services rendered prior to termination; or (b) the contract price for the services. If any hourly or other time-based rate for services is specified in this purchase order, such rate shall be used in determining a  reasonable price.   THE FOREGOING STATES OTS’S ENTIRE LIABILITY FOR TERMINATION.  Additionally, OTS may, by notice to Seller, terminate in whole or in part this purchase order in the event of suspension of Seller’s business, insolvency of Seller, institution of bankruptcy, reorganization, or liquidation proceedings by or against Seller, the appointment of a trustee or receiver for Seller’s property or business, any assignments by Seller for the benefit of creditors or a breach that is not cured after notice detailing such breach.  The rights and remedies of OTS provided in this Termination clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this purchase order.

19. 19. SUBCONTRACTING AND ASSIGNMENT:         
    Seller shall not assign this purchase order or any rights hereunder, nor delegate any duties, nor subcontract any work, without first securing the written approval of OTS.  Any attempts to do so will be null and  The price quoted by Seller includes the price of any goods or services obtained from any subcontractor or supplier to Seller, unless otherwise agreed in advance by OTS.   Seller shall  incorporate these terms and conditions on any order or subcontract approved by OTS and procured from third parties pertaining to this purchase order.  Seller shall remain fully responsible for all work performed by such third parties and shall indemnify and hold OTS harmless for any payment required to be made to any such parties.

20.  WAIVER:          
    No waiver of any default by either party shall act as a waiver of a subsequent or different default.

21.   THIRD PARTY BENEFICIARIES:         
    Seller acknowledges that OTS’s  ultimate parent and its subsidiaries are third party beneficiaries (“Affiliates”) of these terms and conditions.  Affiliates shall have the right to exercise all of the rights of OTS under these terms and conditions. References in the purchase order to OTS shall be deemed to include Affiliates as the context requires.

22. LANGUAGE.  
    All written communication/correspondence is to be in English.

23. GOVERNING LAW AND VENUE:         
    This purchase order shall be governed by and construed under the laws of the State of California, without regard to  its conflicts-of-law rules.   In the event any dispute arises under this purchase order that exceeds $20,000 that cannot be resolved by informal negotiation, the parties agree to participate in mediation as a condition precedent to pursuing litigation.  The mediation shall be conducted by a licensed, qualified mediator in Orange County, California.  Any lawsuit or other legal act arising out of this Agreement shall be filed and adjudicated only in the Federal or the Superior Court  located in Orange County, California.

24. MISCELLANEOUS:         
    Section headings are for convenience only and shall have no legal or interpretive effect. Nothing herein shall be construed as creating an exclusive relationship between OTS and Seller regarding the goods or services.  Seller shall perform its duties under this Agreement as an independent contractor and not as an agent or employee of OTS.  OTS reserves the right to engage other persons or entities to provide goods and services similar to those provided hereunder. OTS shall have the right to audit the books and records of Seller relevant to this purchase order, at Seller’s place of business or by electronic delivery, until four (4) years after delivery of goods and/or performance of services.  Any notices required hereunder shall be given in writing to the addresses set out in the purchase order and shall be deemed effective on the same day any such written notice is personally served  or on the third (3rd) day after such notice is deposited in the United States mail or with a nationally recognized overnight delivery service.