SHUR-LOK CORPORATION TERMS AND CONDITIONS OF PURCHASE

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NONE OF THE TERMS AND CONDITIONS CONTAINED IN THIS P.O./SUBCONTRACT MAY BE ADDED TO, MODIFIED, SUPERSEDED OR OTHERWISE ALTERED EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY SHUR-LOK CORPORATION (SLC) AND DELIVERED BY SLC TO SELLER, AND EACH SHIPMENT RECEIVED BY SLC FROM SELLER SHALL BE DEEMED TO BE ONLY UPON THE TERMS AND CONDITIONS CONTAINED IN THIS PO. / SUBCONTRACT EXCEPT AS THEY MAY BE ADDED TO, MODIFIED, SUPERSEDED OR OTHERWISE ALTERED, NOTWITHSTANDING ANY TERMS AND CONDITIONS THAT MAY BE CONTAINED IN ANY ACKNOWLEDGMENT, INVOICE OR OTHER FORM OF SELLER AND NOTWITHSTANDING SLC'S ACT OF ACCEPTING OR PAYING FOR ANY SHIPMENT ACT OF SLC.
THE PROVISIONS OF EXECUTIVE ORDER 11246, AS AMENDED BY EXECUTIVE ORDER 11375 (EQUAL EMPLOYMENT OPPORTUNITY), 38 USC 2012 (VIETNAM ERA VETERANS READJUSTMENT ASSISTANCE ACT), SECTION 503 OF THE REHABILITATION ACT OF 1973 (HANDICAPPED REGULATIONS), AND THE IMPLEMENTING REGULATIONS FOUND AT 41 CFR 60-1&2, 41 CFR 60-250 AND 41 CFR 60-741, RESPECTIVELY,ARE HEREBY INCORPORATED BY REFERENCE.

1. ACCEPTANCE. This PO/Subcontract becomes the exclusive agreement
between the parties for the supplies and services, subject to the terms and conditions hereof, when accepted by acknowledgment or commencement of performance. Additional or different terms proposed by Seller shall not be applicable unless accepted in writing by SLC. No change in, modification of, or revision to this PO / subcontract shall be valid unless in writing and signed by SLC. Seller agrees that the substance of pertinent and applicable clauses, such as but not limited to 3, 4, and 20, shall be passed down to its subcontractors.

2. INSPECTION. All items to be delivered hereunder shall be subject to inspection and test by SLC, selected customers and the Government to the extent practicable at all times and places including the period of manufacture. SLC, selected customers and the Government representatives shall have access to all areas on the premises of the Seller or of the Seller's subcontractors in which work on the PO/SUBCONTRACT is being performed. Seller and Seller's subcontractors, at no additional cost, shall provide reasonable facilities and assistance for the safety and convenience of SLC, selected customers and the Government representatives. At the time of inspection, Seller and Seller's subcontractor shall make available to SLC, selected customers and the Government inspectors copies of drawings, specifications, and process, preservation and packaging data applicable to the item to be inspected. All items to be delivered hereunder shall be subject to final inspection and acceptance by SLC at destination, notwithstanding any payments or inspection at source. SLC shall accept or give notice of rejection of items delivered hereunder within ninety (90) days after receipt. SLC's failure to give notice of rejection within ninety (90) days after receipt shall constitute acceptance but such acceptance shall not waive any warranty.
SLC may return rejected/defective items to Seller at Seller's expense for repair, replacement, or refund, or may retain such items with an equitable price reduction. Seller shall provide and maintain a quality system meeting the requirements of the current revision of ISO 9002, or equivalent. Implementation of this system shall be to the extent appropriate to the product or service and subject to approval by SLC.

3. CHANGES. SLC may at any time, and without notice to sureties, make changes within the general scope of this PO/Subcontract which affect the (I) drawings, designs or specifications of supplies or services being specially manufactured for SLC; (II) method of shipment or packing; (111) place of delivery; and (IV) delivery schedules. If any such change causes an increase or decrease in the cost of, or the time required for, performance of the PO/Subcontract an equitable adjustment may be made in the PO. /subcontract price or delivery schedule or both, and the PO /subcontract may be modified in writing accordingly. Changes to this PO/Subcontract however, shall only be authorized if they are directed in writing by SLC's Purchasing Department, and no other written or oral change direction, including assistance suggestions or advice that may be rendered by other SLC personnel, shall authorize a change or entitle Seller to any adjustment to this PO/Subcontract Any claim by Seller for adjustment under this clause must be asserted in writing, in the form of a complete change proposal fully supported by factual information, to SLC's Purchasing Department not later than thirty (30) days after the date of receipt by Seller of the written change authorization, or within such extension of that thirty-day period as SLC, in its sole discretion, may grant in writing at Seller's request prior to the expiration of said period or any extension thereof, provided, however, that SLC may at its discretion, consider any such claim regardless of when asserted. Pending any such adjustment, Seller will diligently proceed with the PO/Subcontract as modified. Seller shall immediately upon receipt of any change direction which does not conform to the authorized method of directing changes specified herein contact SLC's Purchasing Department for disposition instructions.

4. TERMINATIONS.
A. Convenience - The performance of work under this PO /subcontract may be terminated in whole or, from time to time, in part by SLC for its convenience in accordance with the provisions set forth in Armed Services Procurement Regulation B-706 incorporated herein by this reference. If this PO/subcontract is not issued under a Government prime contract or subcontract thereunder, the "record" keeping requirement of paragraph (1) of said clause shall be deemed deleted.
B. Default - SLC may terminate the whole or any part of this PO / subcontract in either of the following circumstances.
(1) If Seller fails to deliver the supplies or to perform the services required by this PO/Subcontract within the time specified herein, or any extension thereof granted by SLC in writing; or
(2) If Seller fails to perform any of the other provisions of this PO /subcontract, or so fails to make progress as to endanger performance of this PO / subcontract in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of ten (10) days after receipt of notice from SLC specifying such failure.
In the event of such termination, SLC shall have the right to procure, on such terms and in such manners as it may deem appropriate, supplies or services similar to those terminated, and to recover from Seller the excess cost for such similar supplies or services; provided, however, Seller shall not be liable for such excess costs where the failure upon which the termination is based has arisen out of causes beyond the control of Seller and without the fault or negligence of Seller. Such causes shall be deemed to include, but not be limited to, fires, floods, earthquakes, strikes and acts of the public enemy. The rights of SLC provided in this clause shall be in addition to any other rights provided by law or this PO/subcontract

5. PAYMENT Seller's right to payment is contingent upon SLC's approval and acceptance of articles delivered or services rendered in accordance with the terms and specifications called for by this PO/subcontract but payment of the stipulated price is not evidence of SLC's final acceptance of the articles or services called for in the PO/Subcontract

6. INVOICING. Where applicable, taxes must be separately itemized, PO. / subcontract number and item number must appear on all shipping documents, invoices, quality certifications and packing sheets. Discount terms of this PO / subcontract and payment of invoices will be based upon the date specified on this PO / subcontract for delivery of articles or services or the actual delivery date of such articles or services, whichever date is later If no discount is offered, payment of invoices will be made within thirty (30) days after receipt and acceptance of articles or completion and acceptance of services or thirty (30) days after the delivery date specified on the PO/Subcontract whichever is later

7 PRICES. Seller represents that the prices specified in this PO / subcontract are based on current pricing data and do not exceed the current selling price for the same or substantially similar articles whether sold to the Government or to any other purchaser, taking into account the quantity and schedule under consideration, and that such prices include all applicable federal, state and local taxes, in effect on the date of this order, except any sales or use tax payable at source.

8. LAWS AND REGULATIONS: Seller warrants and certifies that in the performance of this PO /subcontract it will comply with all applicable statutes, rules, regulations and orders of the United States, and of any State or political subdivision thereof, and agrees to indemnify SLC against any loss, cost, damage or liability by reason of Seller's violation of this clause. Seller will comply with the Fair Labor Standards Act of June 30, 1938; 29 U.S.C. 201-219 as amended.

9. APPLICABLE STATE LAW. This PO /subcontract will be governed by the laws of the State of California and interpreted therewith or by federal procurement law (the ASPR) in the event there is no direct California precedent. Any claim, controversy or dispute arising out of or relating to the performance of this PO/subcontract not settled by the parties hereto shall be settled by arbitration, the procedure for which will follow the outline of the rules for appeals under the ASPR. The hearing will be in accordance with the rules of the American Arbitration Association. The award rendered by the American Arbitration Association shall be final and binding and judgment may be entered thereon in any court having jurisdiction thereof. Pending final decision on any claim or dispute hereunder. Seller shall proceed with the performance of this PO / subcontract. The arbitration provided herein shall be in a location agreed to by the parties in Orange County, California.

10. SUBCONTRACTS. Seller will not subcontract, without SLC's prior written consent, for the design or procurement of the whole or any substantial portion of any item ordered hereunder.

11. PATENT INDEMNITY. (If this PO/subcontract is issued under a Government prime contract or subcontract, then, in that event, this Clause No. 11 does not apply and is deemed deleted.) If Seller is responsible for the design of any portion of the materials or articles which are to be delivered hereunder, then Seller agrees to indemnify and hold harmless SLC, its customers and users of its products against all claims, demands, loss and liability, including costs and fees, resulting from actual or alleged infringement of any U.S. patent, trademark or copyright, by reason of the use, sale or disposal of the materials or articles called for hereunder.

12. REPRODUCTION RIGHTS. Seller agrees that the information contained in reports, drawings, documents, or other records which are furnished to Seller by SLC relative to this PO subcontract shall not be disclosed to others or used for purposes other than performance of this PO/subcontract without SLC's written consent; provided, however, that this clause shall not apply to information in the public domain nor shall it limit any rights the Government may have in such information.

13. SELLER PROPRIETARY DATA. Any knowledge information, drawings, designs, or data (herein called "data") which Seller discloses to SLC in connection with the purchase of goods and services covered by this P.O.'s/subcontract and which data Seller has not marked with a protective legend as called for by ASPR shall not be considered as proprietary.

14. PACKING AND SHIPPING. All items shall be packed by Seller in suitable containers for protection in shipment and storage. All highly polished, highly finished or precision parts are to be properly greased and packed in containers as protection against deterioration. Seller shall prepare all articles for sate transportation and in conformance with carrier's classification released to the value that will provide the lowest rate. Seller will not declare a value for such articles which result in additional shipping charges. Seller shall forward original bill of lading when requested by SLC in advance of shipment.

15. WARRANTY.
A. In addition to all other warranties expressed or implied in law, Seller warrants that the items delivered hereunder will conform to all applicable specifications, drawings, samples, symbols or other descriptions furnished by SLC, and will be merchantable, of good material and workmanship and tree from detects. In case any such item shall be detective or otherwise not in conformity herewith, Seller shall, at SLC's option and in addition to all other remedies of SLC, either credit SLC for any such nonconformity or detects, or, at Seller's expense, replace, repair, or correct any such articles. Seller agrees to make all corrections to the satisfaction of SLC and/or the United States Government.
B. Should the Government require acceptance of items which do not conform to all specifications or other descriptions, payment will be made at an equitable reduction in price.
C. This warranty shall survive acceptance and run to SLC, its successors, assigns, customers and users of its products.
D. If the article(s) called for by this PO /subcontract is to be furnished to the US Government and the prime contract contains a Limitation of Liability for Defects clause, this Clause No. 15 will be subject to the provisions of the Limitations of Liability for Detects - ASPR 7-104.45 which is incorporated herein by reference.

16. EQUAL EMPLOYMENT OPPORTUNITY. Unless otherwise exempted under Executive Orders 11246, 11375, or the applicable rules and regulations, as amended, Seller agrees to comply with the provisions of Executive Orders 11246 of September 1966 and 11375 of October 1967, as amended, ASPR 7-103.18 (a) and 12-804 are incorporated herein by reference. Further, Seller agrees to include the provisions of said clauses in all orders or subcontracts which tall within the classifications set forth above and are placed pursuant to this PO. / subcontract.

17. PROPERTY LIABILITY Seller shall keep all property furnished by SLC and all property to which SLC acquires title by virtue of this PO/subcontract segregated and clearly marked and will maintain complete inventory thereof. Seller assumes all risk of loss or of damage to such property while in Seller's custody or control and will immediately notify SLC of loss of or destruction of, or damage to such property. Seller shall also be liable for all losses to SLC by Seller's failure to furnish timely written notice to SLC of loss of, or destruction of, or damage to SLC property suffered in transit or prior to receipt by Seller As directed by SLC, upon termination or completion of this PO /subcontract, Seller will deliver such property, to the extent not incorporated in delivered end products, to SLC in good condition subject to ordinary wear and tear and normal manufacturing losses.

18. INSURANCE. Seller agrees to be responsible for any bodily injury or property damage resulting from Seller's performance under this PO. /subcontract, and Seller warrants that adequate insurance is being carried to cover such liabilities. Seller agrees to carry fire and extended coverage insurance and be responsible for any of SLC's property while in Seller's possession. Seller agrees to maintain SLC's property in good condition and not to dispose of said property except in accordance with SLC's instructions.

19. LABOR DISPUTES. Whenever an actual or potential labor dispute is delaying or threatens to delay performance of the PO/subcontract Seller will immediately give notice thereof to SLC and, further, it this order is a Government contract Seller shall immediately give notice also to the nearest Government Department concerned. Such notice shall include all relevant information with respect to such dispute.

20. GOVERNMENT CONTRACT. It it is indicated on the face of the PO / subcontract form that it is issued under a Department of Defense prime contract or subcontract thereunder, each of the hereinbelow identified clauses, as set forth in the Defense Acquisition Regulations (DAR) in effect on the date of this PO/subcontract is incorporated herein by this reference.
A) Preference for Domestic Specialty Metals 6-305 (b).
B) Renegotiation 7-103.13 (a).
C) Contract Work Hours and Safety Standards Act - Overtime Compensation (excluding paragraph(e) "Records") 7-103.16.
D) Walsh - Healey Public Contracts Act 7-103.17.
E) Equal Opportunity 7-103.18 (a).
F) Authorization and Consent 7-103,22.
G) Notice and Assistance Regarding Patent and Copyright Infringement 7-103.23 (A copy of each notice sent to the Government shall be sent to SLC.) This clause applies only it the contract exceeds $10,000.
H) Pricing of Adjustments 7-103.26.
I) Listing of Employment Openings for Veterans 7-103.27 (excluding subparagraphs (9) ) This clause applies only it the contract exceeds $10,000.
J) Employment of the Handicapped 7-103.28.
K) Clean Air and Water Act 7-103.29. This clause applies only it the contract exceeds $100,000.
L) Buy American Act and Balance of Payments Program.
M) Filing of Patent Applications 7-104.6.
N) Rights in Technical Data 7-104.9 (a). This clause applies only it delivery of data required.
O) Technical Data - Withholding of Payment 7-104.9 (h). This clause only applies it delivery of data required.
P) Restrictive Markings on Technical Data 7-104.9 (p). This clause applies only it delivery of data required.
Q) Excess Profit 7-104.11 (a). This clause applies only it the contract exceeds $10,000.
R) Military Security Requirements (excluding the last sentence of paragraph (c) 7-104.12). This clause applies only it access to classified materials is required.
S) Utilization of Small Business Concerns 7-104.14 (a).
T) Small Business Subcontracting Program 7-104.14 (b). This clause only applies it the price of this PO/subcontract exceeds $500,000 and is not a small business concern.
U) Examination of Records by Controller General 7-104.15. This clause applies only it the contract exceeds $10,000.
V) Priorities, Allocations, and Allotments 7-104.18.
W) Utilization of Labor Surplus Area Concerns 7-104.20 (a).
X) Labor Surplus Area Subcontracting Program 7-104.20 (b). This clause only applies it the price of this PO/subcontract exceeds $500,000.
Y) Government Property 7-104.24 (a).
Z) Duty Free Entry - Canadian Supplies 7-104.32.
M) Utilization of Minority Business Enterprises 7-104.36 (a).
AB) Minority Business Enterprises Subcontracting Program 7-104.36 (b). This clause only applies it the price of this PO / subcontract exceeds $500,000.
AC) Required Source for Jewel Bearings 7-104.37.
AD) Required Sources for Miniature and Instrument Ball Bearings 7-104.38.
AK) Audit by Department of Defense 7-104.41 (a). This clause applies only it the contract exceeds $10,000.
AF) Required Sources for Precision Components for Mechanical Time Devices 7-104.46.
AG) New Material 7-104.48.
AH) Government Surplus 7-104.49.
Al) Preference for US Flag Carriers 7-104.95.
AJ) Refund of Royalties 7-104.8 (b). This clause applies only it amount of royalties reported during negotiation of this contract exceeds $250.
AK) Special Tooling 7-104.25. This clause applies it this contract involves acquisition of special tooling, other than as a line item, the full cost of which is charged to such contract.
AL) Special Test Equipment 7-104.26. This clause applies it this contract provides that initially unidentifiable special test equipment or components, not otherwise itemized in the contract, may be acquired or fabricated for the government.
AM) Utilization of Women-Owned Concerns 7-104.52. This clause applies if this contract is expected to exceed $25,000.
In all of the above clauses, "Contractor" shall mean Seller and "Contract" shall mean this PO/subcontract. In the above clause numbered (0), "Contracting Officer" and "Government" shall mean SLC.

21. ENTIRE AGREEMENT This form and any special conditions or other forms
constitute the entire agreement between the parties, and there will be no deviation therefrom unless authorized by formal written change order of amendment.

FORM SL15011 (Rev. C)
Attachment A
2/15/78C
2500 11/98