Applicability    These Contract conditions apply to all quotations, proposals, sales, rentals, services or leases between Customer and Hydrokinetic Systems, Inc. and its subsidiaries, hereinafter referred to as HKS.

Acceptance    This offer is entire and not severable, is made subject to the conditions and provisions set forth below, and will expire unless accepted 30 days from the date thereof unless extended by HKS. HKS will not recognize any separate purchase order unless approved by HKS's counsel at Customer's cost and unless the terms hereof are incorporated therein by reference. NO MODIFICATION shall be effected by HKS acknowledgement or acceptance of Customer's purchase order forms containing terms and conditions at variance with those set herein.

Taxes    Prices do not include taxes. Taxes will be added to the invoice as required by law and will be billed and collected accordingly. Customer is obligated to pay all federal, state, and local taxes without limitation, unless proper tax exemption documentation is provided by the paying entity.

Prices/Terms    All prices are FOB shipping point, unless otherwise noted. No order may be canceled or changed in whole or part without prior consent of HKS. The prices quoted apply only to shipments made to Customer within 30 days from quotation date. Unless otherwise specified, deliveries thereafter will be invoiced at the prices in effect at the time of shipment. Payment terms are due upon receipt of HKS's invoice. Each incremental shipment of goods or other items covered by this order may be invoiced at time of shipment in an amount proportional to that of the total contract price. Customer shall incur interest at a rate of one and one-half percent (1. 5%) per month on amounts not paid in accordance with-terms of sale. All payments made to HKS are nonrefundable. All payments must be paid in United States dollars, unless requested otherwise from Customer and approved by HKS.

Credit    All contracts and orders are subject to credit approval by HKS. If HKS, in it's sole judgment, has reasonable grounds for insecurity with respect to due performance by Customer, HKS may demand different terms of payment from those specified in this order and may demand assurance of Customer's due performance. Any such demand may be oral or in writing and HKS may, upon the making of such demand, stop production and suspend shipments hereunder. If within the period stated in such demand Customer fails or refuses to agree to such different terms of payment or fails or refuses to give adequate assurance of due performance, HKS may, at it's option, treat such failure or refusal as repudiation of the portion of this order which has not been fully performed or may resume production and make shipment under reservation of possession or of a security interest and may demand an a payment against tender of documents of title. All checks returned unpaid by Customer's bank will be assessed a Returned Check Fee which shall be paid by Customer. Said fee will be determined by HKS, but in no event shall exceed $50.00.

Title of Sale Equipment    Title remains with HKS until customer fulfils all payment obligations to HKS. Customer must keep equipment free from all liens, levies, and encumbrances up until all payment obligations for equipment have been fulfilled.

Sale Returns    A return materials authorization (RMA) is required for all returns. Customer must return all equipment, manuals, and accessories prepaid. All items are to be shipped to HKS, 1340 20th Street SE, Salem, Oregon 97302. Customer assumes all liability of for shipping damages due to improper handling, packaging, or loss of equipment by any special courier or carrier. In the event equipment is returned damaged, defective, or is missing manuals/and/or accessories, customer will be required to pay for all costs associated with repairing and/or replacing equipment, missing manuals, and/or accessories, including, but not limited to; labor, parts and/or replacement costs for equipment, and/or manuals and accessories. A restock fee may be assessed on returns, as HKS deems necessary. Restocking fees are due upon receipt of the invoice.

Delivery Delays    Unless a firm delivery date is stated on the face hereof, shipment dates are approximate and delivery made within a reasonable time thereof shall be deemed full performance of this aspect of HKS's obligations hereunder. HKS shall not be liable for any delays in performance due to causes beyond HKS's reasonable control or beyond the control of its suppliers and shippers, which prevents or impedes manufacture, supply or delivery by HKS or such suppliers and shippers, including but not limited to acts of God, accidents to machinery, differences with workmen, strikes, labor shortages, fires, floods, inadequate or reduced supply or excessive cost of suitable raw materials, delays in transportation or lack of transportation facilities, priorities required or requested by any Federal, or any State government or any subdivision or agency thereof or granted for the benefit, directly or indirectly, of any of them. If delivery is postponed at the Customer's request or for any other reason beyond HKS's control, HKS will be entitled to charge the cost incurred for remobilization and storage of not less than 5% of the total purchase price. In such event HKS shall be entitled to set a reasonable time limit within which the customer will have to take delivery of the product or make payment in full. HKS has the right to freely dispose of the products otherwise and claim damages.

LIMITED WARRANTY

Process Warranty    HKS warrants that the system(s) originally proposed and accepted by customer with a contract and/or purchase order will meet the project requirements, as detailed in the proposal for as long as the systems are maintained in good working order and that no unauthorized modification, repair, accident, abuse has been made to the equipment, or the incoming process materials. This warranty is expressly limited to the detailed information given by customer prior to initiation of our contract and/or purchase order and is wholly dependent upon the accuracy of this information.

Customer, by initiation of such contract, and/or purchase order accepts that the system, outside of the Equipment Warranty and any Service Contracts supplied by HKS, will from time to time need replacement parts and preventative maintenance to assure proper operation. HKS is not liable for the failure of the system to meet the desired performance specifications outside of the Equipment Warranty period.

Equipment Warranty    HKS warrants that the goods to be supplied hereunder will conform to the description in this order; that it will convey good title thereto; that such goods will be delivered free from any lawful security interest or other lien or encumbrance unknown to Customer. All equipment that is pre-manufactured by original equipment manufacturer will be free of defects in materials and workmanship, provided that such warranty of freedom from defects in materials or workmanship shall only extend for the period stated by original equipment manufacturer's warranty that is passed on to customer through HKS. This warranty may be extended if stated so in contract. All equipment that is assembled and manufactured by HKS will be free of defects in materials and workmanship, provided that such warranty of freedom from defects in materials or workmanship shall only extend for the period of twelve (12) months from the date of shipment (Delivery from our factory or date of delivery of the equipment from F.O.B. point). In the event any part or parts of all equipment manufactured by HKS are found to be defective in materials or workmanship, HKS warrants to repair or replace, at our discretion, free of charge, the defective part(s) for the lifetime of this warranty; providing that the equipment is operated and maintained as per instructions issued by HKS or the original equipment manufacturer and that the operating conditions remain within original contract specifications and the Customer must give HKS notice of such defect within thirty (30) days after Customer discovers or should have discovered defect. Any claimed defects reported, and the materials and/or equipment returned, must be freight prepaid, to our plant or manufacturer within the guaranteed period of time, unless otherwise agreed to in writing. Any damages or loss occurring during shipment will not be covered by this warranty, but is the responsibility of the carrier. You should report all shipping damages to the carrier(s) immediately.

Customer's exclusive remedy being expressly limited to HKS's choice: (a) the repair of defective goods; (b) the replacement thereof with conforming goods at FOB point specified in this order; or (c) the repayment of the purchase price. Replacement of defective goods or repayment of the purchase price therefore will be made only upon return of the defective goods, which may be returned at the cost of the HKS only after inspection by HKS and receipt by Customer of definite shipping instructions from HKS documented in writing.

Transportation, handling damage, wear and tear, expendable items which become worn during normal use, replacement or repairs necessary because of operator abuse, misuse, alteration, or improper maintenance, and other caused of damage outside the control of the manufacturer will not be covered by this warranty.

This warranty applies to the original Customer only and cannot be transferred. There are no other warranties, expressed or implied, except as stated above. The warranty becomes null and void if any devices or accessories other than those distributed or officially recommended by HKS are installed on or attached to the equipment.

HKS makes no warranty whatsoever with respect to goods manufactured by third parties. Warranties with respect to such goods are limited to those offered by such suppliers, which are transferable.

HKS makes no warranty express or implied, except as is expressly set forth herein.

Liability    The liability of HKS to Buyer under this Warranty shall in no event exceed the actual cost incurred to repair or replace defective parts. In no event shall HKS be liable under this warranty for any direct or indirect incidental, breach of warranty, negligence, strict liability in tort or other theory of recovery, or consequential damages including but not limited to bodily injury, property damage, loss of business, or 3rd party claims whether foreseeable or not during the period of installation.

Claims/Limitations of Damages    No claim of any kind whether as to goods delivered or for non-delivery of goods, including claims of shortages or improper or defective materials, and whether arising in tort or contract shall be greater in amount than the purchase price or lease rate of the goods in respect of which such damages are claimed; and the failure to give written notice of claims within fifteen (15) days from the date of delivery, or the date fixed for delivery, as the case may be, shall constitute a waiver by Customer of all claims in respect of such goods. IN NO EVENT SHALL HKS BE LIABLE FOR SPECIAL, DIRECT, INDIRECT OR CONSEQUENTIAL DAMAGES AND HKS'S LIABILITY, WHETHER FOR NEGLIGENCE OR OTHERWISE, SHALL BE LIMITED TO THE REPLACEMENT OF DEFECTIVE GOODS AND IN NO EVENT SHALL EXCEED THE PURCHASE PRICE OR LEASE RATE OF THE GOODS IN RESPECT OF WHICH DAMAGES ARE CLAIMED. Customer shall and warrants that it will comply with all federal, state and local laws, regulations, ordinances and rules including, but not limited to, all environmental laws, safety regulations, ordinances and use and maintenance rules in its use, storage or disposal of the goods. Customer shall indemnify HKS for any costs incurred by HKS for claims of any third party arising from Customer's use, storage, or disposal of the goods or the failure by Customer to carry out any of its obligations hereunder. Customer shall pay all damages for any injury or death sustained by any person or persons and for all damage to property growing out of any act or deed, or any omission to act, of the Customer or any subcontractor or any servant, agent or employee of the Customer and to indemnify, save and keep HKS harmless against all liabilities, judgments, costs, damages and expenses which may in anyway come against HKS for or on account of injury received or death sustained by any person or persons and for all damage to property caused by any act or deed, or any omission to act, of the Customer or any subcontractor, or any servant, agent or employee of the Customer in the performance of work with the goods specified herein or any of them, or in which such items are used, except where such liability results from the negligence of HKS or its servants, agents or employees.

Default    Each shipment shall constitute a separate and independent transaction and HKS may recover for each such shipment without reference to any other. If Customer is in default in the payment of any sum due, or with respect to any other of the terms or conditions of this Contract, HKS may, at its option, defer further shipments hereunder until such default be remedied (in which event HKS may elect to extend the Contract period for a time equal to that for which shipments were so deferred), or, in addition to any other legal remedy, HKS may decline further performance of this Contract. In the event of any proceedings, voluntary or involuntary, in bankruptcy or insolvency by or against Customer, or in the event of the appointment, with or without the Customer's consent, of an assignee for the benefit of creditors or of a receiver, then HKS may cancel this Contract for default and hold Customer accountable for any additional costs or damages incurred. In the event Customer's account is turned over to an attorney or other agency for collection, Customer shall pay all reasonable attorneys' fees, collection expenses and court costs incurred by HKS.

MSDS    Material Safety Data Sheets are available for all products upon request. If Customer makes no request, HKS will assume that Customer is in possession of all required MSDS's and similar materials.

Modifications    This Contract constitutes the entire agreement between the parties and there are no understandings, representations or warranties of any kind, express or implied, not expressly set forth herein. No modification of this Contract shall be of any force or effect unless such modification is in writing and signed by the party to be bound thereby; AND NO MODIFICATION SHALL BE EFFECTED BY THE ACKNOWLEDGMENT OR ACCEPTANCE OF CUSTOMER'S PURCHASE ORDER FORMS CONTAINING TERMS OR CONDITIONS AT VARIANCE WITH THOSE SET FORTH HEREIN.

Assignment    This Contract shall be binding upon and inure to the benefit of the respective successors and assigns of each of the parties hereto, but shall not be assigned by Customer without the prior written consent of HKS. Customer shall notify HKS, by Certified Letter, immediately of any change in ownership status of Customer.

Waiver    HKS's waiver of any breach, or failure to enforce any of the terms and conditions of this Contract, at any time, shall not in any way affect, limit or waive HKS's right thereafter to enforce and compel strict compliance with every term and condition hereof. Any waiver by HKS of HKS's rights, whether a single waiver by HKS or repeated waivers by HKS, shall not be deemed to be a course of dealing which Customer may rely upon.

Commitment    We take great pride in the quality of our workmanship, and will immediately correct any error on our part without question. Our primary responsibility is to keep your facility in operation, and we will keep that commitment in the highest regard.

Governing Law    The Customer and HKS agree that this Contract shall be deemed to have been made and executed in the State of Oregon and that any dispute arising under this Contract shall be resolved in accordance with the internal laws of the State of Oregon and not its laws of conflict. Customer and HKS agree that any legal action related to this Contract shall be filed in any court of competent jurisdiction in Oregon. These above terms and conditions are subject to change without notice.