Direct Material Supplies Quality Agreement Agreement Date: Agreement No :

F. Code : 933180 Rev : 0.2 Issue : 2006

Direct Material Supplies Quality Agreement

1.

Scope and implementation

This specification describes the main framework and conditions of business relations between Arçelik and the Supplier in connection with quality implementations. This Specification has been drawn up with the objective to ensure that materials and services with impact on product quality provided to Arçelik by the Supplier are secured continuously and at the expected level. Conditions defined under this Specification have been read and accepted by the Supplier.

2.

Parties

Arçelik

Arçelik A.Ş. Karaağaç Cad. No:2-6, 34445 Sütlüce İstanbul

Supplier

3.

Supply conditions

3.1.

General Conditions

3.1.1. Direct material purchasing general conditions are at the same time Supplier sales conditions. Any notice contrary to the conditions of this specification, and included on any invoice, dispatch note, consignment document, e-mail or any other document drawn up by the Supplier shall be invalid and ineffective. Supplementary conditions to this specification shall only be valid with the written approval of the Arçelik Purchasing Directorate. 3.1.2. The Supplier shall be obliged to establish a quality management system which meets ISO 9001:2000 standards in the minimum, as a guarantee that the provisions of concerned laws and regulations are complied with, continuous improvement is ensured in effective and efficient working conditions, and that Arçelik’s expectations can be addressed in the long run. 3.1.3. The Supplier shall be responsible to ensure that the materials procured by the Supplier comply with the specifications defined in technical documents and designated standards. This responsibility includes compliance with packing material and shipping specifications also. 3.1.4. The Supplier shall ensure that the required technical documents are updated and kept in complete form and are accessible for use. 3.1.5. The Supplier shall ensure that the product purchased by the Supplier complies with the identified buying specifications. Type and content of the control applicable to the Supplier and the purchased product shall depend on the impact of the purchased product on the subsequent product realization, or on the end product. 3.1.6. The Supplier shall develop process and final control plans to ensure that all shipped materials comply with quality standards; shall realize the required and proper tests and inspections in line with the control plan, and draw up the related verification documents. 3.1.7. The Supplier shall perform the final controls with a customer perspective for materials with completed final inspections and tests; and give quality certification for shipment. The quality and 2 / 17

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Direct Material Supplies Quality Agreement quantity of such controls made through a customer perspective shall conform to the characteristic of the material and its function in the product. 3.1.8. The Supplier shall give a first part approval for starting mass production under the following conditions: 

Changes of production equipment setup parameter,



Production equipment or line stands (bench/line stands due to quality problems, failures, etc.),



At the beginning of each shift.

Records of quality controls made in the cases described above shall be maintained. 3.1.9. The Supplier shall maintain an adequate number of human resources with the required qualifications. 3.1.10. The Supplier shall maintain measurement equipment calibrated in accordance with international measurement standards; and use such equipment at the proper control points. The measurement equipment and systems employed shall have the accuracy capable of measuring the concerned measurement size. The Supplier shall make an estimate of measurement equipment uncertainties for the measurement ranges used. 3.1.11. The Supplier shall identify and maintain the infrastructure required to ensure compliance with product specifications. The Supplier shall provide resources for machine/equipment maintenance and establish a planned and effective preventive maintenance system. 3.1.12. The Supplier shall monitor the economic useful life of production equipment and dies; and shall make an estimate of remaining life. 3.2. Operation plans The Supplier shall prepare operation plans accessible by all employees for use, and also including assignments of responsibility for the operation of processes with an impact on product quality. Operation plans shall include all the steps required for product realization. Wrapping and packaging are a part of internal/external dispatch steps operation plan. Changes in operation steps shall be reflected in operation plans which must be continuously updated. 3.3. Control plans The Supplier shall develop and implement control plans for products, semi-finished products, components and/or materials. The control plan 

Shall include the checklist used for production process control,



Shall include the methods for monitoring the controls made on the special characteristics identified both by the customer and the organization,



Shall include information if any, requested by the customer and



Shall initiate the identified reaction plan when the process becomes unstable and statistically incapable.

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Direct Material Supplies Quality Agreement Records relating to the implementation of control plans shall be maintained. Control plans shall be revised in line with information, i.e. Arçelik feedback, process controls, etc. 3.4. Product identification and traceability The Supplier shall identify the material by proper means at the product realization stage. The Supplier shall identify material status according to monitoring and measurement specifications. In manifest situations, product location identification will be adequate in the automated production transfer process. Changes in material and production specifications shall be recorded. 3.5.

Arçelik property

The Supplier shall pay due care to Arçelik property as long as such property is under the control of, or used by the Supplier. The Supplier shall identify, verify, protect and secure the safety of customer property provided for use, or for incorporation in the manufacture of a product. Unless otherwise approved in writing by Arçelik, all dies, benches, raw materials, substances, products, semi-finished products, etc. which are the property of Arçelik may only be used for the production of products or services for Arçelik. Arçelik shall be notified of any Arçelik property lost, damaged or found in unusable condition; and records thereof shall be maintained. Unless otherwise notified in writing by Arçelik, insurance policies for the materials and equipment which are the property of Arçelik and kept at the Supplier’s premises shall be taken out by Arçelik. Returnable packages which are the property of Arçelik are subject to this article. 3.6.

Procurement process

The Supplier shall ensure that the product purchased by the Supplier complies with the identified purchasing specifications. Type and content of the control applicable to the Supplier and the purchased product shall depend on the impact of the purchased product on the subsequent product realization, or on the end product. Employment of the sources identified by Arçelik shall not release the Supplier from its responsibility to ensure the quality of purchased products. 3.7.

Change control

The Supplier shall notify Arçelik of all product realization changes with an impact on Arçelik specifications and obtain Arçelik’s approval. The following changes shall be verified for validity before implementation: 

Production method and parameter change (production and control cycle change),



Design change,



Material change,



Supplier change,



Change in test equipment and methods,



Change in the location of production equipment at the same premise,



Re-commissioning of equipment and line which have not been operational for more than one year,

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Technical specification change. F. Code:933180

Direct Material Supplies Quality Agreement The Supplier shall maintain the change records. The Supplier shall give a written notice to Arçelik about location changes of production facilities, and obtain the written approval of Arçelik. Arçelik shall be entitled to make Supplier inspections and assessments in order to verify that the new production facility has the proper conditions for product realization. Getting approval for the first material samples and mass production shall be the responsibility of the Supplier. After giving a written “feasible (first sample)” approval for initial samples, Arçelik might request machine/process capability analyses to measure the “repeatability (mass production)” capability of the part quality. Arçelik shall be entitled to realize the said analyses at site in cooperation with the Supplier. 3.8.

Quality records

The Supplier shall maintain at an easily accessible place which is not exposed to damage, the quality records drawn up as a reassurance of product quality, for a period of minimum five years as from shipment date, unless a different period is identified by Arçelik,. The Supplier shall be obliged to submit the quality records to Arçelik upon request. 3.9.

Sample request and approval process

The Supplier must send to Arçelik the samples requested by Arçelik for material and process verification. The Supplier shall verify the samples with proper measurements and inspections before dispatch. The Supplier shall send to Arçelik verification records together with the samples. Arçelik may request detailed material, process and inspection records together with the sample request. The Supplier shall dispatch the samples marked as “SAMPLE”. Where production is realized with more than one die or die cell, the Supplier shall send an equal number of samples from each die or die cell and indicate on the sample to which die or die cell the sample belongs. At the end of each sample approval process, Arçelik shall inform the Supplier of its “APPROVAL” or “REFUSAL” decision. Approval to pass on to mass production shall be given at the end of the “first sample approval process”. Arçelik may request a test party before mass production approval. 3.10.

Packaging

The Supplier shall identify and submit to the approval of Arçelik the packaging means to prevent damage during the transport of the material to Arçelik and in storage. Arçelik shall be entitled to determine the packaging and shipment specifications and request the compliance of the Supplier. Packaging identification to be made by the Supplier shall include a specific code, sign, or product identification which will prevent any confusion in relation with the material. Signs on reusable plastic, metal or wooden cases should not get detached during transport and storage, even if easily wiped or detached. Arçelik shall be entitled to reject the concerned shipment party in cases of material damages which might occur due to nonconforming packaging specifications, confused materials, unclear material identification due to inadequate marking, etc. All re-transportation, re-packing and re-marking expenses to arise therefrom shall be borne by the Supplier. The Supplier shall make at least the following identifications on each shipment pack, case, or pallet:  Arçelik material number, 5 / 17

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Direct Material Supplies Quality Agreement  Material description,  Shipment date,  Arçelik Facility,  Supplier’s name,  Supplier’s production facility (if the Supplier has more than one facility)  Quality control approval sign  Freight bill number  batch / charge number Arçelik may supplement the above identifications with a written notice. 3.11.

Environmental concern

3.11.1. Environmental conformance The Supplier shall have an awareness to minimize all the conditions at all its facilities and in all its production processes, which might be a threat to human health and environmental cleanliness. 3.11.2. Special condition for prohibited chemicals and/or chemicals requiring restricted use The Supplier shall be responsible to procure materials conforming to the national and international declarations and customer’s need. The Supplier represents and warrants that the substances used in raw materials, semi-finished products and/or components produced, or provided from third parties and processed by the Supplier do not contain substances prohibited by national and/or international laws, regulations, procedure 90-ÇP-001 which can also be found in http://supplier.arcelik.com and, that substances restricted with specified usage limits are used inside those limits. The Supplier shall fill in the declaration given in [Appendix 1 Form Code: 92641X] as a commitment that the substances indicated under the relative Directive are restrictively used, or not used at all. Further to the compliance declaration, Arçelik may request compliance test results of an accredited laboratory in order to guarantee such compliance. In cases of nonconformance originating from the Supplier, the Supplier shall undertake all penal obligations arising out of the use of substances restricted or prohibited under the Directive, in the materials delivered to Arçelik*: 

All materials determined to be nonconforming and not yet included in Arçelik production (kept in storage areas) shall be replaced with conforming materials by the Supplier (without any charges payable by Arçelik).



All costs for rectification incurred to ensure the conformance of all products processed at Arçelik’s production facilities shall be borne by the Supplier (process and labor costs, cost of other materials which remain out of use, transportation and packaging costs).



All costs which might be incurred due to the blocking and reprocessing of products in cases of nonconformities in Arçelik end products originating from materials shall be borne by the Supplier.



The Supplier shall be liable for all customer returns which might occur due to nonconformities originating from the Supplier, and for all circumstances necessitating statutory penalty. All penal clauses which might be realized in accordance with the

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Direct Material Supplies Quality Agreement agreements executed between Arçelik and Arçelik customers shall be covered by this Article, including shipment delay penalties arising out of the said problem. *For details, see Article 5.4 – Supplier Chargeback.

In cases of a circumstance contrary to the commitment and conformity declaration submitted by the Supplier and/or identified in conformity test reports (cases of nonconformance), determined at the Arçelik production facilities and/or in tests and inspections made by independent accredited laboratories, the Supplier represents and warrants to pay to Arçelik a fine of 1.000 (one thousand) Euro; and for each such repeating circumstance 3.000 (three thousand) Euro. 3.11.3. Special condition for wooden materials Wooden pallets and wooden products used by the Supplier for the materials provided to Arçelik, shall comply with the ISPM 15 Standard (International Standards for Phytosanitary Measures 15) about packs and pallets made of non veneered wood and used in international trade, specified in Rome in 2002 with the participation of the members of the International Phytosanitary Protection Convention (IPPC) Secretariat which is a sub-agency of United Nations Food and Agriculture Organization (FAO). 3.12.

Ethical Rules

A joint CECED Business Rules of Ethics has been drawn up and signed by the European Union White Goods Manufacturers Association (CECED-http://www.ceced.org) where Arçelik is also a member, with a view to global conditions and consumer expectations. Arçelik expects suppliers to continue their operations in line with the following general rules of ethics as required by this joint responsibility: 3.12.1. Laws and regulations Should comply with the laws and regulations applicable in the country of operation 3.12.2. Communication It is the Supplier’s responsibility to inform its employees and suppliers about the requirements of these rules. 3.12.3. Forced labor Employees should not be forced in any way to work. This requirement includes forced labor in prisons, employment in return of giving a loan with high interest, or other forms of forced labor. 3.12.4. Child labor Child labor should not be used. Unless a higher age limit is provided for in local laws, no person below the age of 15 who has not completed his/her compulsory education shall be employed (excluding the provision of ILO Agreement No. 138). Employees below the age of 18 shall not be assigned to hazardous jobs and at night shifts for purposes of addressing the training requirements. 3.12.5. Harassment Employers shall not be subjected to corporal punishment; or physical, sexual, psychological or verbal harassment or molestation.

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Direct Material Supplies Quality Agreement 3.12.6. Compensation Wages, including benefits and overtime, shall be equal to or above the level provided for in applicable laws and regulations. 3.12.7. Work hours Employers shall not be asked to work regularly for more than 48 hours/week and over 60 hours in total during one work week (including overtime) unless the maximum working hours provided for in local laws are below the hours stated above, and excluding extraordinary business requirements. Employees shall have at least one day off during each seven day period, except extraordinary business requirements. 3.12.8. Nondiscrimination In all employment decisions including but not restricted to recruitment, promotion, compensation, benefits, training, redundancies, and dismissals, all employees whether male or female shall be dealt with according to their capabilities and qualifications. 3.12.9. Health and Safety A healthy and safe work environment, and where applicable, healthy and safe housing facilities as per applicable local laws shall be provided to employees in order to prevent accidents and injuries. The Supplier shall be liable for providing the general safety rules required for workplace and human health for all the vehicles used for the material shipment in such cases that the Supplier undertakes the material shipment to the Arcelik Facility out of the Supplier's own resources. Arcelik has the right not to let the vehicles used or commissioned by the Supplier into Arcelik Facility if Arcelik determines that these vehicles and all the other means of transportation are defective. Arcelik notifies the Supplier of the situation by an official report. The Supplier shall be held liable for any poses or job losses that shall occur out of this situation. 3.12.10.

Freedom of association and collective bargaining

Employers shall entitle employees to establish lawful associations and to the right of collective bargaining, and shall act in line with these principles. The Supplier shall make adequate improvements within latest 6 months following the noncompliance determination and notification made by Arçelik.

4.

Supplier performance management

4.1.

Continual improvement

4.1.1. Zero defect approach Arçelik bases its Supplier relationships on a strategy of continual product provision in accordance with technical specifications. Consequently, the Supplier shall develop a basic quality system to ensure continual improvement by focusing on reducing deviations and waste. Such quality system serves the purpose of zero defect product realization. “Specific and periodical Supplier quality PPM targets” is an operational definition aimed at the zero defect target, facilitating and prompting continuous improvement.

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Direct Material Supplies Quality Agreement 4.1.2. Corrective/preventive action Arçelik may request the Supplier to take corrective action and preventive action for noncompliance in the quality or shipment of the materials purchased, and for potential noncompliance respectively. The Supplier shall be responsible to develop a system to assess such requests, plan corrective and preventive actions for noncompliance, and inform Arçelik about such plans and implementation results. A written response by using Arçelik forms shall be given by the Supplier to quality complaints and “Corrective Action Requests” notified in writing to the Supplier by Arçelik. The Supplier response shall meet the following conditions: The Supplier shall notify the interim precautions taken against the problem within 48 work hours. Such interim precautions shall include re-inspection, sorting, and stock assortment processes; and product blocking by the Supplier. The Supplier shall notify within 10 work days the permanent precautions taken against the problem. Permanent precautions shall include the following: 

A description of the problem’s root cause,



Corrective action steps,



Planned preventive action if the corrective action is extendable to other processes with an impact on Arçelik,



Definition of responsibilities and time schedule for corrective action.

Arçelik shall use the complaint and/or “Corrective Action Request” information as a Supplier performance assessment input. 4.2.

Material compliance verifications by Arçelik

Arçelik shall be entitled to perform admission quality controls as required in the materials purchased. “Admission Quality Control” activities qualify as the compliance verification by Arçelik, of the materials dispatched by the Supplier. For this purpose, Arçelik may take samples from dispatch parties in the amounts identified by Arçelik, and shall have the right to increase or decrease the sample size as required. The Supplier shall be obliged to send a quality document with each dispatch upon request. Such documents shall be deemed satisfactory only if they include test results or statistical results. Upon the determination of noncompliance originating from the material in Arçelik’s own production or assembly lines, or at final inspections, Arçelik may repeat material verification inspections; and may return from production lines processed material or material ready to be processed. Arçelik may request the implementation of one or more of the following alternatives upon discovering noncompliance as the result of tests and inspections made in the samples: a) Arçelik may request from the Supplier all the raw material, process and final inspection records expected to be kept by the Supplier. b) Arçelik may reject the dispatch party; and may request the Supplier to immediately supply new materials as a replacement of the rejected dispatch party. All costs to be incurred for the supply of replacement materials shall be borne by the Supplier. c) Arçelik may request the Supplier to make an assortment in the dispatch party. The Supplier shall realize a post-assortment re-verification for the party. It is up to Arçelik to decide whether assortment shall be made at Arçelik facilities or the premises of the Supplier. Arçelik may identify a special method or plan for the re-verification activities. The 9 / 17

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Direct Material Supplies Quality Agreement cost of assortments and verifications to be performed by Arçelik or by third parties upon the discretion of Arçelik shall be borne by the Supplier. d) Emergency action plans shall be identified by Arçelik and shared with the Supplier for materials, semi-finished products, and finished products under a potential risk on the grounds of the non complying dispatch party, and already on Arçelik production lines or storage areas; and for replacement material supply, and reprocessing semi-finished or finished products. e) Arçelik may request extra verification activities including a 100% pre-dispatch inspection to be performed by the Supplier, in order to prevent repeating noncompliance in the subsequent dispatches of the Supplier, and the delivery of risky materials to Arçelik. 4.3.

Conditional acceptance

The Supplier shall be obliged to produce material complying with technical specifications and ensure such compliance up to delivery at Arçelik production facilities. In cases of a probable non compliance with technical specifications originating from production reasons, the Supplier shall notify Arçelik of the situation in writing. Arçelik may give a written approval for dispatch after making a technical assessment. For conditional acceptance approval, Arçelik may request from the Supplier samples for assessment or request the Supplier to make measurements and inspections. Arçelik may request the Supplier to submit the results of such measurements and inspections to Arçelik. Arçelik may accept conditionally the material rejected after the admission quality control. Such acceptance however does not alter the fact that the material has been rejected, which rejection shall be taken into consideration in the assessment of the Supplier’s quality performance. If the material is conditionally accepted under an assortment or repair decision, such assortment and/or repair shall be performed by the Supplier at the Supplier’s premises or at Arçelik if found proper by Arçelik. Post-assortment deficient materials shall be returned to the Supplier. 4.4.

Free pass system

Arçelik may exclude supplied materials from Admission Quality Control processes depending on the qualifications of the group of goods such material belongs in and/or the Supplier’s performance history for the concerned material. Such material shall be defined as “EXCLUDED MATERIAL”. The Supplier shall dispatch materials with the status of “EXCLUDED MATERIAL” by labeling them as “EXCLUDED” on the “Material Identification Card”, or above the barcode on materials supplied with a barcode, in a way so that the barcode remains visible. The “EXCLUDED” label serves as the Supplier’s commitment that all the inspections have been performed in accordance with the material quality control plan and that the material has been verified by the Supplier. Arçelik shall be entitled to request the records of such inspections made in accordance with control plans. Arçelik may invalidate the “EXCLUDED” status for the material at its discretion and notify the Supplier of the new material status. 4.5.

Inspections

Arçelik may make an at site assessment of the Supplier’s compliance with the expected process, environmental and quality management system standards through “system and process” inspections. The Supplier shall support inspection requests with short lead times also. The Supplier shall allow the access of Arçelik and Arçelik customers as required, to all the production sites, test units, warehouses, and quality documents. Arçelik shall show due care for the confidentiality and work safety issues reasonably required by the Supplier. Arçelik shall submit

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Direct Material Supplies Quality Agreement inspection results to the Supplier. Upon the request of any corrective action, the Supplier shall inform Arçelik about plans and developments in due time. 4.6.

Monitoring of the Supplier’s periodic performance

Arçelik monitors the PPM (parts per million) value to assess the quality performance of its suppliers; and this value is used in the periodic Supplier performance assessment. PPM values are monitored individually for “Admission Quality Control” and “Manufacturing Line” PPM rates and calculated as follows:

Probable number of defective materials 

=  (Number of defective materials / Number of samples taken) x Party size

Incoming Control

= (Probable number of defective materials/Total number of materials delivered) x 1000.000

Reject PPM Return from line PPM

= (Number of materials returned from line/Total number of materials delivered) x 1000.000

5.

Product liability

5.1.

Product liability

The Supplier shall be liable for failures and damages to be incurred by the customer arising out of the materials supplied for Arçelik products. The Supplier represents and warrants herewith that the materials supplied by the Supplier are not harmful to Arçelik products and customers. In cases of problems originating from the Supplier, i.e. epidemic defects (defects leading to Workshop Failure Rate or Product Return in a high number of products, or defects with vital hazard to the customer), the Supplier shall be obliged to recompense maintenance, material and product replacement costs and other expenses borne by Arçelik. 5.2. Supply of Materials for After-Sales Service The Supplier shall ensure the supply of materials under this Agreement, for use in the after-sales services of Arçelik, for a period of ten years as from the last date the Supplier sold materials to Arçelik for use in production. The Supplier may not during this time, discard and sell the dies, apparatuses and production equipment used for manufacturing such material without the written consent of Arçelik. If, during the ten year period it becomes impossible for the Supplier to supply to Arçelik the material under this specification, then all the costs to be incurred shall be paid to Arçelik by the Supplier. For this purpose, the Supplier shall ensure the compliance of supplied materials with Arçelik specifications; and all materials shall be dispatched after the performance of proper quality control processes and in proper packages. Material package shall be selected by the Supplier with a view to prevent any damages to the material in shipment and storage. Arçelik reserves the right to claim for legal compensation from the Supplier in the case it is determined that the Supplier sells material qualifying as spare parts to third parties without the written consent of Arçelik.

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Direct Material Supplies Quality Agreement 5.3.

Warranty

Further to these quality obligations, the Supplier shall also comply with the provisions of the Law about the Protection of Consumer Rights. The Supplier shall warranty until the end of the product warranty period, conformity of the material provided by the Supplier. The warranty period shall begin on the date the final product is delivered by Arçelik. All costs, including those compensated by third parties, incurred during the warranty period due to nonconformities originating from materials shall be borne by the Supplier. Some, or where available all the materials replaced at the customer by Arçelik authorized workshops in the warranty period shall be sent to the Supplier by Arçelik for troubleshooting. Examinations made to find the root cause of the defect shall be reported to Arçelik. For defects originating from the Supplier, the responsibility to prevent recurring defects, realization of corrective and preventive actions, and informing Arçelik about these activities lies with the Supplier.

5.4.

Supplier Chargeback

The Supplier shall be responsible for the continuous supply of materials to Arçelik at the expected level, including services after the product realization process. Arçelik shall request from the Supplier the failure costs incurred by Arçelik due to nonconforming materials provided by the Supplier, prorate with the impact on such failure. The sum requested to be reimbursed by the Supplier on the basis of nonconformity costs is not a “penalty” imposed on the Supplier but aims at enhancing the Supplier’s sensitivity and response to the requests for continuous improvement and corrective action. All the following provisions shall be applicable for noncompliance situations originating from the Supplier. Arçelik shall share with the Supplier, evidence indicating that the nonconformity originates from the Supplier; and may invite the Supplier to make an at site determination of the nonconformity. The definition of nonconformity originating from the Supplier includes, besides quality nonconformities, delay in shipment, and dispatched materials which are over or under the ordered amount. All materials determined to be nonconforming and not yet included in Arçelik production (kept in storage areas) shall be replaced with conforming materials by the Supplier (without any charges payable by Arçelik). 

Supplier chargeback shall not be required for nonconformities recovered by the Supplier through replacement materials and which do not cause product and production loss.

Arçelik may request the Supplier to reimburse Arçelik for the following costs arising out of nonconformities originating from the Supplier: 

All assortment and reprocessing costs incurred to ensure product, semi-finished product or material conformity,



All costs incurred due to the stand in Arçelik production lines (product non realization),



All costs relating to other materials rendered unusable due to nonconformities originating from the Supplier,



All product, by-product, and material blocking costs,



All costs incurred for product recall from the site (warehouse, authorized dealer or end customer).

Such costs include the following items: 12 / 17

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Direct Material Supplies Quality Agreement

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all extra process and labor costs incurred,



all costs of other materials which are rendered useless including materials rendered useless as the result of employing assorted material,

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All re-transportation, re-packaging, and re-marking costs including labor and consumed material costs, and



Storage costs for blocked materials, products and semi-finished products.

The Supplier shall also be liable for all customer returns and situations necessitating legal penalties and arising out of nonconformities originating from the Supplier. Product sale cost shall be borne by the Supplier in cases of customer returns on the basis of nonconformity originating from the Supplier. All penal clauses which might be realized in accordance with the agreements executed between Arçelik and Arçelik customers shall be covered by this Article, including shipment delay penalties arising out of the said problem. All penalties which might arise out of the infringement of directives and laws due to nonconformities originating from the Supplier shall also be borne by the Supplier. Arçelik data shall constitute the basis for Supplier chargeback calculations.

6.

Confidentiality and the Protection of Business Secrets

“Arçelik Supplier Portal” access passwords given/ to be given to the Supplier are confidential. The Parties represent and warrant to keep confidential during the Agreement term and for a period of five years thereafter, and refrain from disclosing to third parties without the written approval of the other party, all information, know-how, methods, or ideas, implementations, methods, innovations, designs, artworks etc. (“Business Secrets” or “Confidential Information”) which are yet unknown to industrial circles and obtained by the parties on the basis of the Agreement, and providing a competition advantage to the party who obtains such information. The Supplier accepts to return to Arçelik at the termination of the Agreement all technical drawings, technical instructions, notes (audio tapes, computer diskettes, etc.), records and documents received from Arçelik, and used, reproduced and controlled by the Supplier during the Agreement term; and to destroy the copies thereof.

7.

Intellectual and Industrial Property Rights

Arçelik and the Supplier are not deemed to have given to each other any license, patent, and industrial design or copyright under this Agreement. Arçelik shall be legally liable for any infringement of third party intellectual property rights by the production or supply of the materials in cases where designs of materials supplied to Arçelik by the Supplier are made by Arçelik. In cases where the design of materials provided to Arçelik by the Supplier are made, or ordered to third parties by Arçelik, license for the production of the materials protected under know-how, patent, or industrial designs shall be given to the Supplier with the condition that such materials shall be sold only to Arçelik (and not sold to third parties). In cases where the design of the materials provided by the Supplier to Arçelik are made or ordered to third parties by the Supplier, the legal liability to arise out of the infringement of third party intellectual property rights by the production or supply of such materials and use of the materials supplied in the products of Arçelik shall be borne by the Supplier. Supplier represents and warrants that it has full authority and license to manufacture and sell the materials and that the manufacture and supply of the materials to Arçelik and the supply of Goods by Arçelik to any third party or its inclusion in Arçelik’s products does not infringe the rights of any third party nor give rise (whether now or any time in the future) to any claim for royalty payments 13 / 17

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Direct Material Supplies Quality Agreement whether in respect of any part of the Goods or any format, patent or other Intellectual Property Right against Arçelik. In the event that any necessary license to manufacture expires, lapses, ceases or becomes necessary for any reason during the Term of this Agreement, Supplier shall have the sole responsibility and cost of obtaining a new or alternative license and any consequential re-tooling or redesign of the materials. Supplier indemnifies and holds Arçelik and its suppliers, distributors and customers (the “Indemnified Parties”) harmless from and against any costs, losses, liabilities and expenses, including all damages (including punitive damages), wasted advertising and promotion costs, court costs, bond costs, interest, reasonable expenses and reasonable attorney’s fees (collectively “Losses”) that the indemnified party may suffer, incur or be subjected to by reason of any legal action, proceeding, arbitration or other claim by third whether commenced or threatened, arising out of or as a result of any breach of warranties contained in this clause. Further, Supplier agrees to indemnify Arçelik for any damages arising out of, or related to Supplier’s breach of any warranty or representation; supplier’s violation of any law, rule, or regulation; intellectual property infringement claims related to the Supplier’s goods or service; or Supplier’s reckless or willful conduct.

8.

Material Sales to the Supplier

The Supplier may purchase from Arçelik some of the materials to be used for Arçelik production to the extent it is not possible for the Supplier to provide such materials for reasons of Arçelik quality rules, import regime regulations, supply difficulties and similar reasons. Prices for the materials sold to the Supplier under this framework shall be determined by Arçelik. Transportation charges for such materials shall be borne by the Supplier. Sales made to the Supplier in this way, shall be traced in a current account together with the purchases from the Supplier. Arçelik may suspend material sales to the Supplier in order to prevent a deficit balance in such current account due to the purchases made by the Supplier from Arçelik; or may make material sales in a way to create a deficit balance against an indefinite term bank letter of guarantee in the sum to be determined by Arçelik. For late payments, a value date calculation shall be made at the default interest rates applicable by Arçelik and a default interest invoice shall be drawn up.

9.

Consigned Materials

The following provisions shall be applicable between the Parties in cases where materials are consigned to the Supplier by Arçelik for processing: Consigned raw materials/materials are the property of Arçelik and shall be delivered to the Supplier in consignment against document. Arçelik records shall constitute the basis in determining the units of raw materials/materials delivered to the Supplier, and the units of parts/components produced out of such materials and delivered to Arçelik. The Supplier shall use the raw materials/materials taken over from Arçelik in consignment only for purposes of producing the goods and services requested by Arçelik. The said raw materials/materials may not be used in any way for any production to be realized by the Supplier for its own use or for the use of third party individuals and corporations. The Supplier represents and warrants herewith to refrain from selling, transferring, consigning; pledging and delivering the raw materials/materials taken over in consignment by the Supplier, to third party individuals and corporations, without the written approval of Arçelik. Upon determining that the raw materials/materials consigned to the Supplier by Arçelik are used contrary to the above provision, Arçelik may bill the cost of raw materials/materials used for purposes other than those identified above, plus 50% of such cost to the Supplier, besides reserving the right to terminate the Agreement unilaterally.

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F. Code:933180

Direct Material Supplies Quality Agreement The Supplier accepts to perform the quality control of the raw materials/materials taken over in consignment from Arçelik, in accordance with the control criteria and methods to be submitted to the Supplier by Arçelik; not to use nonconforming materials and notify Arçelik of the situation within maximum one business day. Arçelik shall notify the Supplier in writing of its request for the conditional use of the raw materials/materials. The Supplier accepts to store the raw materials/materials taken over from Arçelik in consignment under the storage conditions to be notified to the Supplier by Arçelik and make these available to inspection by Arçelik. Arçelik records shall serve as a basis for the determination of raw material/material units delivered to the Supplier; for the units of parts/components delivered by the Supplier; and Gross Consumption Per Unit. Maximum raw materials/materials which must be used by the Supplier for the units of parts/components delivered to Arçelik shall be calculated as follows: Consigned Raw materials/Materials to be Used

=

Gross Consumption Per Unit

Units of X Delivered

Parts/Components

In the inventories to be performed by Arçelik, stocktaking of raw materials/materials in consignment at the Supplier’s site shall also be made by Arçelik representatives. A comparison shall be made, of the amount of raw materials/materials in consignment which must have been used, and the actual amount of raw materials/materials used in the same period. In the case the amount of raw materials/materials is determined in this stocktaking to be less than the amount of raw materials/materials which should be available at the Supplier’s site, the cost for such short amount shall be paid to Arçelik by the Supplier in cash and all at once. Upon the written request of Arçelik, the Supplier shall inform Arçelik in writing of the amount of raw materials/materials in consignment at the Supplier’s site, and semi-finished and finished products in periods other than the stocktaking periods. Arçelik shall pay the insurance expenses for the raw materials/materials delivered to the Supplier in consignment. The Supplier accepts to return to Arçelik at the first request of Arçelik, all the raw materials/materials at the Supplier’s site upon the termination of the Agreement or the termination of the consignment delivery implementation by Arçelik unilaterally. Under such circumstances, Arçelik records shall constitute the basis for determining the amount of raw materials/materials to be returned.

10. Legal Obligations The Supplier shall act in compliance with its regional, national and international legal obligations with respect to the products manufactured and the production technology used by the Supplier (end user safety, environment, work safety, worker health, etc.). Otherwise, losses which might be incurred by Arçelik shall be borne by the Supplier.

11. Termination The Supplier shall be liable to supply materials with the proper quality and reliability specifications during the cooperation term. Upon any substantial infringement of this Specification which aims at ensuring compliance guarantee, or upon noncompliance with the identified minimum quality requirements, Arçelik may permanently drop the Supplier from the Approved Suppliers List. 15 / 17

F. Code:933180

Direct Material Supplies Quality Agreement

The decision for termination shall be notified to the Supplier in writing by the Purchasing Director.

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F. Code:933180

Direct Material Supplies Quality Agreement

12. Competent Courts and Enforcement Offices Courts and Execution Offices of any European Country shall have jurisdiction over the disputes arising from the Agreement. Read, understood, and accepted.

SUPPLIER ....................................

ARÇELİK A.Ş ....................................

....................................

Purchasing Manager

...../...../200..

...../...../200..

.................................... ....................................

....................................

...../...../200..

...../...../200..

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Purchasing Director

F. Code:933180