POLIPOL. Conditions of Purchase

General Conditions of Purchase

I. Scope of these Conditions of Purchase

1. The following General Conditions of Purchase (hereinafter referred to simply as “Conditions of Purchase“) shall apply for all contracts concluded between the companies of the POLIPOL Group (hereinafter simply “Ordering Party”) and its suppliers / component suppliers / manufacturers (hereinafter simply “Contractor“) regarding all products and services ordered by companies of the POLIPOL Group. The Conditions of Purchase cover both sales contracts and contracts of service as well as contracts for work and labour and contracts for work and material. Our Conditions of Purchase shall be agreed with the Contractor with placement of the first contract or the first order and shall apply in their respectively valid versions for all future contracts, orders, and business relationships, even if their applicability is not alluded to again.

2. The POLIPOL Conditions of Purchase shall apply exclusively; conflicting conditions of the Contractor or such as deviate from our Conditions of Purchase, which we do not expressly recognise, shall not be binding for us, even when we have not expressly rejected them. Our Conditions of Purchase shall also be effective when we unreservedly accept the products supplied by the Contractor, and services rendered, despite being aware of conditions deviating from our Conditions of Purchase.

II. Contract and Conclusion of the Contract

1. Contracts, orders and agreements shall only be binding for us as the Ordering Party when they have ensued in written form. The Contractor can accept our contracts and orders and confirm them in writing only within a period of two weeks. Acceptance and confirmation subject to restrictions or subject to further changes shall not lead to the conclusion of a contract without our express written confirmation.

2. We reserve the proprietary rights and copyright on illustrations, drawings, calculations and other documents; they may not be made accessible to third parties without our express written consent. They are to be used exclusively for manufacturing on the basis of our order; following implementation of the contract or order, they are to be returned to us immediately and without having to be requested.

III. Prices – Conditions of Payment

1. The prices shown in the contract or order are binding. In the absence of a deviating written agreement, the delivery price shall apply for delivery duty paid (“DDP“ Incoterms® 2010 – Delivered Duty Paid) and shall include packaging, transport and insurance (“CIP“ Incoterms® 2010 – Carriage, Insurance Paid) as well and any applicable VAT.

2. We can only accept and process invoices when these comply with the statutory provisions applying for us as invoice recipient. They are to list, in particular, all positions, specifying the respective order and article number, the net unit prices, the description of the article, the quantity or weight. Any applicable VAT is to be shown separately, stating the VAT Registration No. The Contractor shall be responsible for the consequences arising from the non-observance of this obligation, unless he can provide proof that he is not accountable.

3. As a rule, payment ensues within 30 days of becoming due. Invoice receivables shall not become due prior to the arrival of the goods at the place of delivery specified by us and our receipt of a correct, verifiable invoice. In the event of an invoice having to be returned by us, for reasons for which we are not responsible, it shall become due for payment at the earliest within 3 days of our receipt of the duly corrected invoice. Even in the event of premature delivery, we reserve the right to make payment only to the agreed payment date.

4. We shall be entitled to exercise set-off and retention rights to the statutory extent. In all other respects, in the event of impairment of performance or in the case of faulty products supplied or services rendered, we reserve the right, without prejudice to further rights, to retain a security amounting to three times the value of the probable indemnity claim or reduced value of the goods supplied or services rendered.

IV. Delivery time – Delivery – Transfer of Risk

1. The delivery period specified by us in the order or the specified delivery date shall be binding for the Contractor.

2. The Contractor is obliged to notify us immediately in writing if circumstances arise, or become apparent, which result in incapacity to meet the contractually agreed delivery commitment. The grounds and the probable duration of the delay are to be specified. The Contractor can only plead the non-supply of necessary documents when he has requested same from us in advance with an appropriate grace period.

3. The Contractor shall only be entitled to make partial deliveries with our prior written consent. In the case of premature delivery prior to the agreed delivery date, we reserve the right to return the goods freight forward at the expense of the Contractor.

4. In the event of delayed delivery, we shall be entitled, without prejudice to our statutory rights, to demand a contract penalty to the amount of 1% of the contract value or order value for each week of delay, or part thereof, at most, however, 10 %. Besides, following the unsuccessful expiry of an appropriate period of grace, we can demand compensation instead of performance and declare our withdrawal from the Contract. If we demand compensation, the Contractor shall have the right to provide us with proof that he is not responsible for the breach of duty. The subsequent acceptance of products and services shall not constitute a renouncement of the above claims.

5. Unless otherwise agreed in writing, delivery shall ensue duty paid (“DDP” Incoterms® 2010 – Delivered Duty Paid), including packaging. The Contractor must clear the goods for export and make same available to us with a declaration of origin at the point of destination specified by us (“DAP“ Incoterms® 2010 – Delivered At Place). The Contractor shall bear the costs for shipping and insuring the goods as well as the carrier's liability until the goods are accepted by us or our agents at the specified point of destination.

6. The Contractor is obliged to state our order number and the article number as well as a description of the goods on all shipping documents, shipping notes, labels and packaging; if he fails to do so, we shall not be responsible for delays in processing.

7. The Contractor is obliged to collect transport and outer packaging supplied, as well as any other packaging, at the specified point of destination, free of charge for us, or have it disposed of.

V. Faults – Warranty

1. As the Ordering Party, we shall examine the goods, to the extent that this is practicable in the regular course of business, and provide notification of obvious faults in the delivery and service rendered within an appropriate period.

2. Every quality description or other detail of the goods, the product or the service, be it contractual, in the advertising, analysis data or product brochure or similar media, shall be regarded as a guarantee of workmanship and appearance and a guarantee of durability within the meaning of the statutory provisions. All products supplied and services rendered must comply with state-of-the-art technology, the specifications (tender documents), the relevant legal requirements and the specifications of official bodies, employers' liability insurance associations and professional associations.

3. We shall have full entitlement to the statutory warranty. In every event, in the case of a fault including, in particular, deviations from the agreed or guaranteed appearance and workmanship or durability, the Contractor shall be obliged, at our discretion, to provide subsequent performance by way of repair, to replace the faulty parts or to execute a substitute delivery of new goods. No granting of a period of notice shall be incumbent on us when the Contractor refuses subsequent performance or same has failed or is unreasonable for us. In these cases, as well as in the case of unsuccessful expiry of the period of grace or cases of urgency, in particular to ward off impending danger or prevent more serious damage, we shall be entitled to carry out the rectification ourselves or have it carried out by a third party, at the expense of the Contractor. Nonetheless, the right to assert compensation claims, in particular to claim compensation instead of performance shall be expressly reserved.

4. Our right to claim for material defects shall not lapse for three years calculated from the time of transfer of risk (Item IV. 5.).

VI. Product Liability – Recall

1. Should we be held liable by third parties on the basis of product damage for which the Contractor is responsible, the Contractor shall be obliged to indemnify us from these third-party compensation claims, including all the costs necessary to avert such claims, on first request, when the Contractor has set the cause in his domain and organisational area or is liable himself vis-a-vis third parties.

2. If we are forced to carry out a product recall due to faults within the meaning of the above Item VI. 1., the Contractor shall, pursuant to Sections 683, 670 BGB, or pursuant to Sections 830, 840, 426 BGB, be obliged to reimburse us for any expenses and costs arising in the context of the product recall. Where possible and where time permits, we shall inform the Contractor of the scope and extent of the recall measures to be carried out and give him the opportunity to respond. All statutory rights shall remain unaffected.

3. The Contractor shall be obliged to take out insurance with an adequate insured sum against all product liability risks and, for the period of the business relationship with us, to maintain a product liability insurance policy for personal injury and damage to property. On request, the Contractor must submit the insurance policy to us as evidence. The handling costs and expenses arising in the context of any insurance claims and legal disputes shall be borne exclusively by the Contractor. Should we have any further compensation claims in addition, in the case of product liability, these shall remain unaffected.

VII. Industrial Property Rights

1. The Contractor guarantees and assumes responsibility for ensuring that, in the context of his products and services, no rights of third parties are compromised, in particular commercial property rights, such as patents, trademark rights, utility patents and design patents, as well as author's rights.

2. Should we be held liable by third parties due to the products and services of the Contractor breaching statutory industrial property rights, the Contractor undertakes to indemnify us, at first request, from these claims, including all necessary expenses which we incur in relation to the third party claims and the averting of same. The Contractor is not entitled, without our written consent, to recognise the claims of third parties and/or conclude agreements with third parties in regard of these claims. The time limit for this indemnification shall be three years, calculated from the point at which we become aware of the third party claim, at the latest, however, 10 years from the supply of products or the rendering of services.

3. The Contractor shall have no commercial property rights of his own to tools, models, illustrations, drawings, calculations and other documents supplied by us for the purpose of executing the contract and processing the order. All patents, utility and design patents as well as brand rights and author’s rights shall remain exclusively with us. Nor shall the Contractor be permitted to use our logo and reference numbers as an identifier in commercial correspondence in particular in advertising, or on websites, specifically neither as title tags, meta tags, or keywords, or within the framework of Google Adword advertising offer, without our prior express approval.

4. Should the use of our commercial property rights or the manufacturing of goods and products nevertheless lead to independent rights of the Contractor, same shall be obliged to waive these rights and transfer them back to us.

5. The Contractor shall not be entitled to assert his own claims and rights to the property to which we are entitled or to register these for goods and products ordered.

VIII. Reservation of Title – Provision of Equipment

1. When we supply parts to the Contractor, we retain ownership of same. Processing or alteration through the Contractor shall be undertaken on our behalf. If our reserved goods are processed with other items not belonging to us, we shall acquire co ownership of the new items at the ratio of the value of our item (purchase price plus VAT) to the other items processed at the time of processing.

2. If the item supplied by us is inseparably amalgamated with other items not belonging to us, we shall acquire co ownership of the new item at the ratio of the value of the reserved item (purchase price plus VAT) to the other amalgamated items at the time of amalgamation. If, as a result of the amalgamation, the Purchaser’s item is to be regarded as the main item, it shall be considered agreed that the Contractor shall assign co ownership of the item to us; the Contractor shall hold the solely-owned property or the co-owned property for us.

3. In all other respects, all parts and documents which the Contractor receives from us for the purpose of processing the contract, shall remain our property. The Contractor may only utilize these outside of the execution of the contract and/or pass these on to third parties or make them accessible to third parties with our written consent. Following execution of the respective contract, the Contractor must return these to us immediately at his own expense.

IX. Tools – Provision

1. Unless otherwise agreed, all proprietary rights to tools provided for use to the Contractor shall remain with us. These may only be used by the Contractor for the processing of our contracts and orders. The Contractor shall be obliged to use the tools exclusively for the production of the goods ordered by us. No use outside of this is permitted.

2. In the storage, use and care of the Customer's tools, the Contractor must exercise the same care as he would in his own matters. The Contractor shall be obliged to carry out all necessary maintenance and servicing on our tools, as well as all maintenance and repair work at his own expense and in good time. The Contractor must inform us immediately of any breakdown; should he culpably fail to do so, this can lead to compensation claims.

3. The Contractor shall be obliged to insure the tools belonging to us at replacement value at his own expense against fire, water and theft. On request, the Contractor must submit the insurance policy to us as evidence. The Contractor assigns all compensation claims arising from this insurance to us; we accept the assignment.

4. The Contractor is prohibited from disposing by legal transaction of the tools supplied by us, in particular making them available to third parties, without our express consent. If a major deterioration in the financial circumstances of the Contractor becomes known, or if same is the subject of enforcement measures, we shall be entitled to demand the provision of suitable securities. The Contractor shall be obliged to inform us immediately of circumstances of this kind.

5. We can demand the surrender of tools supplied by us, at any time, without having to state reasons. The Contractor shall also be obliged, without an express request, to return the tools supplied to him by us, at the latest, however, within six months of termination of the Contracts or execution of the order. The Contractor shall have no right of retention to the tools.

X. Quality Standards – Corporate Code of Conduct

1. As the Ordering Party, we reserve the right to define quality standards within the framework of quality management and to specify measures for sustainability management which must be observed by the Contractor. The elements of the quality and sustainability management serve to guarantee an agreed, uniform product and performance quality within the framework of a quality measurement and quality improvement concept. The implementation of the quality management measures specified by us is binding for the Contractor. The Contractor undertakes to actively support our quality management and guarantee the implementation.

2. The Contractor shall be obliged, in compliance with the valid regulation REACH-EGV No. 552/2009 of 22.06.2009 Registration, Evaluation, Authorisation and Restriction of Chemicals to use exclusively regulation-compliant commodities and products (components, fabric, materials, etc.), in particular in the provision of furniture and furnishing items, to provide information on any labelling requirements and the proportion of substances of high concern, as well as to comply with the statutory registration obligation. Furthermore, the Contractor shall comply with and observe the provisions of the Banned Chemicals Ordinance (ChemVerbotsV) regulating prohibition of and restrictions on the bringing into circulation of dangerous substances and preparations when producing commodities and products. He shall be obliged, without exception, to supply commodities and products free of dimethyl fumerate (DMS) and polycyclic aromatic dydrocarbons (PAK).

3. As the Ordering Party, we expect each of our Contractors to subscribe to the “good practices” of the UN Global Compact Principles – www.unglobalcompact.org) and to conduct their entrepreneurial activity accordingly by (1) supporting and respecting international human rights in their own sphere of influence, (2) not participating in human rights abuses, (3) preserving freedom of association and recognising the right to negotiate collectively, (4) eliminating every form of forced labour, (5) not permitting child labour, (6) eliminating discrimination in hiring and employment, (7) supporting a preventative approach to environmental issues, (8) taking steps to promote greater responsibility towards the environment, (9) working towards the development and expansion of the use of environment-friendly technologies (10) counteracting corruption in any form, including extortion and bribery.

XI. Confidentiality

1. The Contractor shall be obliged to observe strict confidentiality regarding all illustrations, samples, models, drawings and calculations received from us. They may only be revealed to third parties with our express consent. Also, and in particular, documents entrusted to him, master copies, especially technical and commercial data, as well as business and trade secrets of which the Contractor becomes aware in the context of our cooperation shall be subject to confidentiality. The Contractor undertakes not to pass business and operational data, in particular technical, strategic and commercial data and information arising from the cooperation with us, on to third parties or make them accessible to third parties in any other way.

2. Without exception, the Contractor undertakes to use confidential information and data only for processing and implementation serving the purpose of the contract and to refrain from breaches of every kind as well as every form of abuse, including, infringements of the data protection provisions. In particular, he must comply with the recognised principles of data security and prevent abuse by third parties.

3. Documentation and data made available, including such data in electronic form, may not be photocopied or duplicated in any other way, unless the observance of the above principles is guaranteed. Upon execution of the contract, the Contractor shall be obliged to return all documentation and data sets to us or destroy same, confirming the destruction to us in writing upon request.

4. The obligation to maintain confidentiality shall continue to apply following completion of the execution of the contract and the termination of the contractual relationship; it shall expire only when, and to the extent that, the manufacturing know-how contained in the illustrations, drawings, calculations and other documents is generally known.

5. In the event of any detected infringement of the obligation to observe confidentiality, the Contractor shall be obliged to compensate us for the losses incurred and to pay a contract penalty of EUR 50,000 for each individual case of noncompliance. This shall not apply when the Contractor is not accountable for the infringement of the obligation to observe confidentiality.

6. The Contractor is aware that the disclosure and revelation of business and trade secrets to unauthorised third parties is punishable by law. This applies in particular when the Contractor unlawfully acquires knowledge of a business or trade secret using technical means, by producing a physical copy of the secret, or in any other way, or unlawfully utilises a business or trade secret which he has acquired in this manner, or reveals it to a third party.

XII. Court of Jurisdiction – Place of Performance – Applicable Law

1. Exclusive court of jurisdiction for products supplied and services rendered and for payments, as well as for all disputes arising between the Contractor and us shall be determined by our official place of business (Diepenau), provided the Contractor is a businessman within the meaning of the German Commercial Code (HGB). Unless otherwise dictated by the contract or the order, the place of performance shall be our official place of business.

2. The relationship between the Contractor and us shall be subject exclusively to the laws of the Federal Republic of Germany.

[Status September 2011]