Page 1 of the Quality Assurance Agreement between MonLog GmbH and Suppliers Quality Assurance Agreement for MonLog GmbH suppliers Gewerbepark Aunkrichen 4 94474 Aunkirchen / Vilshofen The following Quality Assurance Agreement is hereby agreed between - "MonLog" - and - the "Supplier" - Preamble Product quality plays an important role in competition as well as with regard to product safety, customer satisfaction and cost avoidance. The resulting need for MonLog to subject goods purchased (hereinafter referred to as "Products") to quality inspections leads to measures and costs for MonLog which could be avoided by suppliers carrying out in-process quality controls including outgoing goods inspections and corresponding documentation of inspection results. For this reason, MonLog wishes to source only those Products from suppliers which suppliers have inspected and found to be in impeccable and confirmed quality. This can only be achieved if suppliers perform ongoing quality inspections within the framework of a qualified quality insurance system. Our common goal must be to achieve a zero defect standard of quality. As long as this Quality Assurance Agreement is successfully implemented and provided that reasonable prices are charged and products are available as required, MonLog will preferentially place orders with the Supplier rather than with other suppliers which have the same quality capability.
Page 2 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 1.0 Purpose and scope 1.1 The purpose of this Agreement is to establish a long-term and mutually beneficial supplier partnership. 1.2 All future purchase and supply transactions between MonLog and the supplier shall therefore be based on this Agreement which shall thus constitute an integral part of any such contracts. 1.3 The rights and obligations of the contracting parties arising from purchase and supply transactions, including but not limited to supplier prices and terms of payment, shall be agreed separately by the contracting parties. 2.0 Quality assurance by the Supplier 2.1 The contractual arrangements impose the obligation on the Supplier to ensure that all its deliveries to MonLog comply with the state-of-the-art and are free from defects. The objective must be a "zero defect strategy". The Supplier operates an effective quality management system which complies with the latest edition of ISO/TS 16949 or, as a minimum, of DIN EN ISO 9001, and which guarantees a consistently high level of tested quality of the products supplied to MonLog by the Supplier. The Supplier shall continually improve and enhance this system in compliance with the state-of-the-art or on the basis of agreements reached with MonLog. The quality of products supplied to MonLog shall be planned in advance in accordance with the applicable VDA guidelines. 2.2 The Supplier shall bear full responsibility for compliance with this Agreement and for the quality of the products it supplies to MonLog under the applicable contractual arrangements and in compliance with the technical documentation or any other characteristics stipulated by or agreed with MonLog. 3.0 Technical characteristics and technical documentation 3.1 The characteristics and specified tolerances which must be complied with by the Supplier are given in the order standards or the technical documentation which constitute part of these contractual arrangements. Technical documentation includes the drawings, samples, supply specifications, standards or similar information stipulated by MonLog. The Supplier shall ensure that products are at all times manufactured, inspected and supplied in accordance with the most recently applicable order standards or the most recent technical documentation to have been submitted to it.
Page 3 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 3.2 Internal production drawings, production and inspection plans as well as guidelines of the required scope shall be produced by the Supplier on the basis of the order standards or technical documentation. 3.3 The Supplier shall review all contracts to ensure that - contractual requirements are appropriately documented; - any requirements which deviate from technical documentation or any other stipulations or agreements have been clarified; - the Supplier has the capability to meet the contractual requirements. 4.0 Inspection planning and performance The Supplier shall carry out the following inspections: 4.1 Quality planning A quality planning VDA guideline is required within the framework of project management in order to safeguard the quality of all new or modified products. This will focus on: - manufacturing (machines, equipment, tools, work processes, preventive maintenance); - capacity and procurement (human resources, materials, machines, operating and test equipment, subcontractors); - handling, storage, preservation, packaging, and shipment; - process safety and environmental protection, product and packaging recycling; - reliability analysis, product safety/manufacturability and availability analysis; - quality planning, e.g. FMEA, SPC, MFU, control plan, process flowchart, inspection, measuring and test equipment capability, annual re-qualification inspections and inspection, measuring and test plan; - safety-critical characteristics, including but not limited to products with DwSpA (Documents with special archiving) and S/C (= significant characteristic) and C/C (= critical characteristic) relevant characteristics.
Page 4 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 4.2 The Supplier shall be responsible for performing incoming inspections on raw materials, third party products and purchased parts in the framework of the latest edition of ISO/TS 16949 or DIN EN ISO 9001. Raw materials and products which are part of the raw materials, product or service provided to MonLog may only be worked, processed or installed by the Supplier if such incoming goods inspections and in particular compliance with MonLog order standards and / or technical documentation has been verified. Traceability of material to manufacturing batches must be guaranteed. 4.3 Initial sample inspections. A production part approval process based on PPAP or other agreement must be performed in accordance with the VDA guideline (PPF) every time MonLog orders a component for the first time. Initial samples (usually consisting of 5 items) must have been manufactured under seriesproduction conditions. All the characteristics stipulated in the specifications as well as material and mechanical characteristics must be sampled. Further initial samples need to be taken in the following circumstances: - Change of subcontractor - Change in specifications - Changed production processes - Relocation of production sites combined with use of new or relocated machines Series parts may only be delivered following approval of the initial sample by MonLog or after a written concession has been issued. 4.4 SPC process monitoring. The main characteristics of products and services procured by MonLog from the Supplier must be subject to in-process SPC monitoring and controlling in compliance with the latest editions of ISO/TS 16949 or the VDA guideline. If the production process (e.g. punching) is such as to preclude a normal distribution and it is therefore not possible to perform SPC monitoring, the Supplier must use suitable inspection, measuring and test methods to achieve the zero defect target. Inspection, measuring and test methods are also suitable when process capability is documented by means of short-term analyses, e.g. CMK => 1.67 and when an attributive inspection ("ok" or "not ok") is performed during production using gauges with tolerance limits which are set within the statistical action limits and documented. 4.5 Outgoing goods inspections regarding identity, correct and proper packaging, labelling and completeness of shipments.
Page 5 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 4.6 All inspection, measuring and testing must be interpreted and documented in full in inspection plans according to the degree to which process capability has been achieved, the potential impact of defects and the significance of the relevant quality characteristic. MonLog assumes that series production is undertaken with statistically controlled and monitored production processes. 4.7 Products supplied to MonLog are quality capable when process capability CMK is shown to be => 1.67 and CPK => 1.33 or if process capability is not complied with if it can be shown that 100% controls have been performed. These capability indices for the main characteristics must be included in the PSW (Part Submission Warrant) or initial sample inspection report based on the VDA form. 4.8 Goods for which there is no evidence of process capability may not be shipped or must be subject to 100% inspection. 4.9 Inspections, measurements and tests must be performed using calibrated, suitable and capable inspection, measuring and test equipment, the type and scope of which are designed in such a way as to enable all contractual quality characteristics to be verified. The inspection, measuring and test equipment must be monitored at regular intervals and subject to an inspection, measuring and test equipment capability analysis to ensure that such equipment is ready and fit for use. The inspection and test status of the products must be demonstrated in a way which ensures that only products which have passed the required quality inspections and tests are shipped. The form of marking used must ensure that the inspector responsible for releasing the inspected items can be clearly identified. The Supplier shall conduct regular internal quality system audits, process audits and product audits which are closely based on the latest editions of the ISO/TS 16949 or VDA guidelines and shall do so in all company functions which have an influence on the manufacturing process for the products supplied to MonLog.
Page 6 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 5.0 Documentation and retention periods 5.1 All quality assurance measures taken within the framework of the "quality management system" must be documented in a corresponding manual or additional internal quality assurance regulations and instructions. 5.2 Audits conducted by the Supplier must be documented accordingly. The related records and specified corrective action must be kept by the Supplier for a period of at least ten years. 5.3 All inspection records and acceptance documents as well as all the inspection, measurement and test documents provided by subcontractors must be kept by the Supplier for a period of 10 years or, for DwSpA, S/C and/or C/C-relevant products, for a period of 15 years following discontinuance of the products and must be provided to MonLog at no charge in response to a legitimate request to this effect. 5.4 All records made of inspections, measurements and tests on raw materials, products and services as well as all results arising from controls performed on inspection, measuring and test equipment and the concession procedure must also be kept for a period of 10 years or, for DwSpA, S/C and/or C/C-relevant products, for a period of 15 years. 5.5 The Supplier shall submit these documents to MonLog if legitimately requested to do so by MonLog in particular cases. 5.6 Provision of inspection, measuring and test certificates under EN 10204 (DIN 50049) is subject to additional agreement between MonLog and the Supplier. 6.0 Conduct of Supplier audits by MonLog and customer protection 6.1.1 In order to safeguard MonLog's quality requirements, MonLog and its customers may give reasonable advance notice of inspections by their representatives of the production and quality management system operated by the Supplier and its subcontractors. 6.1.2 Absolute customer protection constitutes part of this Agreement in those cases in which supply parts are produced or delivered in accordance with design input provided by MonLog or its customer or in which the product or production-related technical know-how of MonLog or its customer have been disclosed in the context of the business relationship with MonLog.
Page 7 of the Quality Assurance Agreement between MonLog GmbH and Suppliers During the term of the business relationship with MonLog, the Supplier shall, in particular and with regard to these customers, only issue offers for such supply parts, accept orders, or supply such customers with MonLog's written approval. This assurance relates to products with which MonLog does business and which MonLog already procures from the Supplier or which it will ask for or order in the future within the framework of the business relationship. The Supplier shall pass on any customer inquiries relating to these products for them to be handled directly by MonLog. 6.2 During process audits the Supplier or manufacturer shall allow MonLog to inspect: - its manufacturing processes, provided that this does not impair the Supplier's competitiveness in any way; - all quality assurance measures and organisational units; - the quality manual; - the documentation required by the quality management system. 6.3 A valid certificate based on the latest ISO / TS 16949 or DIN EN ISO 9001 standards will be recognised as sufficient evidence of the Supplier's or its subcontractors' quality capability. 6.4 If doubts arise or complaints are made, MonLog is also entitled to conduct an audit of the Supplier. 7.0 Quality nonconformities 7.1 As a rule only conforming raw materials, products and services may be supplied to MonLog. 7.2 Raw materials, products and services with quality nonconformities may be shipped within the framework of a documented concession procedure - if, in the Supplier's view, these do not constitute defects which would negatively affect their use and function; - if such nonconformities do not impose additional costs on MonLog;
Page 8 of the Quality Assurance Agreement between MonLog GmbH and Suppliers - MonLog has given its written permission; - the goods are shipped with a copy of this concession. If the concession is issued by MonLog, the goods must be shipped with a copy of the concession. The Supplier shall ensure that no defective goods without a concession are shipped to MonLog. 7.3 Repaired or reworked parts must be reinspected according to a stipulated quality inspection procedure before they are reused. 7.4 If, following delivery of goods, complaints are made by MonLog or MonLog customers for which the Supplier is responsible, the Supplier shall take all the required measures to rectify the complaint and minimise any losses. The Supplier shall also arrange or carry out cross-checks to determine the cause of any complaints. Immediate action must be taken in response to legitimate complaints and all corrective action must be notified to MonLog in writing without delay. An 8D report must be used for this purpose. The complaints procedure may only be closed by the Supplier after the effectiveness of the action has been demonstrated to MonLog. The objective is to deal with complaints promptly and to thereby sustain delivery capabilities. 7.5 In warranty cases MonLog shall be entitled to demand payment from the Supplier of the proven cost of handling each complaint of no less than 75 (excluding value-added tax) where such complaint is due to culpable behaviour on the part of the Supplier, including but not be limited to selection of incorrect material, manufacturing defects or shipping errors. In the case of subsequent improvement or performance in response to defective supply parts, MonLog shall also be entitled to demand reimbursement of the costs of a second incoming goods inspection.
Page 9 of the Quality Assurance Agreement between MonLog GmbH and Suppliers These cost arrangements and the minimum amount have been discussed with the Supplier in each case. The Supplier explicitly agrees to this charging method. The Supplier reserves the right to furnish evidence in specific cases that MonLog has incurred no such costs or lower costs. MonLog's statutory warranty rights remain unaffected. 8.0 Storage, packaging and transport 8.1 The Supplier shall comply with the coordinated and agreed packaging units and labelling. In specific cases, changes are subject to agreement with MonLog. 8.2 The Supplier shall package raw materials, supply parts and services for MonLog in a way which guarantees the absence of damage due to transport, storage or ageing. 9.0 Incoming goods inspections in MonLog 9.1 On the basis of this Agreement and the quality inspections performed by the Supplier, MonLog shall be entitled in the future to limit its inspections of incoming goods received from the Supplier to quantity, identity (packaging markings and delivery notes in compliance with order requirements) and to transport damage which is visible on the outside of the packaging. 9.2 This shall not affect the Supplier's liability for defects in quality or products. The Supplier explicitly waives the objection of delayed notification of defects under section 377 of the German Commercial Code (HGB). 9.3 If MonLog finds a defect in any products delivered by the Supplier or if it has reasonable suspicion that such a defect exists, MonLog shall initiate suitable measures to check the goods and to prevent goods which are suspected of having defects being delivered to its customers. The Supplier shall also be informed in writing without delay, no later than within two working days, after the defect becomes apparent.
Page 10 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 10.0 Product liability 10.1 If a product delivered by the Supplier is the cause of damage, the Supplier shall be statutorily liable to the extent that the product delivered by the Supplier was the source of such damage. In this respect the Supplier explicitly indemnifies MonLog against liability for products delivered by the Supplier. 10.2 The Supplier shall take out product liability insurance which provides cover of at least 5 million per person/property damage; such insurance shall also cover the extended product risk including damage in other countries, a vehicle recall campaign and the risk arising from waiving the objection of delayed notification of defects. 10.3 The Supplier shall inform MonLog on request about the purchase and continued application of insurance cover. The Supplier shall inform MonLog of any changes or cancellation of such insurance cover without delay. 11.0 Nondisclosure Each contracting party shall treat with confidentiality all commercial and operational information concerning the other contracting party which is obtained under this Agreement and in the context of its business relationships where such information is not already in the public domain and is not intended to be passed on to third parties; each contracting party shall also treat such information as business secrets which shall not be made available, either directly or indirectly or in whole or part, to third parties and which shall only be used for the contractually agreed purposes. The duty to maintain confidentiality shall continue to apply after this Agreement has been terminated. Section 12.0 Term and termination 12.1 This Quality Assurance Agreement shall come into force upon its signature by both contracting parties and shall remain valid for an indefinite period of time. 12.2 Either party may serve six months notice to terminate the Agreement at the end of a month/calendar year. The right to terminate without notice for good cause remains unchanged. 12.3 Notice to terminate shall in all cases be made in writing.
Page 11 of the Quality Assurance Agreement between MonLog GmbH and Suppliers 13.0 Miscellaneous 13.1 Additions or modifications to this Agreement shall only be valid if made in writing by both contracting parties. 13.2 This Agreement is subject to German law 13.3 If individual provisions of this Agreement, in whole or part, are or become invalid in law or unworkable, this shall not affect the validity of the remaining provisions of the Agreement. In place of the invalid or unworkable provisions another suitable arrangement shall be made which, as far as legally possible, comes closest to that which the contracting parties wanted or would have wanted in accordance with the purpose of the Agreement had they taken such matter into account when the Agreement was signed. 13.4 Passau is agreed as the legal venue. Passau,... MonLog GmbH Supplier:...... Signature / Company stamp Signature / Companies stamp