Sales conditions

General Terms of Sale, Delivery and Payment
CITIZEN Machinery Europe GmbH
As of: 06/2011

Section 1 Scope of application

All our quotations, sales and deliveries are governed by these Terms of Sale, Delivery and Payment (for the supply of machine tools for domestic transactions). Terms and conditions contradicting or deviating from our Terms of Sales, Delivery and Payment shall not be recognised unless they are confirmed by us in writing as an addition to our Terms of Sale, Delivery and Payment.
Our Terms of Sale, Delivery and Payment shall apply even if, in the knowledge of conflicting or deviating terms and conditions of the customer, our delivery is made without reservation. References or counter-confirmations of the customer which make reference to his purchasing conditions are hereby expressly excluded.
Individual agreements concluded with the customer, including ancillary agreements, additions and amendments, always take precedence over these Terms of Sale, Delivery and Payment.
A written contract or our written confirmation is authoritative for the content of such agreements.
Our Terms of Sale, Delivery and Payment shall also apply for all future transactions with the customer.
Unless otherwise regulated in our Terms of Sale, Delivery and Payment, the current version of the delivery conditions of the VDMA (Association of German Machinery and Equipment Constructors) shall also apply.

Section 2 Quotation and conclusion of contract

Our quotations are subject to change and non-binding. This shall also apply if we have provided the customer with catalogues, technical documentations (e.g. drawings, plans, calculations, cost estimates, references to DIN standards), other product descriptions or documents (also in electronic form) to which we reserve ownership rights and copyrights.
Any orders submitted by the customer shall constitute a binding contractual offer. Unless otherwise stated in the order, we are entitled to accept this contractual offer within 14 days of receipt. Our acceptance is given in writing, by telex, fax or telecommunication, unless we deliver or invoice immediately.
Only the information contained in our specifications is decisive for the quality of the delivery item owed by us. The assumption of warranties and procurement risks requires an express written agreement of both parties, in which the terms 'warranty' and 'procurement risk' are explicitly used.
Any job time calculations provided by us are not binding, because they are made on the basis of theoretical values.
They shall not be used to determine the quality of the delivery item, unless they are expressly included in the order confirmation.
Unless otherwise agreed, the installation shall be carried out exclusively by us or our vicarious agents. Drawings or other advice provided by us for the installation of our delivery items shall not be considered as assembly instructions, but only as references to the dimensions of the delivery item and to the connections that need to be provided.

Section 3 Prices

Unless otherwise agreed, the prices shall be ex works including loading at our factory plus value added tax.
Additional costs for packaging and shipment including unloading, insurance, customs, fees, taxes or other public charges shall be borne by the customer; they shall be invoiced separately.
The customer shall also bear all costs for any installation agreed upon; these shall be invoiced separately.
Should the shipment be delayed at the request of the customer, he shall bear the costs incurred; these shall also be invoiced separately.

Section 4 Payment

Invoices are payable no later than 10 days after the commissioning of the delivery item. Repair and installation costs as well as service charges shall be payable immediately upon receipt of the invoice, without any deductions.
If invoices are still outstanding, payments made by the customer shall be used to settle the oldest receivables due.
Payments with bills of exchange and cheques are not considered as cash payments. These shall be accepted on account of payment only. Any discount charges and collection charges, fees and taxes resulting from the acceptance, transfer or cashing of a bill shall be payable by the customer. We are not responsible for the timely presentation of bills of exchange, cheques or other notes of remittance. If a bill of exchange is not discounted or not cashed on time, the entire receivables or the outstanding receivables are due for payment.
If the customer does not fulfil his payment obligations, in particular if he does not cash a cheque or bill of exchange, or if he suspends his payments, we are entitled to immediate payment of the entire outstanding receivables, even if we have accepted checks or bills of exchange. In such cases, we are also entitled to refuse execution of deliveries and services outstanding until the customer has executed consideration, or alternatively, has furnished adequate security for said deliveries and services outstanding.
The customer is entitled to set-off rights only to the extent as his counter-claims are undisputed, legally established or acknowledged by us in writing. Furthermore, the customer is only entitled to exercise a right of retention insofar as his counter-claim is based on the same contractual relationship.

Section 5 Scope of delivery

Any terms specified by us are not binding unless they are expressly set down in writing in our order confirmation. The information contained in our order confirmation is decisive for the scope of delivery. The scope of delivery shall be determined according to our specifications in the order confirmation.
Ancillary agreements and amendments require our written confirmation.
Partial deliveries and corresponding settlements are permissible, provided they are reasonable for the customer.
We are entitled to make technical changes to the delivery item, provided this does not affect the technical functions, or this is customary and reasonable for the customer.

We are also entitled to exercise this right with regard to technical modifications of ready-to-use equipment.

Section 6 Delivery and deadline

The delivery time shall be considered to be the delivery date specified in writing in the order confirmation.
Compliance with the term of delivery is subject to correct and timely delivery of materials to us from our suppliers.
The term of delivery shall be regarded as having been met if, by the time of its expiry, the delivery item has left our works or if the customer has been informed of readiness for dispatch in case of collection by the customer.
Unless otherwise agreed, in case of call-off supply contracts, the customer shall be obliged to determine in advance delivery schedules covering at least a period of 3 months and to call off the deliveries in time before the respective delivery date, according to the delivery schedules determined. Should the customer not comply with this obligation or not comply with it as agreed, we are entitled to make the call and/or organise the scheduling ourselves, to deliver the goods or to withdraw from the agreement after having set a reasonable deadline.
If we can prove that our suppliers have not delivered on time, despite careful selection of our suppliers and despite the conclusion of the necessary contracts under reasonable conditions, the term of delivery shall be extended by the delay period caused by the non-punctual delivery by our supplier. Should the above-mentioned hindrance last for more than one month, the customer is entitled to cancel the contract with respect to the not yet fulfilled part of the contract. We may only invoke the previously described circumstances if we have informed the customer of these circumstances without delay, i.e. within 3 working days following knowledge of the circumstances.
In the event of default of acceptance, the customer shall indemnify us for the loss caused by this breach of contract, in particular for expenses incurred by us as a result of the storage of the delivery item. This shall not apply if the customer is not responsible for the neglect of duty. In this case, the customer's obligation to reimburse costs is limited to the expenses incurred by us due to the storage of the delivery items. Where a reasonable deadline fixed for acceptance of the goods is not observed, we are also entitled to otherwise dispose of the delivery items and proceed with delivery to the customer within a reasonable, extended deadline.
Delivered items, even if they have slight defects, shall be accepted by the customer without prejudice to his rights arising out of the warranty liability.

Section 7 Transfer of risk

The risk of accidental perishing and accidental deterioration of the goods shall pass to the customer no later than upon delivery or from the date on which the customer is in default of acceptance for the first time. However, in the case of sales shipment, the risk of accidental perishing and accidental deterioration of the goods and the risk of delay passes to the customer upon hand-over of the goods to the forwarder, carrier or other person or organisation carrying out the shipping services.

Section 8 Retention of title

We retain title to the delivery item until receipt of all payments under the supply contract.
The customer may neither sell nor pledge the delivery item, nor assign it as security. The customer shall advise us immediately by registered letter of any seizure, especially execution taken by third parties against the delivery item owned by us, and shall forward the documents required for an intervention.
If the national law of the country in which the goods remain requires further steps for the validity of the retention of title, for example the registration with a registry, the customer shall carry out such measures at his own cost and furnish us with appropriate evidence thereof.
If the customer breaches the contract, particularly in the event of non-payment of the purchase price, we have the right to cancel the contract in accordance with the statutory provisions and require return of the goods on the basis of the retention of title and on the withdrawal. If the customer does not pay the due purchase price, we may assert these rights only if we have previously set the customer an appropriate time limit for payment to no avail or if setting a time limit is dispensable according to the statutory provisions.
If the customer files to open insolvency proceedings, we are entitled to withdraw from the contract and demand immediate return of the delivery item.

Section 9 Insurance

We are entitled to insure the delivery item at the expense of the customer against theft, breakage, fire, water and/or other damages, unless the customer can provide proof that he has taken out the insurance himself.

Section 10 Product monitoring and warning obligations

To protect consumers from dangers of all kinds, the customer is obliged to continuously monitor the products with regard to their safety (product monitoring obligation). Should a product prove to be hazardous, the customer is obliged to inform us in writing without delay (product warning obligation).
If a claim for compensation is asserted against us by third parties due to a breach of the product monitoring and/or warning obligations, and where such breach of the product monitoring and/or warning obligations is attributable to the customer, the customer shall be obliged to compensate us for all damages caused by said breach of obligation of the customer.

Section 11 Warranty

Unless otherwise provided below, the rights of the customer in the event of any defect of quality or defect of title (including any wrong deliveries and short deliveries as well as improper installation or inadequate assembly instructions) shall be governed by the statutory provisions. Special statutory provisions on final deliveries of products to a consumer shall in any case remain unaffected (recourse against supplier in accordance with articles 478, 479 of the German Civil Code (BGB)). In case the delivery items are used objects, all and any warranty claims shall be excluded, unless otherwise expressly agreed in writing.
The basis for our warranty for defects shall be first and foremost the agreement regarding the condition/quality of the goods. The agreement regarding the condition/quality of the goods shall be exclusively the specifications provided to the customer. If the condition/quality has not been agreed, the statutory provisions must be applied to assess whether there is a defect or not (article 434 section 1 sentences 2 and 3 of the German Civil Code (BGB)). However, we assume no liability for public statements of the manufacturer or other third parties (e.g. advertising).
Anny warranty claims of the customer shall require that the customer complies with his statutory obligation to examine the goods and give notice of defects (articles 377, 381 of the German Commercial Code (HGB)). If a defect is revealed during the inspection or at a later point, we shall be notified about this in writing immediately after its discovery. The notification shall be deemed immediate if it is provided within two weeks; dispatch in due time shall suffice to meet the deadline. Irrespective of such obligation to examine the goods and give notice of defects, the customer shall notify in writing all apparent defects (including wrong deliveries and short deliveries) within two weeks of delivery; dispatch in due time shall suffice to meet the deadline here as well. If the customer fails to carry out the proper inspection and/or issue the notification of defects, our liability for the defect which was not notified is excluded.
If the delivered item is defective, the customer may demand as supplementary performance either remedy of the defect (rectification) or delivery of an item that is free from defects (substitute delivery), at his discretion. Should the customer fail to state which of these two rights he opts for, we reserve the right to set him a reasonable time limit. If the customer fails to state his choice within the time limit, the right of option shall be passed on to us when the time limit expires.
We are entitled to make the owed supplementary performance conditional on whether the customer pays the due purchase price. However, the customer is entitled to retain a share of the purchase price proportionate to the defect.
The customer shall allow us the necessary time and opportunity for due supplementary performance and shall in particular hand over the goods concerned for inspection. In the case of a substitute delivery, the customer shall return the defective goods according to the statutory provisions.
The expenses which are necessary for the purpose of inspection and supplementary performance, in particular shipment, travel, work and material costs shall be borne by us, if a defect actually exists. However, if it is determined that a request for remedy of a defect by the customer is unjustified we are entitled to demand reimbursement of the costs incurred from the customer.
In urgent cases, if, for example, the safety of operations is at stake or disproportionate damage is to be avoided, the customer has the right to remedy the defect himself and to demand from us compensation for the objectively required expenses. We shall be informed of such self-remedy as soon as possible, if possible prior to the repair. The right of the customer to rectify defects himself shall not exist if we are entitled to refuse the relevant supplementary performance in accordance with the statutory provisions.
The customer may withdraw from the contract or reduce the purchase price if the supplementary performance fails or if a reasonable deadline for the supplementary performance as set by the customer expires to no avail or is not required according to the statutory provisions. However, there shall be no right to withdraw from the contract if the defect is negligible.
Claims of the customer for damages or reimbursement of fruitless expenses shall only exist according to section 12 and are otherwise excluded.

Section 12 Other liability

Insofar as not otherwise derived from these Terms of Sale, Delivery and Payment, including the following provisions, we shall be liable according to the relevant statutory provisions in case of a breach of contractual and non-contractual duties.
We shall only be liable for damages – irrespective of their legal grounds – in case of intent or gross negligence.
In case of simple negligence, we shall only be liable

a) for damage resulting from loss of life or injury to body or health.

b) for damage resulting from the breach of an essential contractual obligation (obligation the proper fulfilment of which constitutes a condition sine qua non and on the fulfilment of which the customer reasonably relies and may rely); however, in this case our liability is limited to the reimbursement of the foreseeable, typically occurring damages.
The limitations of liability arising from (2) shall not apply if we have fraudulently concealed a defect or have guaranteed the quality of the goods. The same applies to claims by the customer based on the German Product Liability Act.
In case of any breach of duty other than relating to defects, the customer shall only be entitled to withdraw from the contract or to terminate the contract if the breach occurred through our fault. A free right of termination of the purchaser (in particular according to sections 651, 649 of the German Civil Code (BGB)) is excluded. Apart from that, the statutory requirements and legal consequences shall apply.
Should any claims for damages should be asserted against us based on the infringement of industrial property rights of third parties, the customer shall not have furnished evidence of this defect of title until a final legal judgement has been pronounced against him in this matter. This provision does not affect the right of the customer of serving us with a third-party notice.

Section 13 Limitation

The general limitation period for claims arising from defects of quality and defects of title is one year from delivery of the goods. If acceptance has been agreed, the limitation period shall commence upon acceptance.
However, if the goods are a building or an object which, in accordance with its common use, has been used for a building and has caused its defectiveness (building material), the limitation period, pursuant to the statutory provisions, shall be five years from delivery. Special statutory provisions for third-party claims for restitution in rem, fraudulent intent by the seller, or rights of recourse against the supplier in the case of final delivery to a consumer shall remain unaffected.
The above limitation periods shall also apply for contractual and non-contractual claims for damages by the customer which are based on a defect of the goods, unless the application of the regular statutory limitation period (sections 195, 199 of the German Civil Code (BGB)) would lead to a a shorter limitation period in the individual case. The limitation periods of the German Product Liability Act shall remain unaffected in any case. In other respects, all claims for damages of the customer shall be subjected to the statutory periods of limitation as determined under Section 12.

Section 14 Order-related requirements and provisions

Where the customer, as contractually agreed, prescribes the use of, or makes available certain production equipment, devices, tools and structures, drawings or samples for the execution of the order, or where these are produced, ordered or provided by us on behalf of the customer, the customer shall assume responsibility for the correctness of the specifications and the usability of the items provided. In addition, the customer shall also guarantee that the use of such equipment and devices and/or other requirements does not breach any industrial property rights or other rights of third parties.
Order-related equipment, according to (1), shall remain our property unless otherwise agreed. This shall also apply if the customer has reimbursed us for the expenses on a pro rata basis, but not in full.
If the customer is the owner of the order-related equipment, the customer is obliged to collect the provided items at our request within a reasonable deadline. Should the deadline expire without effect, we shall be entitled to dispose of the items provided; the costs for this shall be charged to the customer.

Section 15 Trade secrets

Plans, drawings and technical documents that we have handed over to the customer shall remain our property.
The customer may not use, copy, or reproduce these documents, nor hand them over, make them available or disclose them to third parties without our consent. This shall apply even if the documents are not marked as confidential information.
The customer shall ensure that all his employees, consultants, shareholders and others who have access to these trade secrets are obligated in writing to safeguard our trade secrets to the extent described above.
These obligations shall also apply after termination of the contractual relationship.

Section 16 Final provisions

The place of performance for delivery and payment is Esslingen, Germany.
These Terms of Sales and Payment and all legal relationships between us and the customer are subject to the legislation of the Federal Republic of Germany under exclusion of the UN Convention on Contracts for the International Sales of Goods (CISG).
The exclusive place of jurisdiction for all disputes arising directly or indirectly from this contractual relationship is the court having jurisdiction for Esslingen. However, if we act as a plaintiff or applicant, we are also entitled but not obliged to appeal to the court of jurisdiction at the seat of business of the customer.
Any ancillary agreements, reservations, amendments and supplements shall be made in writing.
Negotiations regarding claims for defects or other claims for damages shall only be deemed to be ongoing if the parties have stated in writing that they will negotiate such claims. Where invoking such requirement of the written form constitutes an abuse of legal rights, neither party may invoke the observation of such written form requirement.
Should any provision of these General Terms of Sale, Delivery and Payment be or become invalid, this shall not affect the validity of any other provisions. Should other agreements within the framework of cooperation with the customer be or become invalid, this shall not affect the validity of any remaining agreements. In such a case, the invalid provision shall be construed or amended in such a way as to ensure that the intended economic purpose is achieved in a legally valid manner.

Citizen Machinery Europe
Esslingen, June 2011