SKOV A/S Suppliers: How to cooperate.

SKOV A/S Suppliers: How to cooperate. SKOV A/S Rev. 03, English Hedelund 4, Glyngøre 01-11-2012 7870 Roslev DK Denmark

Dear Supplier All of SKOV A/S suppliers contribute to making SKOV A/S the largest and most recognised supplier of climate control and production monitoring solutions for animal agricultural production ensuring optimum conditions for animals, people and the environment. In order to strengthen our partnership, we have prepared this manual to describe what we expect from our partners. Our customers require shorter delivery times and more flexibility and to be able to meet these market requirements, SKOV A/S must constantly be able to offer unmatched quality products, services and solutions at the best price. SKOV A/S therefore expects you, as a supplier, to help us achieve these objectives. In other words, SKOV A/S wants to cooperate with qualified, competent suppliers focusing intensely on costs, quality, flexibility, and delivery performance. This will be your commitment to our shared objectives which will help us add value to SKOV A/S customers every day. SKOV A/S customers expect us to constantly improve which means that continuous development of our business is an important competition parameter. In order to live up to this, we will focus on suppliers / partners who share our values in terms of: Drive; we set ourselves ambitious objectives and achieve them. Innovation; we are flexible, open to change and inspire each other. Cooperation; characterised by respect, openness and responsibility. SKOV A/S expects its partners to commit themselves to fulfilling these values in order for all of us to improve our competitiveness and at the same time strengthen our partnership. With this Supplier Handbook we wish to inform you about SKOV A/S expectations and requirements regarding the cooperation with your company, and our main objective is clear; we wish to create excellent, close working relations based on trust with our loyal suppliers to ensure that SKOV A/S will also be our customers preferred supplier in the future! Niels Bach Operations Manager SKOV A/S Poul Koch Purchasing Manager SKOV A/S SKOV A/S wants to be a preferred supplier to our customers and... We want to be a preferred customer at our suppliers

Contents 1 General Information... 4 2 SKOV A/S Sourcing Strategy... 4 3 Contacts at SKOV A/S... 5 4 Delivery Service... 6 5 Lead Time... 6 6 Quality... 7 7 Administrative Order Processing... 8 7.1 Purchase Order... 8 7.2 Order Confirmation... 9 7.3 SKOV A/S Web Portal... 10 7.4 EDI Connection Concept... 11 8 Labelling Products... 12 8.1 Packaging Goods:... 12 8.2 Labels:... 12 8.3 RoHS Marking:... 15 8.4 Bar Codes:... 15 8.5 Handling / Transport Symbols:... 16 8.6 Condition of Goods:... 17 9 Delivery Documents... 17 9.1 Delivery Note:... 17 9.2 Placing of delivery note 18

1 General Information This Supplier Handbook describes the guidelines of the future cooperation with SKOV A/S and should be seen as a supplement to the contract which may already have been entered into, or the price agreement concluded. The Supplier Handbook is a natural consequence of the requirements and expectations which SKOV A/S has experienced in recent years from export customers and others. These requirements and expectations imposed on SKOV A/S are continuously being tightened and a great effort and willingness to change are required by SKOV A/S as well as our suppliers to be able to meet these market requirements. In this Supplier Handbook, SKOV A/S operates with the following three terms: 1. SKOV A/S Standard Contract 2. SKOV A/S Conditions for Purchase and Delivery 3. SKOV A/S Suppliers How to cooperate Re. 1. The Standard Contract is used for our strategic, capacity and bottleneck suppliers. Re. 2. Conditions for Purchase and Delivery is used when no contract is made. Re. 1 and 2 are not part of this Supplier Handbook. 2 SKOV A/S Sourcing Strategy SKOV A/S has, among other things, the following sourcing strategy: o o The right suppliers, preferably as few as possible. A transparent structure for cooperation, adapted to the purchasing basis and contract. All new SKOV A/S suppliers must be evaluated prior to their first supply. The supplier evaluation must establish whether the supplier is acceptable as a SKOV A/S supplier. The evaluation includes factors such as the supplier s accounts, quality control, performance scores, technical competencies, logistics, etc. An approved supplier will then be segmented in accordance with the following model which describes how SKOV A/S wishes to control the supplier.

Importance of purchase Possibility for impact on economic SKOV investment result in cooperation High B A Low D C Low Complexity of market Risk of supply Supplier investment in cooperations Value of products For each segment, there is a set of established control parameters stating, for example, whether SKOV A/S carries out annual supplier evaluations and audits. 3 Contacts at SKOV A/S Name Function Phone Mobile Email Poul Koch Purchasing Manager +45 72 17 55 80 +45 52 13 55 80 pko@skov.dk Lars Ramsdahl Purchaser, Mechanics +45 72 17 56 67 +45 25 66 00 35 lra@skov.dk Jens E. Nielsen Purchaser, Electronics +45 72 17 55 38 +45 25 66 00 11 jen@skov.dk Marianne Metner Purchasing assistant, +45 72 17 55 33 +45 25 66 00 48 mmr@skov.dk Mechanics Lene M. Hjelmager Purchasing assistant, +45 72 17 56 62 +45 25 66 00 33 lmh@skov.dk Electronics Hans Ladefoged Quality +45 72 17 56 83 +45 25 66 00 30 hla@skov.dk Line Nielsen Finance +45 72 17 55 04 lin@skov.dk

4 Delivery Service In order for SKOV A/S to become the largest and most recognised supplier in the future in climate and farm management solutions for animal agricultural production, it is essential for SKOV A/S to be able to maintain a high delivery service level at any time. SKOV A/S defines a high delivery service level as follows: a. High level of quality; i.e. the supplier must always deliver in accordance with applicable specifications or any other type of documentation. b. High flexibility; i.e. the ability to be able to meet our customers requirements for fast delivery, or the ability to be able to meet requirements in terms of changes to packaging, labelling and much more. c. High delivery capability; i.e. being able to deliver according to the first confirmed delivery date. As a SKOV A/S supplier, you are expected to be able to maintain a delivery reliability level of minimum 98 % over a period of 12 months. In other words, 98 out of 100 order lines must be delivered at the first confirmed delivery date. The ability of the supplier to deliver will be evaluated regularly and the supplier will be informed of this on a monthly or quarterly basis. The supplier s reliability of delivery will be measured as follows: - Actual delivery date measured against the first confirmed delivery date - Actual delivery date measured against a new confirmed delivery date if SKOV A/S wishes to postpone the delivery date - Actual delivery date measured against a new confirmed delivery date if SKOV A/S wishes to fix an earlier date of delivery and this is accepted by the supplier 5 Lead Time The lead time will be fixed individually for the individual product groups; however, SKOV A/S expects the following goals: Class A goods: Lead time = transit time; i.e. the supplier has sufficient stock to meet SKOV A/S needs. Class B goods: Lead time is max. 2 weeks incl. transit time Class C goods: Lead time is max. 4-6 weeks incl. transit time Class D goods: Lead time is stated as the supplier s standard lead time. For classes A, B & C, SKOV A/S will forward a forecast and the supplier must guarantee that he will be able to deliver in accordance with this forecast. SKOV A/S undertakes to buy a

certain quantity of the quantity forecast. The supplier, on the other hand, undertakes to be able to deliver a +/- quantity of the quantity forecast. There is no forecast for class D goods. Lot sizes for class A & B goods must correspond to the package quantity and orders will be submitted accordingly. 6 Quality At SKOV A/S, we expect the following of our suppliers regarding quality: Achievement of an overall PPM of less than 500. Measured as follows: defective products / quantity received x 1.000.000. Defective products include all nonconformities defined as supplier errors identified on receipt of products or at a later stage of the production process. The supplier undertakes to inform SKOV A/S in advance if changes to the production process are contemplated. In addition, our suppliers must have a quality system which includes the following: Process Control Because defects which occur during the production process will at some point appear at SKOV A/S, or even worse at a SKOV A/S customer. Final Inspection SKOV A/S has no receiving inspection; the supplier must therefore ensure that the product meets the specifications for dispatch. Handling Nonconforming Products If / when product defects are identified, it is important that routines exist to ensure that gates are closed in order to prevent delivery of defective items and that products are kept away from OK items to prevent them from being delivered to SKOV A/S. Corrective Action / Continuous Improvement It is important the supplier has routines for corrective actions. If / When defects occur, it must be possible to correct them directly, and in the long run, improvements must be implemented to prevent the defects from recurring.

Production Basis It is important to SKOV A/S that the supplier has the documentation required to perform his work in order to ensure that changes / improvements which may be implemented can be integrated. Complaints Handling The supplier must have an established rule for handling complaints. Should it be necessary for us to complain about a product delivered, we must known that such an incident will be handled and recorded in order for the supplier to evaluate his own abilities. Document Control It is important that the supplier has document management since it is essential to us that the supplier is able to control revisions of drawings in cases where SKOV A/S specifies the product. Suppliers must also be able to deliver certificates of their supplies (plastic). The points above will be included in SKOV A/S evaluation as well as in the continuous supplier evaluation and the score on these points will therefore make up the basis of the assessment. 7 Administrative Order Processing 7.1 Purchase Order SKOV A/S forwards purchase orders daily for products and components supplied to our daily production or in any other way to our sales orders. Purchase orders from SKOV A/S are generated via MRP runs and are administered internally by the purchasing assistants responsible. The lead time agreed in advance with the supplier forms the basis of the creation of the order and the subsequent forwarding of the order. Orders are forwarded to the supplier by e- mail, EDI or fax. A purchase order from SKOV A/S contains, among other things, the following: - Purchase order number - Delivery address - Delivery and payment terms agreed - Orderer - SKOV A/S item number and description - Supplier s item number or approved type numbers - Quantity ordered

- Price agreed - Requested delivery date at SKOV A/S 7.2 Order Confirmation To be able to meet our customers' requirements for a quick response, SKOV A/S wants to receive the order confirmation no later than two working days after the date on which the order was placed. The order confirmation is to confirm the purchase order in terms of quantity, price, date of delivery (at SKOV A/S) and place of delivery. The order confirmation must at least include: - SKOV A/S purchase order number - SKOV A/S item number - The item designation In cooperation with our suppliers, SKOV A/S wants to reduce the time spent on non-value creating, administrative work. We therefore require that the order confirmation be transmitted electronically, either via SKOV A/S web portal or via an EDI connection. A temporary alternative to the above is to send the order confirmation to the orderer via e- mail.

7.3 SKOV A/S Web Portal SKOV A/S s web portal allows the supplier to access SKOV A/S' ERP system directly via a login and a password, and thus ensures easy and quick access to confirming the purchase order in question. This web portal provides SKOV A/S and the supplier with a common interface where all nondelivered purchase orders are visible, giving them a quick overview of purchase orders not yet confirmed. The portal allows the supplier quick confirmation of a purchase order; by clicking once, the date confirmed will be registered in SKOV A/S ERP system. This reduces the risk of the confirmation disappearing and prevents the supplier from receiving reminders concerning missing order confirmations. Below is illustrated SKOV A/S' web portal for order confirmations. The picture shows an overview of current orders at supplier X. When marking and entering a purchase order on the webportal, a confirmation screen of the SKOV A/S purchase order number 4500101508 at supplier X appears. At this screen you will have to confirmation the delivery date at SKOV A/S as well as the supplier's reference. When done you press "save", and the purchase order is confirmed in SKOV A/S ERP system.

It is not possible to confirm part deliveries. If it is needed to confirm a part delivery, then you must contact SKOV A/S. If it is impossible to deliver to the confirmed date, then the supplier immediately must inform the SKOV person who has placed the order. The delivery date in web portal must not be updated by the supplier without accept from the SKOV person who has placed the order. To get access to the web portal you will have to contact SKOV A/S to get your username and password, as well as receiving an instruction for use. 7.4 EDI Connection Concept When doing business with SKOV A/S, it possible to establish an EDI connection so that SKOV A/S and the supplier can send purchase orders and order confirmations via EDI; in the longer run, invoices will also be included in the EDI system. SKOV A/S uses the OIOUBL XML format. The XML format is the same format in which public authorities in Denmark require all suppliers to deliver invoices. From April 2011, SKOV A/S can order products by sending XML order files, and order confirmations can be received as well. In the near future, SKOV A/S also expects to be able to send order changes and to receive invoices in the same OIOUBL format. In the longer run, SKOV A/S will require that all regular SKOV A/S suppliers be able to deliver invoices in the OIOUBL XML format. Documents are exchanged via the OIOUBL format using SKOV A/S FTP server. The overall principle of this system is shown below. SAP (SKOV ERP) Order -> Idoc Confirmation <- Idoc FTP server SKOV Orders Confirmation Supplier Order (Sale) Order confirmation Order change -> Idoc Change Order change

Invoice <- Idoc Invoice Invoice Links to information regarding the OIOUBL standard: http://www.oioubl.info/classes/en/index.html 8 Labelling Products All physical dispatches to SKOV A/S must meet SKOV A/S standard delivery requirements. 8.1 Packaging Goods: Goods received at SKOV A/S must meet the following requirements: Packaging of wood (pallets and wooden boxes) must be heat-treated in accordance with ISPM15 Packaging may not contain polystyrene Packaging may not contain chip board Neutral packaging without logos and company name, unless otherwise agreed Special packaging requirements may exist for selected items / components. The supplier will be informed of this by means of packaging instructions to be prepared by SKOV A/S A min. fork opening of 10 cm on all pallets (for handling by ordinary pallet trucks) 8.2 Labels: The least wrapping unit must be marked with a SKOV A/S label. The SKOV A/S label is available in two different sizes: 70x30 mm and 105x105 mm. The supplier is allowed to change the size of the label to a dimension of approx. the same size. If you want to change sizes, it must be approved by SKOV A/S. The label is to contain the following: SKOV A/S item number Mandatory Bar code for item number Mandatory SKOV A/S item description If possible Date for production Mandatory Number Mandatory Below are examples of the labels Small product label 70 x 30 mm

Large product label 105 x 105 mm When labelling products, the general rule is to use the largest label as possible. The supplier must mark the least wrapping unit with a SKOV A/S label. As an example, if the product is not in a box (e.g. on a pallet), the pallet has to be marked with the label. Another example is if several pieces of an item are put in a box, then the box has to be labelled, including the number of pieces in the box. If a pallet contains more than one item number, the boxes must be clearly marked with SKOV A/S labels.

As indicated below the label has to be placed on the pallet / box or product so it is visible at goods receipt. SKOV A/S, a large label on a pallet

A small label on a box and indication of quantity and weight 8.3 RoHS Marking: If the component is a RoHS or a non-rohs component, this must be clearly indicated on the product, either on the label or on the packaging. The supplier is free to choose either a RoHS compliance symbol or text. A small label on a roll with electronic components and RoHS compliant 8.4 Bar Codes: The bar codes on the labels must observe the following rules: Type: Bar code UCC/EAN 128

Without application identifier and control digits Standard font is CAN number 3 ~ Swiss 721. The size can be selected between 3 and 6 in CAB. The height of a large label must be min. 15 mm The height of a small label must be min. 8 mm Example of bar codes for itemnumber. 8.5 8.6 Handling / Transport Symbols: Handling symbols must be used to the extent required.

8.7 Condition of Goods: In general, goods must be stored indoor at the supplier due to the ISPM15 regulations in connection with export to countries where observance of ISPM15 is required. Supplies for SKOV A/S must be adequately packaged. Goods must arrive in the same condition as when they left the supplier. Goods may not project beyond the width / length of the pallet on arrival. In case of deviations, we will document and inform the supplier of the defects for corrective actions to be carried out. 9 Delivery Documents 9.1 Delivery Note: As a minimum, suppliers must provide delivery notes with the following information in texts and bar codes: SKOV A/S purchase order no. The supplier s delivery note no. SKOV A/S item no. Product description (only text) Quantity Unit (only text) Example of a delivery note:

9.2 Placing of delivery Note In order to make the SKOV goods receipt more effective, the delivery note MUST be placed on the outside of the packaging in a plastic pocket, se below example.