Company X Purchasing Policy Prepared By: ______________ Approved By: ______________ Revision Date: ______________ Effective Date: ______________

PURPOSE: The purpose of this policy is to ensure quality materials, supplies, and services are procured by authori ed individuals from authori ed suppliers !ith consideration "iven to the adequacy of quantities, competitive pricin", and timely delivery# These business activities should be conducted in the best interest of the $ompany at all times# The "uidelines should also consider and avoid the disruption of business operations due to improper or untimely purchases and the inefficient use of cash caused by e%cessive purchases# SCOPE: This policy applies to the purchase of "oods and services, the approval of such purchases, and the receipt and acceptance of materials, supplies, and services# This policy covers all purchase commitments &!ith or !ithout the use of purchase orders'. The general ledger accounts impacted by this policy include Ra! (aterial )nventory, *peratin" +upplies and *ther $urrent Assets, Accounts Payable and e%pense accounts, !hich are directly char"ed# This policy applies to $ompany , and each of its subsidiaries or"ani ations and any-all departments requirin" "oods and services# +ystems covered by this policy include the +ystem , and +ystem .# POLICY: )t shall be the policy of the company to use a Purchase *rder system to efficiently and properly purchase all the "oods and services needed by the company, !ith certain notable e%ceptions# The e%ceptions are those items that are evidenced by a contract and or a"reement as to the terms and conditions of purchase such as utilities, frei"ht, professional fees and services, insurance, and incidental purchases such as conference fees, subscriptions and etc# +uch purchases shall be made !ith the appropriate si"natory approval by mana"ement as indicated in para"raph /#0# Appropriate internal controls shall be utili ed to assure and maintain accuracy of: a# the purchase orders issued, b# the quality and quantity of the "oods received, and c# reportin" and recordin" the receipts of "oods and services to1 accurately and properly ma2e payment and ensure that the transaction is recorded in the proper period PROCEDURES: The follo!in" procedures are intended to assist the business units in applyin" this policy# These procedures are not intended to address specific control activities applied by the business units or statements of operatin" procedures# The intent is to provide supportin" "uidelines to assist

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operatin" units in developin" necessary activities to ensure that the policy is understood and bein" follo!ed# 1.0 Purchasing R !uir m n"s Purchasin" requirements should be determined and submitted to the purchasin" department based on the company4s needs: 3#3 Ra! (aterials 5based on several factors includin" sales forecasts, production schedules, and current inventory in stoc2# 3#/ Repetitive purchases of certain items, such as storehouse inventory, that may be based on automatic reorder points requested by manufacturin"# 3#6 Requisitions for (R* items and +ervices that are not maintained in the storeroom and used throu"hout the plant that are requested by appropriate supervisors# 3#7 $apital E%penditures 5 based on approved capital pro8ects and requested by the pro8ect leader# +ee $apital E%penditure policy# #.0 $ppro%al L % ls /#3 Purchases of (aintenance, Repair, and *perations items &(R*', in the normal course of business, !ill require the follo!in" approvals: Dollar $moun" 9p to :3,000 :3,003 to :30,000 :30,003 and above $u"hori& ' $ppro%al L % l +upervisor-Department (ana"er +enior (ana"er &Direct Report to ;P' ;ice President

+i"nificant purchases of (R* items outside of the normal course of business !ill require approval of the $E*# /#/ Purchases of materials, outside processin" &*+P', utilities, and frei"ht, in the normal course of business, !ill require the follo!in" approvals: I" m (aterials, *+P, 9tilities, <rei"ht +crap $u"hori& ' $ppro%al L % l ,: Director of (aterials and =o"istics .: (ana"er, (aterials and PP)$ Director of (anufacturin" +ervices and $ontroller

+i"nificant purchases of materials, *+P, utilities, and frei"ht outside of the normal course of business !ill require approval of the $E*# (.0 Plac m n" o) Or' rs 6#3 *nly Purchasin" Department personnel are authori ed to issue purchase orders# 6#/ Purchases made under contractual arran"ements &e%cludin" corporate a"reements' that either supplement or are used in lieu of a purchase requisition must be revie!ed by the purchasin" department for assessment of commercial terms and conditions prior to approval# $ontracts are to be si"ned by the Purchasin" Department to verify that the commercial terms and conditions in the contract have been revie!ed and are acceptable# 6#6 $opies of all contracts are required to be provided to the respective business unit $ontroller &and to the $hief <inancial *fficer if over :30,000' for assessment as to the proper accountin" treatment and disclosure requirement prior to approval#

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6#7 Purchases made under contractual arran"ements must be authori ed in accordance !ith the approval levels described in section /#0# 6#> All ori"inal contracts are to be maintained by the Purchasin" Department# 6#? The Divisions Purchasin" Departments shall maintain appropriate purchasin" "uidelines and approved vendor4s list# 6#@ Purchase orders !ill be prepared on the +ystem , and or +ystem . and !ill have sequential numbers assi"ned automatically# *.0 R c ip" an' $cc p"anc 7#3 Aoods and services received should be verified for accuracy &i#e# proper quantity and type of product or service' throu"h comparison of receivin" documentation to approved purchase orders or contracts# 7#/ Discrepancies bet!een receivin" documentation and the purchase order or contract should be identified, investi"ated, and resolved in a timely manner# 7#6 Aoods and services received should be recorded to +ystem , and +ystem . accurately and in a timely manner# 7#7 Aoods should be inspected for quality purposes in a timely manner# +.0 $pplica,l E-" rnal .ui'anc >#3 This policy is based on "ood business practice supported by normal chec2s and balances as !ell as separation of duties#

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