I. Purpose

This practice aims to apply the "Desirable Contract Conclusion Practices for Win-Win Cooperation between Large Enterprises and SMEs" established by the Fair Trade Commission, ensuring that contracts between Ajou Steel Co., Ltd. and its partners reflect the partners' benefits fairly, preventing the misuse of Ajou Steel's superior bargaining power in transactions, and establishing rational and fair trading practices.

II. Establishment of Contract Conclusion Infrastructure

1. Setting Criteria for Choosing Contract Methods

A. Ajou Steel should select contract methods based on certain criteria, considering its trading position and market impact. Examples of contract methods are as follows.

(1) Private Contracts

Contracts concluded without bidding, based on Ajou Steel's own evaluation and final approval of the counterpart, in the following cases:

1. When there is no time to put the contract up for competition due to a sudden rise in raw material prices or similar circumstances
2. When it is inevitable to contract with the current trading partner:
   1. When it is difficult to distinguish responsibility for defects in construction, or in the case of finishing works
   2. When the manufacturer/supplier of the item installs, assembles, or maintains the item
   3. When receiving manufacturing/supply from someone other than the manufacturer/supplier of the item would result in incompatibility
3. When competition is practically impossible:
   1. Construction using patented methods or new technologies
   2. When manufacturing or purchasing items that are patented, utility models registered, or design registered
4. When competition is not possible due to specific technology, services, location, structure, quality, performance, efficiency, etc.

(2) General Competitive Contracts

Contracts concluded by freely competing without restricting the qualifications of participants or designating participants in bidding, taking into account the type and importance of items, the number of potential partners, etc.

(3) Restricted Competitive Contracts

Contracts concluded by restricting the qualifications of participants in bidding based on the importance of items, trading experience, etc., and then deciding on the successful bidder. Examples of restricted competitive contracts include:

1. Contracts considering the bid limit amount, construction capability, or similar construction performance
2. Construction contracts requiring special technology or methods
3. Manufacturing contracts requiring special equipment or technology
4. Purchasing contracts requiring special performance or quality
5. Service contracts requiring special technology
6. When it is necessary to consider the financial status of participants to prevent poor contract performance
7. ※ When restricting the qualifications of participants, the restrictions and criteria must be stated in the bid notice

(4) Designated Competitive Contracts

Contracts concluded by designating participants in bidding based on the importance of items, trading experience, etc., and then deciding on the successful bidder. Examples include:

1. When it is difficult to achieve the contract's purpose without specific equipment, technology, materials, items, or performance, and there are 10 or fewer potential bidders
2. Construction projects with an estimated price below a certain amount, manufacturing contracts with an estimated price below a certain amount, service contracts with an estimated price below a certain amount
3. Purchasing products certified with environmental labels or standard marks
4. ※ At least five bidders must be designated, and there must be at least two bid participants (if there are fewer than five designated participants, all participants must be designated)

※ The above conditions can be modified considering the special circumstances of individual companies

B. Ajou Steel establishes internal selection criteria considering the importance of items, the number of potential trading partners, trading experience, and the total transaction amount.

Criteria for Selecting Contract Methods

2. Proposal System for Potential Partners

Ajou Steel operates a cyber proposal system through its website, allowing new companies wishing to do business to submit proposals directly.

3. Establishment of PRM (Partner Relationship Management)

A. Large companies should establish PRM to promote win-win cooperation between large enterprises and SMEs through open management that includes transactions with new companies, rather than closed partner management.

※ PRM (Partner Relationship Management) or SRM (Supplier Relationship Management) is a management system aimed at mutual development through large companies sharing various necessary information with their partners, ensuring transparency and stability in transactions, and providing necessary information for the partners' business activities.

Provide a cyber space or arrange regular meetings for partners to share information and cooperate.

4. Operation of SME Support Organization

Operate a dedicated support organization responsible for providing technical support, funding support, education, and proposal systems for partners.

III. Conclusion of Contracts Ensuring Autonomy

1. Compliance with Contract Conclusion

Ajou Steel should comply with the following items when concluding contracts with partners.

A. Prior Issuance of Written Documents

(1) The principle is to conclude contracts in writing in advance, but at least a signed and sealed contract must be concluded before starting work for delivery, etc. (the same applies to 'handover' in construction).

(2) The contract must include the subcontract payment amount and its payment method, the conditions, methods, and procedures for adjusting the subcontract payment according to raw material price changes, and the contents specified in the Enforcement Decree of the "Fair Subcontract Transactions Act."

(3) In the case of frequent transactions, issue a basic contract first, then issue a settlement statement for transactions during a certain period.

(4) In the case of frequent additional work with clearly expected volume fluctuations, issue a settlement agreement immediately after completion of delivery, etc.

(5) When requesting additional work within a significantly shorter period than the generally accepted period, prior written agreement on the main contents is required.

(6) Orders placed via fax, messenger, or other electronic forms are also considered valid written issuance.

B. Price Determination by Reasonable Calculation Method

(1) The unit price of items should be determined through consultation, considering the quantity, quality, specifications, delivery time, payment method, material price, labor cost, market trends, appropriate management expenses, and profit.

(2) If there is a reason for changing the initial unit price during the contract period, the contractor can apply for unit price adjustment, and the new price must be determined through mutual consultation within 30 days (extendable by 30 days) from the application date.

(3) If the unit price determination is delayed due to special reasons, the price should be retroactively settled from a mutually agreed point in time, and the unit price should be determined as soon as possible through mutual consultation.

(4) Periodically investigate the wage rates used as the basis for cost estimation to present unit prices that reflect reality, considering the labor costs in the same industry and setting wage rates based on the conditions of work, company size, and technical level. Do not set wage rates significantly lower than those in the same industry without justified reasons.

(5) The criteria and procedures for negotiating the unit price when the initially set price changes should be specified in the contract.

(6) Clearly state the reasons for changing the unit price (e.g., price changes, raw material prices, exchange rates), negotiation period, payment conditions, and other specific contents.

C. Clear Delivery Times

(1) Set delivery times suitable to normal practices considering the characteristics of each industry, through sufficient consultation with partners.

(2) Clearly define the delivery times at the time of contract conclusion and clearly state any changes to the delivery times. In case of emergency orders with shorter delivery times than usual, pre-consult with partners and reach an agreement.

(3) If partners suffer losses due to unreasonable delay or refusal of acceptance despite not being responsible, compensate them for the damage.

D. Objective Inspection Standards

(1) At the time of contract conclusion, set objective, fair, and reasonable inspection standards and methods for items (in construction, "completed work") through mutual consultation with partners.

(2) Upon delivery, even before inspection, promptly issue a receipt, and conduct inspections quickly according to pre-determined inspection regulations and procedures.

(3) Unless there are justified reasons, notify the inspection results within 10 days of receiving the delivered items.

(4) Manage ordered items with the care of a good manager during the inspection period or before the inspection.

E. Reasonable Payment Deadline

(1) When commissioning manufacturing or other services to partners, the payment must be made within 60 days of receiving the delivered items (in construction, the acceptance date; for services, the completion date). If issuing tax invoices monthly, the payment must be made within the set date.

(2) If Ajou Steel receives payments for completed works, progress payments, etc., from the client according to the completion or progress of manufacturing, repair, construction, or service performance, the corresponding amount must be paid to the partner within 15 days (or the payment deadline if earlier) from the receipt date.

(3) If progress payments, etc., are received according to the progress of manufacturing, repair, construction, or service performance, the corresponding amount must be paid to the partner within 15 days (or the payment deadline if earlier) from the receipt date.

(4) Payments must be made in cash at a ratio equal to or higher than the cash ratio received from the client for the manufacturing commission, etc.

(5) If paying with promissory notes, issue notes with a maturity period within the payment period received from the client for the manufacturing commission, etc.

(6) If paying with promissory notes, the notes must be discountable by a financial institution established by law, and the discount fee for the period from the note issuance date to the maturity date must be paid on the note issuance date.

(7) If issuing promissory notes within 60 days of receiving the delivered items, the discount fee for the period exceeding 60 days from the receipt date to the maturity date must be paid within 60 days of receiving the delivered items.

(8) If paying with promissory note substitutes, the fees for the period from the payment date (for company purchase cards, the card payment approval date; for accounts receivable-backed loans, the delivery details transmission date; for purchase loans, the purchase fund payment date) to the subcontract payment repayment date must be paid on the payment date.

(9) If paying with promissory note substitutes within 60 days of receiving the delivered items, the fees for the period exceeding 60 days from the receipt date to the subcontract payment repayment date must be paid within 60 days of receiving the delivered items.

(10) If the payment is made more than 60 days after receiving the delivered items, interest calculated at a rate determined by the Fair Trade Commission must be paid for the excess period.

F. Reasonable Handling of Defects Found After Delivery

Define the entity responsible for identifying the cause of defects, the types of defects, and the burden ratio of responsibility, and handle returns based on mutual agreement between the parties.

G. Contract Termination

(1) Define the reasons for termination through mutual agreement between the parties, distinguishing between cases where prior notice is required and cases where it is not. In the event of termination reasons, notify the counterpart in writing without delay.

(2) The following cases can be terminated without prior notice:

1. When the counterpart receives a suspension of transactions from a financial institution or a business suspension or cancellation from a supervisory authority
2. When both parties agree that it is difficult to fulfill the basic or individual contract due to dissolution, transfer of business, merger with another company, disaster, or other reasons

(3) In the following cases, the counterpart must be given a period of at least one month to fulfill the obligations, and if not fulfilled within that period, the contract can be terminated:

1. When the counterpart violates important contents of the contract or individual contract
2. When the ordering party delays the implementation of necessary matters for manufacturing the ordered items without justified reasons, causing disruption to the partner's work
3. When the partner refuses to manufacture the ordered items or delays the start of work without justified reasons, making it difficult to meet the delivery date
4. When there is a reasonable reason to believe that the partner lacks the technical, production, and quality management capabilities to fulfill the contract satisfactorily

(4) In case of unavoidable reasons for suspending transactions, notify the counterpart in writing as soon as possible.

※ In addition to the above compliance items, the following items are recommended if necessary:

• Technology Escrow System

- Use a "Technology Escrow System" to deposit technology data with a third-party institution to protect the original technology of the trading company

• Improvement of Occasional Orders

- Present predictable quantities on a quarterly basis to avoid the instability caused by occasional orders

2. Prohibited Items in Contract Conclusion

Ajou Steel should avoid the following items when concluding contracts:

A. Failure to Issue or Preserve Written Documents

(1) Issuing documents without stating items that are difficult to finalize at the time of commission without justified reasons and without stating the reasons for their omission and the expected date of finalization

(2) Delaying or failing to issue new documents without justified reasons after the items have been finalized

(3) Failing to respond in writing within 15 days of receiving a request from the partner for confirmation of the commission details, subcontract payment, and commission date for oral commissions

(4) Failing to sign or seal the written confirmation of the commission details for oral commissions

(5) Failing to issue specific additional contracts or work instructions for significant and frequent additional work

(6) Failing to issue change contracts or settlement statements for additional or changed construction quantities proven during construction

(7) Failing to preserve legal documents for three years and arbitrarily destroying them within three years according to internal regulations

(8) Preserving documents for three years from the end of the transaction but creating and preserving false documents or contents afterward

(9) Failing to preserve bid details, successful bidder determination forms, estimates, construction commission explanations, specifications, etc., related to subcontract payment determination

B. Unfair Subcontract Payment Determination

(1) Determining subcontract payment by uniformly lowering unit prices without justified reasons

(2) Unilaterally deducting a fixed amount under the pretext of cooperation requests, etc., and determining subcontract payment

(3) Determining payment in favor of specific partners without justified reasons or determining payment at unilaterally low unit prices without agreement with the partners

(4) Misleading the counterpart with errors in the order conditions or by showing estimates or false estimates from other companies to determine payment

(5) Determining payment below the sum of the direct construction cost items without justified reasons in private contracts

(6) Determining payment below the lowest bid price in competitive bidding without justified reasons

(7) Uniformly lowering unit prices without objectively valid reasons such as material price or labor cost declines

(8) Determining payment lower than for other partners without justified reasons, despite having the same payment conditions, quantity, and difficulty

(9) Determining payment based on bulk order estimates but actually placing small orders

(10)Commissioning manufacturing without determining payment and determining payment below the usual amount without consultation with the counterpart

(11)Lowering payment by providing the technology data received from the counterpart to other companies and using their estimates

(12)Creating a significantly lower execution budget than the original contract amount and determining payment within that budget

(13)Determining payment significantly lower than the usual amount for reasons such as export, special sales, or samples

(14)Forcing partners to supply at significantly lower prices than usual for special sales events such as discount promotions

C. Requiring Oral Proposals or Development Requests

Canceling development after completing equipment or production preparation, or demanding a price reduction from the orally proposed price

D. Unfair Management Interference

(1) Interfering with personnel matters by requiring the appointment or dismissal of partner employees to be subject to Ajou Steel's approval or hiring specific individuals against the partner's will

(2) Interfering with subcontracts by restricting the selection and contract conditions of subcontractors without regard to the quality and timely delivery of ordered items

(3) Interfering with ongoing construction against the partner's will by mobilizing site workers

(4) Restricting the partner's product items, facility size, or transactions with Ajou Steel's competitors

(5) Unjustly requiring partners to provide delivery-related technology data

(6) Forcing partners to participate in special sales events or purchase products such as gift certificates

E. Failure to Reflect Additional Construction Costs (for construction contracts)

(1) Preventing requests for additional quantity settlement after construction completion

(2) Imposing the costs of installing and operating the supervisor's office on the partner or prohibiting any contract changes due to wage increases or price changes after the initial contract

(3) Excluding construction delays and stoppages due to construction circumstances or natural disasters from the construction period and not recognizing additional contracts for these reasons

F. Failure to Adjust Subcontract Payment Due to Design Changes

(1) Receiving additional amounts for design changes or economic circumstances from the client and not paying the partner or paying less than received

(2) Failing to adjust the contract amount within 30 days of receiving additional amounts for design changes or economic circumstances from the client

(3) Paying the adjusted amount more than 15 days after receiving additional amounts for design changes or economic circumstances, without paying delay interest, promissory note discount fees, or other fees

(4) Failing to notify the partner of the reasons and contents of the adjustment within 15 days of receiving additional amounts for design changes or economic circumstances

G. Failure to Adjust Subcontract Payment Due to Raw Material Price Changes

(1) Failing to respond to the partner's request for unit price adjustment or failing to proceed with substantial consultation after notifying of the start of consultation

(2) Failing to have a responsible person with substantial unit price adjustment authority participate in the consultation after 30 days from the request

(3) Repeatedly proposing prices that the counterpart cannot accept without objective basis for unit price adjustment

H. Exclusive Transaction Requirements

Prohibiting partners from transacting with Ajou Steel or designated companies (excluding cases where exclusive transactions are agreed upon for joint technology development)

I. Unilateral Transfer of Complaint Handling Responsibilities

Taking full responsibility for economic and administrative complaints during construction, and if complaints persist and disputes continue, handling the complaints and deducting related costs from the progress payment

J. Unfair Special Terms

(1) Setting contract terms that unfairly infringe or limit the partner's benefits

(2) Imposing the costs of unlisted requirements on the partner

(3) Imposing the costs of complaint handling, industrial accidents, etc., that should be borne by Ajou Steel on the partner

(4) Imposing the costs of unlisted items required in the bid details on the partner

3. Faithful Contract Execution According to the Contract and Related Laws

The parties should comply with the following items during contract execution:

A. Compliance with Civil Law and Other Related Laws

Adhere to the principles of good faith, the Subcontract Act, and the Fair Trade Act, resolving disputes based on written materials.

B. Prior Sufficient Agreement and Issuance of Written Documents for Unit Price Reductions

Present reasonable grounds for the extent of unit price reduction due to raw material price declines or increased quantities and resolve them through agreement.

C. Adjustment of Payment Due to Contract Changes

If additional costs are incurred due to additional specifications, the corresponding payment should be made.

※ Recommended Items

Terminate contracts according to the stipulated contents, and notify the partner in writing 2-3 months in advance if possible for contract terminations not corresponding to the contract termination reasons.

4. Items to Avoid During Contract Execution

The parties should avoid the following items during contract execution:

A. Unfair Refusal of Acceptance

(1) Refusing acceptance even when it is difficult to judge if the delivered items differ from the commission content due to unclear commission details

(2) Refusing acceptance of already commissioned items due to claims from the client, foreign importers, or poor sales

(3) Refusing acceptance for delayed delivery or construction due to late supply of raw materials or construction materials despite knowing it is impossible to deliver or construct within the delivery or construction period

(4) Applying higher standards than the usual standards without setting inspection standards

(5) Refusing acceptance by applying higher standards than the initially agreed inspection standards even if inspection standards are set

(6) Refusing acceptance without justified reasons even after the partner requests acceptance

(7) Refusing acceptance arbitrarily due to perceived difficulty in stable supply because of the partner's bankruptcy

(8) Refusing acceptance of other items due to defects in some items or the client's order cancellation or suspension

B. Unfair Return Actions

(1) Returning items due to order cancellation from the client or changes in economic conditions

(2) Returning items unfairly judged as defective due to unclear inspection standards and methods

(3) Returning items judged as defective due to poor quality of supplied raw materials

(4) Returning items due to delayed delivery caused by delayed supply of raw materials

(5) Returning already accepted items due to claims from the client, foreign importers, or poor sales

(6) Returning items inspected by a third party commissioned by the partner

(7) Returning items due to delivery or construction delays despite evidence of acceptance of these delays

C. Unfair Reduction of Payment

(1) Reducing payment for unreasonable reasons such as cooperation requests or changes in economic conditions without specifying reduction conditions at the time of commission

(2) Applying retroactive unit price reductions to commissions made before the agreement on unit price reductions

(3) Excessively reducing payment for early or cash payments

(4) Unilaterally reducing payment for minor partner faults that do not significantly affect losses

(5) Deducting amounts above the reasonable purchase or usage cost when partners purchase necessary items or use Ajou Steel's equipment

(6) Reducing payment for price or material price drops at the time of payment compared to the delivery time

(7) Reducing payment unfairly for reasons such as business losses or price reductions

(8) Reducing indirect labor costs, general management costs, profit, VAT, etc., differently from the initial contract

(9) Imposing costs of employment insurance, industrial accident insurance, etc., on partners, which should be borne by the original contractor

(10)Reducing payment due to unreasonable delivery or construction periods set by Ajou Steel, delaying the supply of materials and equipment

(11)Reducing subcontract payment retroactively or by concrete contract details different from the original contract

(12)Reducing payment for reasons such as receiving items at low prices, different from the original contract

(13)Reducing payment by changing contracts despite unchanged commission content and conditions

(14)Transferring exchange losses to partners, reducing payment differently from the original contract conditions

D. Unfair Requests for Economic Benefits

(1) Requesting economic benefits such as sponsorships, incentives, or support funds under the pretext of starting transactions or bulk transactions

(2) Requesting economic benefits such as sponsorships, incentives, or support funds for reasons such as business losses or deteriorating business conditions

(3) Requesting economic benefits such as sponsorships, incentives, or support funds without legal obligations on the partner's part

E. Imposing Costs Due to Ajou Steel's Causes

1. Transferring costs caused by Ajou Steel's wage increases or internal approval delays to the partner

F. Unfair Compensation in Kind

Paying partners in kind against their will, different from the initial contract

G. Retaliation Actions

Limiting order opportunities or suspending transactions due to partners reporting subcontract law violations to the Fair Trade Commission, or giving other disadvantages

H. Evasion Actions

(1) Trying to avoid the application of the subcontract law through indirect methods

(2) Recovering payments to partners after complying with corrective measures by the Fair Trade Commission, or deducting from delivery payments

(3) Lowering unit prices uniformly after paying promissory note discount fees or delay interest to partners

I. Forced Purchases of Items

(1) Forcing partners to purchase or use products or services from Ajou Steel's affiliates or specific companies without justified reasons

(2) Unjustly forcing partners to purchase or use designated items or equipment against their will

(3) Repeatedly requesting purchases despite the partner clearly indicating no purchase intention

J. Unfair Payment Requests for Purchased Items

(1) Forcing partners to purchase necessary items or use Ajou Steel's equipment and making them pay purchase or usage costs before the payment date

(2) Forcing partners to purchase necessary items or use Ajou Steel's equipment under significantly unfavorable conditions compared to Ajou Steel's purchase or usage conditions

K. Forced Provision of Technology Data

(1) Unjustly forcing partners to provide the following technology data to Ajou Steel or third parties:

1. Data on manufacturing, repair, construction, or service performance methods maintained as confidential through substantial efforts
2. Information related to intellectual property rights such as patents, utility models, designs, copyrights, etc.
3. Technical or managerial information useful for business activities and having independent economic value

(2) Unjustly using technology data acquired from partners for Ajou Steel or third parties