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Appendix C: Industry Recommendations for Security Audit

1. SECURITY

1. Supplier confirms that employees of Supplier performing work at Buyer's facilities have no record of criminal convictions involving drugs, assaultive or combative behavior or theft within the last five years. Supplier understands that such employees may be subject to criminal history investigations by Buyer at Buyer's expense and will be denied access to Buyer's facilities if any such criminal convictions are discovered.
2. Within fifteen (15) days after executing of this Agreement, Supplier shall furnish Buyer with its plan to provide an atmosphere of restricted accessibility for Buyer freight while in Supplier's control. Furthermore, where restricted accessibility may be precluded bylaw, Supplier agrees to implement Buyer's Minimum Security Guidelines. Supplier shall follow generally accepted industry standards to do so. Supplier agrees to ensure a level of security acceptable to Buyer at all times.
3. Buyer must be notified immediately of any Supplier inspections.
4. If exception is taken or signs of tampering spotted in any portion of a shipment, Supplier will immediately notify Buyer and will proceed according to the instructions provided by Buyer personnel. If material is to continue transit, reasonable efforts must be made to preserve evidence of tampering, i.e., photographs.
5. Supplier and its agents' facilities shall be secure from unauthorized entry. Buyer may, at its option, periodically audit Supplier's facilities and may require Supplier to jointly audit any agents' facilities.
6. Supplier agrees to confirmed comply with requirements and responsibilities as defined in Addendum "D", Freight Contractors Minimum Security Guidelines.

ADDENDUM

FREIGHT CONTRACTORS
INDUSTRY RECOMMENDED
MINIMUM SECURITY GUIDELINES

1. GENERAL

   1. The Supplier shall produce to Buyer's local Distribution Contracts and Security Manager, written security procedures and evidence of implementation based on Buyer's security guidelines, within one month after commencement of the contract or freight agreement.
   2. The Supplier agrees to assign a senior security representative to monitor, standardize and implement its security procedures throughout all servicing and transit locations
   3. The Supplier shall ensure that all employees and sub-contractors who have access to Buyer product are positively vetted before employment commences. Evidence of vetting procedures to be produced at Buyer's request. Compliance with this section will be governed by existing local laws and regulations.

2. HANDLING GUIDELINES

   1. The Supplier is required to provide a secure storage area for Buyer product. The secure area will be designed to deter and prevent unauthorized access. Entry to the secure area is to be limited to personnel directly involved in shipping and receiving of Buyer's product. For the purpose of this action, examples of security storage may include sealed or locked containers, locked cages, locked hard-wall areas, and cargo stored in racks at a sufficient height to prevent access by unauthorized persons. Any loose cargo stored over six hours must be stored in a locked cage or locked hard-wall area.
   2. Loading of Buyer product shipments must be done in the presence of the authorized driver; no pre-loading of product shipments on vehicles for later collection is permitted.
   3. The Supplier is prohibited from opening Buyer freight unless directed by Customs officials or Buyer. Any freight showing evidence of being opened or tampered with must be reported to Buyer immediately and a written report is to be produced within twenty-four (24) hours following the discovery. The Supplier must implement procedures for communicating freight discrepancies and damaged cartons to Buyer.

3. SUPPLIER'S PREMISES SECURITY

   1. The Supplier will provide and maintain, at all times, adequate security systems to allow continuous security monitoring and protection of Buyer's freight against fire and intrusion. This will include a building fire detection system, an intruder detection system, and a closed circuit television system with a video recording capability. Any exceptions to this requirement must be approved by Buyer.
   2. The Supplier will ensure that all vehicle and pedestrian access to its premises is controlled to prevent unauthorized casual and intentional intrusion. Details of measures shall be included in Supplier's security procedures.

4. VEHICLE SECURITY

   1. All trailers used for transporting product shall be quipped with solid sides and locking cargo doors. Any exception to this requires prior written agreement by Buyer. Any such waivers granted by Buyer shall be on an individual shipment basis and will not cover multiple shipments of Buyer's product.
   2. Where applicable, the driver of the delivery vehicle shall not deviate from the assigned delivery routes nor make unscheduled stops.
   3. Buyer reserves the right to require, at any time, that the Supplier's vehicle tractor units and trailers be fitted with a mutually agreed vehicle location system and that arrangements be made to supply Buyer with copies of alarm exception reports.
   4. All Supplier's vehicles used for carrying Buyer product shall be equipped with a suitable communication system that will allow the vehicle driver to request assistance in the event of an emergency.

5. AUDITS

   1. Excepting routine business meetings with Buyer, Supplier will meet with Buyer Security or its appointed representatives at least one per year or at Buyer's request.
   2. Buyer reserves the right to audit any of Supplier's premises and/or servicing and transit locations and will report audit results and proposed corrections within fifteen days of completed audit. Copies of audit procedures shall be included in Supplier's security procedures.

6. CARRIER'S USE OF SUB-CONTRACTORS
   If the agreement of the parties fails to address Supplier's use of sub-contracts for performance of any of its freight forwarding responsibilities under this base contract, then Supplier must seek and receive Buyer's written consent before use of such sub-contractor.

7. GENERAL SECURITY RESPONSIBILITIES

   1. Supplier corporate security representative will complete loss/theft investigations and report to Buyer in writing within 24 hours of any such incident.
   2. Supplier will perform twice a year self audit of facilities in cities as well as hub locations through which Buyer's freight is moved and report results to Buyer in writing according to Buyer's security checklist.
   3. Supplier will establish security Standard Operating Procedures for Buyer's shipments by March 1, 1994 and update it twice per year. Supplier will provide a copy of its security Standard Operating Procedures to Buyer immediately after promulgation and after each update. Supplier will perform additional updates as needed.
   4. Buyer Corporate Security to have open access to Supplier facility audits and loss/theft investigations. Also, Buyer's Corporate Security shall, as necessary, participate with Supplier security on security investigations and resolutions of issues involving loss/theft investigations.
   5. As needed, Supplier to provide Buyer a full report on all losses and thefts at specific facilities for indicated period of time (6, 12, and 24months...etc.). Supplier's report will list losses for both Buyer and non-Buyer freight.
   6. Supplier will comply with Buyer's Freight Carrier Contractors Minimum Security Guidelines. A blanket exception will be allowed on item 4.C (vehicle locator system) provided Supplier's vehicles are equipped with two way radio (minimum requirement) equipment. Any other exceptions to Buyer's Security guidelines will be considered by Buyer on a location by location basis. Buyer reserves authority to accept or refuse exception requests.
   7. Quarterly Security Reviews shall be conducted at each servicing location. Results are to be reported at quarterly meetings and any irregularities and corrective action plans explained.
   8. Supplier's Corporate Security Official will meet with Buyer's Security semi-annually or as required. A security report will be submitted as required, with copies provided to Buyer's Security and to Buyer's Corporate Logistics.
   9. Airport audits will be performed by Supplier on a regular basis as per local Buyer requirements. Local Supplier Security Officials and local Buyer Security Officials will meet on a regular basis as per local security requirements.

ANY AMENDMENTS OR WAIVERS TO THESE GUIDELINES
MUST BE APPROVED BY CORPORATE SECURITY AND CORPORATE LOGISTICS

Ownership

The high value product/inventory program clearly defines the primary responsibility for the security and control of high value product/inventory. The responsibilities of logistics/security and site management include:

1. Logistics to own the security audits of warehouses which they manage.
2. Logistics will also own the security audits of freight lanes managed by Buyer as defined in Exhibit One in the appendix of this policy
3. Corporate Security resources to provide training and timeline for training.
4. Ownership for standardization for security processes and material
5. Buy off of document to be used for security audit guidelines

Areas where Logistics cannot own:

1. Material warehouses as defined in Exhibit Two
2. Inbound materials not routed on freight suppliers

FREIGHT CARRIER CONTRACTORS INDUSTRY RECOMMENDED MINIMUM SECURITY GUIDELINES OVERVIEW