Law On Leasing, No.3226 Enacted : June,10 1985 SECTION ONE General Provisions Purpose : ARTICLE 1 : The purpose of this Law is to regulate leasing Scope : ARTICLE 2 : This Law governs leasing contracts and the rights and obligations of the parties to such contracts. Definitions : ARTICLE 3 : For purposes of this Law : • “Contract” is a leasing contract. • “Lessor” is an authorized leasing company. • “Lessee” is a party contracting to lease the goods. • “Good” is a good subject to a leasing contract. • “Rental amount” is a financial rental amount. Contract : ARTICLE 4 : The contract gives the Lessee the possession of the Good in order to provide the full benefit for an irrevocable time period against payment of the Rental Amount.The Goods requested or specified by the Lessee shall be purchased from third parties by the Lessor or obtained through any other legal means by the Lessor. Subject of the Contract : ATRICLE 5 : The subject of a Contract may be movable or immovable Goods. Intangible and industrial rights such as patents may not be the subject of a Contract. Financial Rental Amount : ARTICLE 6 : The Rental Amount to be paid and the payment schedule shall be determined by the parties.The Rental Amount may be fixed or variable.The Rental Amount may be denominated in Turkish Lira or any foreign currency that is traded by the Central Bank. Regarding cross-border transactions, the annual Rental Amount may not be less than the Turkish Lira equivalent of U.S.$ 25.000.- The Council of Ministers is authorized to increase this amount or decrease it to its original level. Irrevocable Contract Period : ARTICLE 7 : Contracts may not be canceled for a minimum period of four years.The Council of Ministers will determine the specific conditions for which this period may be decreased and will issue an administrative order on this subject. Form and Registration of the Contract : ARTICLE 8 : The Contract shall be issued and notarized by a notary public.Contracts regarding movable Goods shall be registered in a special register with the notary public where the Lessee resides.Contracts regarding immovable Goods shall be registered in the declaration column of a deed at the title Office at the township where immovable is located.Contracts on ships must be registered with the ship registrar. After registration, third parties can not make claims regarding the rights in rem over the Goods against the Lessor. If the Lessor does not have a branch in Turkey, leasing contracts shall be registered with the Ministry responsible for the Undersecreteriat of Treasury and Foreign Trade. Purchase of the Goods Subject to Leasing : ARTICLE 9 : Ownership of the Goods subject to leasing shall remain with the Lessor .However parties may agree in the Contract that the Lessee shall have the right to exercise a purchase option at the end of the Contract term. Legal Status of The Lessor : ARTICLE 10 : Leasing companies may be formed only as joint stock companies. Establishment of and opening of branches of domestic leasing companies and the opening of branches of foreign companies are subject to the prior approval by the Ministry responsible for the Undersecreteriat of Treasury and Foreign Trade. The provisions of the Law no.6224 on Encouragement of Foreign Investments remain in full force and effect. Domestic leasing companies and branches of foreign companies are subject to control by the Ministry responsible for the Undersecreteriat of Treasury and Foreign Trade. The form and conditions of prior approval and control by the Ministry shall be set forth in an administrative order. Those who carry out leasing activities without prior approval as required by this Law shall be subject to a fine of Turkish Lira 500 thousand to 5 million and imprisonment of 3 months to one year. If the activities are carried out by a legal entity, than the individual(s) responsible for the decisions and implementations shall be subject to the above fines and imprisonment. The personnel of leasing companies which are not in compliance with this Law shall be fined TL 200 thousand to one million, depending on the degree of their responsibility. Minimum Capital : ARTICLE 11 : The paid-up capital of a leasing company shall not be less than one billion Turkish Lira. Branch operations of foreign companies shall have a paid-up capital of not less than the equivalent of U.S.$ 2 million in Turkish Lira. The Council of Ministers is authorized to increase these limits up to fivefold. Limits of Financial Transactions : ARTICLE 12 : The Council of Ministers is authorized to set limits of leasing transactions and of the terms and amount of such transaction to shareholders and other group companies. SECTION TWO Legal Aspects of Leasing Contracts Rights and Obligations of the Lessee : ARTICLE 13 : The Lessee shall be the user of the Goods during the leasing period and shall have all benefits of the Goods, in accordance with the purpose of the Contract. The Lessee shall use the Goods with care and in accordance with terms and condition as set by the Contract.Unless stated otherwise in the Contract , the Lessee shall be responsible for maintenance and safe keeping of the Goods and shall pay the cost of such. Loss and Damage of the Goods : ARTICLE 14 : The Lessee shall be responsible for the loss of or damage to the Goods during the contract period.This responsibility is limited to the amount not met by the insurance payment.However the difference shall be paid by the Lessee together by the rental payments. Transfer Prohibition : ARTICLE 15 : The Lessee may not transfer his possession rights to a third party. Non-delivery of the Goods to the Lessee : ARTICLE 16 : Article 106 of the Law of Obligations shall apply in case the Goods are not delivered to the Lessee on time, because the Lessor did not complete an agreement with the manufacturer or supplier of the Goods on time or did not make the payment on time, or for any other reasons. Rights and Obligations of the Lessor : ARTICLE 17 : The ownership of the Goods leased shall remain with the Lessor.The Lessor is obligated to insure the Goods for the duration of the contract period.The Lessee shall pay the insurance premiums. Transfer of Ownership to a Third Party : ARTICLE 18 : Unless otherwise indicated in the Contract, the Lessor can not transfer the ownership of the Goods to a third party. In case the contract provides authority to transfer, the ownership of the Goods may be transferred only to another Lessor.The new owner must comply with the provisions of the existing contract.In order for a transfer to be valid with respect to Lessee , the Lessee must be informed of the transfer. Bankruptcy or Judicial Prosecution of the Lessee : ARTICLE 19 : In case of bankruptcy of the Lessee , the official in charge of bankruptcy proceedings shall decide to segregate the Goods subject to leasing before establishing the Bankruptcy Administration in accordance with Article 221 , paragraph one of the Bankruptcy Law.This decision may be contested within 7 days. In case the Lessee is subject to judicial prosecution, the judicial prosecutor shall decide to exclude the Goods subject to leasing from the procedure. This decision may be contested within 7 days. Objections contested shall be resolved within one month by the relevant authority. Bankruptcy or Judicial Prosecution of the Lessor : ARTICLE 20 : In case of bankruptcy of the Lessor , the Contract shall remain valid until the end of its term with respect to the Bankruptcy Administration.In case of judicial prosecution against the Lessor , Goods subject to leasing may not be attached during the Contract period. SECTION THREE Termination of the Leasing Contract Termination of the Contract at the End of the Contract Period : ARTICLE 21 : The Contract will terminate at the end of the agreed period. However,each party may ask for an extension with existing or new terms and conditions three months before the termination. Termination Due to Other Reasons ARTICLE 22 : The Contract may terminate unless there is a contrary provision in the Contract, due to dissolution of the company , the termination of legal existence , bankruptcy or incomplete judicial prosecution of the Lessee , death or loss of physical capacity by the Lessee or dissolution of operation of the Lessee. Violation of the Contract : ARTICLE 23 : The lessor may terminate the Contract if the lessee does not pay the Rental Amount within 30 days from the date the Rental Amount is due. If the Contract provides a purchase option at the end of the Contract period, the lessor may not terminate the contract for a period of not less than 60 days. The contract may also be terminated if one of the parties breaches the contract, and the other party should not be expected to continue the contract. Results of Termination of the Contract : ARTICLE 24 : Upon termination of the Contract, the Lessee who does not have a purchase option or does not wish to exercise the purchase option , is obliged to return the Goods to the Lessor immediately. Results of Cancellation of the Contract : ARTICLE 25 : If the Contract is canceled by the Lessor , the Lessee is obligated not only to immediately return the Goods to the Lessor but also to pay the Rental Amount of the remaining Contract period and the loss incurred by the Lessor in excess of this amount.If the Lessee cancels the Contract, the Lessee shall return the Goods but may request indemnification. SECTION FOUR Other Laws Governing Leasing Contracts Applicable Provisions of Other Laws : ARTICLE 26 : In the absence of a specific provision under this Law, leasing contracts will be governed by the general provisions if appropriate, private provisions as much as applicable, of the Law of Obligations. Non-Applicable Provisions : ARTICLE 27 : Articles 688,689,690 of the Civil Code,Articles 222,223,224 and 254 of the Law of Obligations and the provisions of the Law no.6570 governing real estate rentals shall not be applicable to the Contract. SECTION FIVE Articles Governing Incentives and Taxes Incentives : ARTICLE 28 : The lessor can benefit form the investment incentive conditions for the investments subject to leasing with the same conditions of the investments realized directly. Provisions Regarding Customs Duties : ARTICLE 29 : Goods brought to the country under a Contract between a foreign Lessor and a domestic Lessee shall be subject to the following provisions regarding customs duties. a) At the importation of Goods into Turkey under Contracts which do not have a purchase option or which have a purchase option but which do not have customs exemption provision on their incentive certificates, regulations for Temporary Exemption Regime shall be applied based upon the Contract term except for the time limitation foreseen by customs legislation. A guarantee in an amount sufficient to cover taxes which may become payable in the future will be collected for the Goods imported to the country pursuant to Article 29.At the end of the Contract period, if the Goods are not being subject to exact importation but are being returned to the Lessor , the guarantee will be released. The form and conditions of the guarantee shall be regulated by an administrative order. b) At the end of the Contract period, customs duties on imported Goods shall be collected.Such customs duties shall be calculated by applying the exchange rate on the date that the tax liability arises to the fair price. Exemptions and Determination of Tax Rate : ARTICLE 30 : The Contract is exempted from all types of taxes, duties and charges. The Council of Ministers is authorized to decrease the withholding tax rates applied to earnings and wages of the foreign companies which have no branch offices in Turkey , to nil or increase to corporate tax rate. Type of Claims : ARTICLE 31 : Claims deriving from the Contracts shall be considered commercial. Administrative Orders : ARTICLE 32 : Administrative orders referenced in this Law will be issued as follows : a) Article 7 by the Council of Ministers b) Article 10 by the Undersecreteriat of Treasury and Foreign Trade. c) Article 30 by the Ministry of Finance and Customs, within three months following the publication of this Law. Validity : ARTICLE 33 : This Law is valid on the day of its publication. Enforcement : ARTICLE 34 : The Council of Ministers shall enforce this Law.