THORELLI ASSOCIATES Law Offices Three First National Plaza

THORELLI & ASSOCIATES Law Offices Three First National Plaza 70 West Madison Street, Suite 5750 Chicago, Illinois 60602 -4292 Phone: 312 -357 -0300 Fax: 312 -357 -0328 Email: thorelli@thorelli. com Website: www. thorelli. com Thomas H. Thorelli Direct: 312 -357 -0301 Paris Office: 133 Blvd. du Montparnasse 75006 Paris France French Mobile: +33 (0)6 20 64 57 00 SUCCESS FORMULAS FOR DOING BUSINESS IN THE UNITED STATES: A LAWYER’S PERSPECTIVE CASE Event – Brussels, Belgium November 29, 2017 presented by Thomas H. Thorelli of Thorelli & Associates Chicago, Illinois, U. S. A.

SUCCESS FORMULAS FOR DOING BUSINESS IN THE U. S. KEYS TO SUCCESS IN THE U. S. FROM A LEGAL PERSPECTIVE II. INTRODUCTION III. NEGOTIATING TECHNIQUES IV. CONTRACT NEGOTIATIONS V. PRODUCT LIABILITY VI. GETTING PAID BY U. S. CUSTOMERS I.

I. KEYS TO SUCCESS IN THE U. S. FROM A LEGAL PERSPECTIVE

A. Successful Products 1. Unique product with specific consumer advantage. 2. Product fully adapted to U. S. requirements. 3. Price Competitiveness 4. Requirement: Thorough Market Research

B. Marketing 1. Marketing materials prepared by Americans. 2. Marketing strategy for a complicated, segmented market. 3. Marketing focus on niche markets. 4. Constant awareness of competitive activities.

C. Medium to Long Range Focus

D. Structure 1. Always have written contracts 2. Use an American lawyer - your U. S. partner does! 3. Control negotiations by preparing all drafts of agreements. 4. Negotiate with two or more parties at a time.

E. Successful Negotiations 1. Learn about prospective partner (research, references, no assumptions). 2. Ask for more than you can reasonably expect to allow for negotiating room. 3. Use your lawyer in negotiations. 4. Negotiate flexibility into contact. 5. Recognize key cultural distinctions between the French and Americans.

F. 1. 2. 3. 4. 5. Product Liability Preventive Management Only 1% ever sued in the U. S. for product liability. Documentation adapted to U. S. requirements is the key. Limit warranties, include disclaimers. Shift risk when possible. Obtain insurance in France for U. S. market, with tail provisions. 6. Require subcontractors in France to protect you. 7. Keep up with safety enhancements in your industry.

II. INTRODUCTION

A. Understanding the U. S. market 1. B. 1. 2. World's largest market a. Toughest competition b. Many different markets c. Cultural differences d. Structure of particular market (channels of distribution, etc. ) Large share of small market instead of small share of large market Intense competition including advertising Examples

C. Product adaptation 1. Different voltage, weights and measures 2. Better rat trap example 3. Packaging, promotional emphasis D. Time and Money

III. NEGOTIATING TECHNIQUES

A. Americans promise everything B. Americans aim higher than C. D. E. F. G. Europeans Short term vs. long term orientation Social aspects vs. business Throw away society Degree of specialization of negotiating partner Role of young people in business

H. Patriotism I. J. K. L. M. N. Job security Open mindedness Impact of Appearance Cultural diversity Intense business climate Urgency/time is money/deadlines

O. Deadlines – test them . 1. 2. 3. Find out other party's deadlines. What deadlines do you have? Can we negotiate our own deadlines? P. Quick negotiations very dangerous – telephone negotiations are tough Q. Competitive vs. win/win negotiations R. Don’t trust your assumptions, estimates or perceptions

S. Sources of power in U. S. negotiations . 1. 2. 3. 4. 5. 6. Legitimacy Commitment to a specific goal Time on your side Knowledge about the other party Ability to take risks and limit them Minor concessions T. Negotiate with organizations, not individuals 1. 2. Use your organization as fall back for holding the line If you make a concession, always ask for something in return

T. Negotiate with organizations, not individuals 1. 2. 3. U. V. W. X. Use your organization as fall back for holding the line If you make a concession, always ask for something in return Flexibility Use of U. S. lawyer in negotiations Quality Emphasis/Price Orientation Information is Power Use of Lawyers in Negotiations

IV. CONTRACT NEGOTIATIONS

Role of a lawyer in the U. S. A. 1. 35, 000 lawyers in Chicago alone 2. 3. 4. Few statutes in the U. S. Litigious society Compensation a. Winner pays own fees b. Commission payment Use of attorneys in contract negotiations 5. B. Need for attorney to give balance in negotiations

C. Negotiate to maintain flexibility with new business partner D. Good idea to start with agent or distributor relationship - profit up for U. S. partner - go for market shares not profit

E. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Specific items for negotiation Exclusivity versus non-exclusivity Minimum sales quantities Geographic/customer restrictions a. Anti-trust aspects Exchange rate risk Payment terms and security interests a. Consignment stock Covenant not to compete Product liability Warranties Term and termination Choice of law Intellectual Property a. Confidentiality b. Non-use c. Licensing d. Developments

H. Joint venture 1. 2. 3. 4. 5. Profit split; future financing Decision making Dispute resolution - buy out Shareholders' agreement Dissolution

V. Product liability

A. Legal theories

B. Product liability preventive management 1. Know U. S. product liability law a. Educate engineers, marketing people, production department 2. Stay abreast of technical developments a. Manufacturers held to highest product safety standard 3. Proper labeling, instructions, warnings a. Not only describe risks, but outcome of improper use b. Have attorney check claims made in promotional material 4. Guaranties and warranties a. Should be limited with assistance of attorney b. Magnuson-Moss Warranty Act

5. Incorporate subsidiary 6. Shift responsibility for product liability to U. S. partner a. Indemnification 7. Purchase insurance in France a. Less expensive b. Available; generally not available in U. S. 8. Tort reform laws a. Comparative fault b. Must prove fault c. Limit punitives – to fund

VI. GETTING PAID BY U. S. CUSTOMERS

A. Payment culture: Thirty days after receipt of invoice. Major corporations generally late. B. No title withholding until payment in full. C. Banking sophistication low 1. 2. 3. Bank guarantees not used Experience in international Still use checks to pay bills in U. S. D. Credit background checks vague

E. Best strategy 1. 2. Irrevocable confirmed letter of credit with French banks to be disbursed upon loading of goods on carrier. Once credit granted, retain security interest. F. UCC-1 Financing Statements 1. Personal guarantee of business owner if possible G. Collection of unpaid balances 1. 2. 3. Collection agencies retain 30% - 40% of amounts collected Amounts under $10, 000, generally not worth pursuing Retake products if proper security agreement filed