Presentation of David H Presentation of David H. Conaway Shumaker, Loop & Kendrick, LLP to Association of Corporate Counsel Charlotte, NC February 1, 2017 Managing Customer Risk: Successful Contract Terms and Strategies to Avoid Risk and Optimize Outcome

1. Role of Sales Contracts – 2 Minute Drill Purpose of a Sales Contract Define Parties’ Obligations Optimize Outcome When a Dispute arises Trade Credit Role 2.8 trillion Accounts Receivable in Global Economy Banks, Private Equity

Disputes Erode or Eliminate Contract Profit Manufacturing Margins Materiality is a Driver How Much is Invested in Contracts How Much Invested in Resolving Disputes

Managing Customer Risk: Know Thy Risk Financial Distress Business/Management Issues Takata Airbag Recall

External Market Conditions Oil and Gas Industry Third Party Action – often by the Lender Lender Private Equity Activist Investors Suppliers are co-venturers

2. Sales Contract Cosmos Making Your Terms and Conditions Stick Credit Applications – Highly Underrated Purchase Orders Order Acknowledgement Invoices Terms and Conditions Sales or Supply Contract

3. Terms and Conditions That Make a Difference Efficient Dispute Resolution: Roadmap for Success Attorneys’ Fees – Altering Incentives to Litigate Interest Upon Default – Increasing the Cost of Non-Payment E.D.N.Y. Wrongful Contract Termination Case Example: Interest/Attorneys’ Fees Made the Difference

Undelivered Inventory – Specially Manufactured Goods Typical Customer’s Wisdom Apple Tier One Supplier Example of Claim Unassailable Inventory Claim – Duty to Mitigate Improves Value of A/R Claim Take or Pay Clause Setoff

Multiple Buyers Provisions – Joint and Several Liability Recoupment: A Distinction with a Difference Limitation of Liability/Damages: Curb Your Customer’s Enthusiasm Termination of Licenses Upon Default

Application of U.C.C. Article 2 in Chapter 11 U.C.C. 2-609: Anticipatory Breach U.C.C. 2-702: Cash Before Delivery Include in Sales Contract When Worlds Collide: Chapter 11 Meets Article 2 Impact on Critical Vendor Impact on Executory Contracts

4. Global Sales Contracts: Square Peg, Round Hole Introduction Are you using domestic sales contract template? Uniform Commercial Code Article 2 U.S. Article 2 Litigation Predictable Bespoke Global Contracts International Template Materiality Drives Tailored Contracts

Global Contract Considerations Applicable Law Article 2 vs. CISG (Convention for the International Sales of Goods) Attached 84 signatory countries Represent 80% world trade

Role of Bargaining Power Comity and Reciprocity Issues Battle of the Forms: Article 2 or CISG Whose documents control Seller’s Last Shot Where Will Disputes Be Resolved Home Field Advantage Enforcement of U.S. Judgments Abroad No U.S. Enforcement of Judgment Treaty

Where Are the Assets: Monetizing a U.S. Judgment Duplicative Legal Proceedings Arbitration of Foreign Disputes New York Convention (1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards) - Attached 156 Signatory Countries

Arbitration Institutions Attached Arbitration Institutions What Awards Will Countries Enforce? - ICC, London Court of International Arbitration, CIETAC (China), Hong Kong International Arbitration Center?

Who Pays the Costs of Dispute Resolution? “American Rule” of Legal Fees “English Rule” Contrasted Other Considerations Protecting Intellectual Property Rights Hedging Credit, Country and Legal Systems Risk Force Majeure – Turbulent Financial Markets and Global Conflicts Currency Fluctuations/Risks

Thank you for your attendance. David H. Conaway 101 S. Tryon Street, Suite 2200 Charlotte, NC 28280 704.945.2149 dconaway@slk-law.com http://www.slk-law.com/Professionals/David-H-Conaway Manufacturing • Customers • Vendors • Supply Chain Insolvency • Litigation • Commercial and Financial Contracts • Cross-Border