GLOBAL TRADE SOLUTIONS, INC OFFSET OVERVIEW

2 OFFSET DEFINITIONS THE OEM OBLIGATOR AND ITS SUPPLIERS’ BUSINESS TRANSACTIONS WITH FOREIGN INDUSTRY RELATING DIRECTLY TO THEIR PRODUCTS DIRECT OFFSETS THE OEM OBLIGATOR AND ITS SUPPLIERS’ BUSINESS TRANSACTIONS (THIRD PARTY PRODUCTS, TECHNOLOGY TRANSFER, TRAINING, INVESTMENT) WITH FOREIGN INDUSTRY INDIRECT OFFSETS

3 WHAT IS OFFSET? A TRANSACTION WHEREIN A CONTRACTOR (OEM) PROVIDES A PRODUCT TO A FOREIGN COUNTRY, AND IN RETURN, ACCEPTS AN OBLIGATION TO PROVIDE THE FOREIGN COUNTRY WITH INDUSTRIAL COMPENSATION EQUAL TO: (1)AN AGREED-UPON PERCENTAGE OF THE ORIGINAL CONTRACT PRICE (2)A SPECIFIED DOLLAR AMOUNT OFFSET IS ALSO CALLED: INDUSTRIAL COOPERATION CO-PRODUCTION COUNTER PURCHASE/COUNTERTRADE COMPENSATORY TRANSACTION BUY BACK SWAP BARTER

4 RESOLVING OFFSET OBLIGATIONS - MANUFACTURING -INDIRECT PROJECTS -TRADING CREDITS -PARTNERS’ ACTIVITIES -PARENT CORP PURCHASES -NON-PRODUCT PURCHASES -TECHNOLOGY TRANSFER -PRODUCT SUPPORT -SOFTWARE APPLICATIONS MULTIPLE PATHS CAN BE PURSUED

5 STRATEGY CAPTURE WHAT YOU ARE DOING LINK ALL PURCHASES, ACTIVITIES, AND INVESTMENTS TO LOCAL INDUSTRIAL COOPERATION PROGRAMS (ICP) OR OFFSET OBLIGATIONS. IF NOT, THEN OBLIGORCOMPANIES WILL EXPEND ADDITIONAL RESOURCES TO MEET OBLIGATIONS THAT COULD HAVE BEEN SATISFIED BY OTHER TRANSACTIONS…….AND THIRD PARTIES LOSE POTENTIAL REVENUES BY NOT ASSISTING THE OEM OBLIGATOR. FBJ94-65

6 GTS MISSION - OFFSET THAT MANY OF COMPANIES HAVE THE POTENTIAL TO EARN OFFSET CREDITS BASED ON THEIR CURRENT ACTIVITIES AND FUTURE STRATEGIES THAT GTS CAN BRING VALUE TO BOTH THE OEM OBLIGATOR AND THE COMPANY DOING QUALIFIABLE INTERNATIONAL ACTIVITIES. ASSUMPTIONS

7 OFFSET RECOGNITION PROCESS TIMING IS EVERYTHING LOCAL PARTNER SUPPORT SCREENING PROCESS NON-DISCLOSURE AGREEMENT EXCHANGE OF DATA LOI OR MOU AGREEMENT BUSINESS PLAN DEVELOPMENT TIME NEWCO PRE APPROVAL REQUEST FINAL APPROVALS

8 CLASSIC TRADING SCENARIO THIRD PARTY ACTIVITIES ASSISTING OEM GTS COORDINATING WITH THE COUNTRY OFFSET AUTHORITIES, AND BOTH COMPANIES COMPANY Y HAS NO OBLIGATION, BUT IS DOING AN ACTIVITY THAT WOULD EARN CREDIT COMPANY X NEEDS CREDITS, BUT CANNOT PERFORM THE OBLIGATION

9 HOW MULTIPLIERS WORK EACH COUNTRY TARGETS DESIRED ACTIVITIES AND APPLIES INCENTIVES ( OR MULTIPLIERS ) TO ENCOURAGE THOSE ACTIVITIES EXAMPLES (EACH COUNTRY IS DIFFERENT) 1 to 1 FOR PROCUREMENTS 1 to 3 FOR TRAINING 1 to 5 LOW TECH XFERS 1 to 7 LOCAL INVESTMENTS 1 to 10 HIGH TECH XFERS COUNTRIES VALUE ACTIVITIES DIFFERENTLY

10 WHO HAS OFFSET OBLIGATIONS ?? US DEFENSE BOEING, GENERAL ELECTRIC, LOCKHEED MARTIN, UNITED TECHNOLOGIES, NORTHROP GRUMMAN, BAe SYSTEMS, HARRIS……. TIER ONE AND TWO SUPPLIERS TO THE OEMs MANY EUROPEAN COMPANIES MOSTLY FORTUNE 100 COMPANIES

11 STRATEGIC BENEFITS CREATES NEW CORE BUSINESS OPPORTUNITIES OPENS NEW GLOBAL CHANNELS BENCHMARK INTERNATIONAL COMPETITION SUPPORT CURRENT RELATIONSHIPS MORE THAN JUST OFFSET

12 COUNTRIES DOING OFFSET UK SPAIN NETHERLANDS GREECE NORWAY SWEDEN DENMARK BULGARIA POLAND SOME OF THE MOST ACTIVE TURKEY UAE ITALY CZECH REPUBLIC ISRAEL TAIWAN S. KOREA ROMANIA S. AFRICA

13 OFFSET TRANSACTION UNIQUE SOURCE OF REVENUES YOUR COMPANY GTS REVENUES CREDITS OBJECTIVE - TO LEVERAGE YOUR BUSINESS DEALS TO DEVELOP NEW RELATIONSHIPS OR PROFIT OEMs BUSINESS ACTIVITY

14 HOW TO LEVERAGE OFFSET ASSUMING THAT THE PARTIES CAN DETERMINE A COURSE OF ACTION……. A STATEMENT OF WORK IS DEVELOPED YOU PRICE OUT THE EFFORT CALCULATE THE CORRESPONDING AMOUNT OF OFFSET CREDITS TO FUND PROJECT PROPOSE TRANSACTION TO THE COUNTRY LINK OBLIGOR TO THIS OPPORTUNITY GAINING OFFSET CREDITS

15 PROCUREMENT TRANSACTIONS PROCUREMENT ACTIVITIES MARK ALL POs STRATEGIC RELATIONSHIPS SUPPLIERS CUSTOMERS MISC COMPETITIVE INITIATIVES DO WHAT MAKES SENSE

16 COUNTRY CRITERIA FOR CREDIT INCREMENTAL…new or increased work? CASUALTY…is the link to the obligor clear? BOTTOM LINE: COUNTRIES BELIEVE THAT U.S. COMPANIES WILL NOT PLAY HARDBALL FOR OFFSET CREDIT RECOGNITION

17 CAPTURING CURRENT EFFORTS MARK PURCHASE ORDERS FOR OFFSET MAY USE ALL OR ANY PART OF THE VALUE OF ITS PURCHASE ORDER(S) WITH SUPPLIER FOR OFFSET PURPOSES; INCLUDING BUT NOT LIMITED TO, (1) FULFILLING ’S OFFSET OR INDUSTRIAL BENEFIT OBLIGATIONS, (2) TRANSFERRING OFFSET CREDITS GRANTED AS A RESULT OF SUCH PURCHASE ORDER(S) TO THIRD PARTIES, AND (3) RETAINING CREDITS GRANTED FOR USE IN SATISFYING FUTURE OFFSET OBLIGATIONS

18 DOING INTERNATIONAL BUSINESS INCREMENTAL PROCESS INVOLVEMENT MARKET SURVEY EXPORTING DISTRIBUTORSHIP BILATERAL MANUFACTURING JOINT VENTURE MULTIPLE COUNTRY OPERATIONS TIME

19 SUPPORT AVAILABLE GTS INTRODUCTIONS TO OTHER COMPANIES THAT MAY OFFER NEW OPPORTUNITIES FOR YOU. - TECHNOLOGY - MARKET - COUNTRY SPECIFIC INTERESTS GTS CAN HELP

20 OPPORTUNITY SELECTION GTS CAN ASSIGN OFFSET CREDITS TO OTHER COMPANIES IF YOUR ACTIVITIES CAN BE IDENTIFIED AS QUALIFYING FOR CREDIT. ANY ACTIVITY MUST MAKE GOOD BUSINESS NEVER DO ANYTHING JUST FOR OFFSET CREDITS CREDIT TRANSACTIONS

21 SUMMARY LEVERAGING OFFSET OPPORTUNITIES ARE INCREASING NOTHING IS EASY NEED STRATEGY AND FOCUS MUST ASSESS BOTH RISKS AND REWARDS

22 FOR MORE INFO CONTACT FRED JOHNSON GLOBAL TRADE SOLUTIONS, INC. office fax on the web at OR QUESTIONS

PROCESS 1. Client provides documents 2. Obligor submits for their offset obligation. 3. GTS negotiates credits 4. Fee paid to Client PROCESS 1. Client provides documents 2. Obligor submits for their offset obligation. 3. GTS negotiates credits 4. Fee paid to Client Obligors Obligors GTS GTS Country Offset Authorities 3 3 Procurements Typical Offset Transaction

PRODUCT DELIVERIES PRODUCT DELIVERIES QUALIFY SUPPLIER BID OPPORTUNITIES PLACE ORDERS QUALIFY SUPPLIER BID OPPORTUNITIES PLACE ORDERS Global Procurement Process LOCAL COMPANY SELECTION LOCAL COMPANY SELECTION COUNTRY SELECTION OFFSET CREDITS DEVELOP STRATEGY DEVELOP STRATEGY CURRENT SUPPLIERS

Foreign Company Obligor Local Company Third Parties Offset Authorities OFFSET RELATIONSHIPS