Kimberly Kirkendall, CPA

1.  Kimberly Kirkendall, CPA

2. In general contracts should match the understanding of both parties in regards to: What you want to buy, what they want to sell How and when the transaction will be paid for What expectations exist around the specific transaction (disclosure, usage, etc) What to do if there are problems or disagreements Contract is a Contract � isn�t it?

3. You may define the item to be transferred differently (or the entity you are contracting with) There may be different expectations of the situation surrounding the transaction Different expectations of the relationship / delivery after the transaction The mechanism for resolving disputes can be different In Cross Border Agreements � there are differences of opinion

4. Tooling agreement � you pay for and own the tooling that the factory has on site for your products. But you pay the agent in Taiwan, so the Chinese factory has no record of your ownership. Production agreement � you place an order in line with the factories MOQ on components (about a 6 month supply) you approve the samples, but after the first pilot run � one component has unacceptable failure rates and needs to be scrapped. Who pays? You have a non-compete agreement with your supplier, then can�t sell XX type of product to anyone else in the US. Then you hear that they are supplying it � what happened? Supplier / Distributor Agreements

5. You have 60% ownership of the JV, so that is how much control you have You expect the plant to be profitable and return your investment within 5 years The JV agreement was made with XYZ entity but now they have been sold to another party You find that the plant management aren�t responsive and you communicate only with your partner. Joint Venture Agreements

6. You want to keep your key employee, so sign a 3 year agreement, right? It�s time for termination, you can offer the govt specified minimum severance, right? You have specified in the company HR manual that there is about theft, expense acct limits, etc � then you find them using expense funds to pay wage increases / health care benefits Employment Agreements

7. Their legal system has developed at a different pace and to resolve different issues US companies aren�t educated in the subtleties of business in China You assume that your partners business interests would be the same as your own With foreign entities emotions can run high, long held resentment or hazy views of our lifestyle / attitudes The differences arise because�

8. Fundamentally � we view contracts from a different perspective

9. Agreements in China are based on what things should be � our ideal when we first negotiated the agreement Then as things progress, as two friends who have each others best interest at heart, we are going to do what we think best to keep the relationship in balance. And that is how we guide our behavior. How the Chinese view it

10. Showing a lack of commitment to that relationship � is a breach and therefore the relationship is broken. Not keeping your partners best interests in mind when problems arise is a breach of the agreement, and therefore the relationship is broken. When you hear yourself say �its just business� that�s when you need to stop, you are treading on dangerous ground So to maintain the balance�

11. In the U.S. Contract = Control In China Relationship (power) = Control In the U.S. Words = Agreement In China Actions = Agreement Our Definitions Differ

12. Kimberly Kirkendall, CPA International Resource Development, Inc. Tel: 330-573-5518 Email: Chinaresource@live.com CONCLUSION