Frank Sebastian Director of AR, Credit and Collections Frank.Sebastian@adidas-group

1. More Reasons Why Customers (the Smalland Mid-Sized are Joining the Largest) areAdopting a Terms Push Back Strategy and What Suppliers Can Do to Fight Back Frank Sebastian Director of AR, Credit and Collections Frank.Sebastian@adidas-group.com Larry Lipschutz, CCE Director of Credit & Collections llipschutz@frenchgerleman.com Scott E. Blakeley, Esq seb@blakeleyllp.com

2. The Supply Chain and Trade Credit • Trade credit as driver of the economy • Less expensive than external financing • The origin of TPS: Credit crunch of 2008 • Large companies sitting on record cash holdings but increasing the days to pay suppliers • Customers stretching supplier terms to preserve cash and fill working capital gaps • Inventory purchases are biggest cash drains • Customers extending payables has become a best practice

3. The Supply Chain and Trade Credit Source: Credit Research Foundation

4. A Customer’s Request vs. Demand for Extended Terms: How Indispensable is the Customer (and the Supplier)? The Voice of the Supplier’s Credit, Sales and Management Teams.

5. The Supply Chain and Trade Credit • Customer strategy for extending supplier terms • Financially sound customer • Financially struggling customer • Re-credit score and supplier due diligence • Formal vs. ad hoc TPS • Accommodative vs. Punitive • The small to medium sized customer vs. the large customer

6. Key Terms for Large Company TPS • Cash Conversion Cycle(CCC)- Number of days to convert account receivables into cash flow. • Days Payables Outstanding(DPO)- Number of days payables outstanding relative to purchases of inventory (cost of goods sold) • Days Sales Outstanding(DSO)- Sales per day relative to average receivables • Days Inventory Outstanding(DIO)- Cost of goods sold per day relative to average inventory levels

7. The Supply Chain and Trade Credit • Added Reasons Customers are Rolling Out TPS • Benchmarking: Customer’s Competitors Forcing TPS • Customer Mergers • Supply Chain Financing Moves Downstream • The Press and the Cottage Industry of Consultants • International Influence

8. COST OF CARRYING A/R PAYMENT TERMS AND SUPPLY CHAIN FINANCING COSTS

9. Government Response to TPS • U.S. • Supplier Pay • Voluntary program aimed at larger companies – no maximum number of days to pay. Rather, these companies sign a pledge to reduce their DPO with smaller suppliers • European Union (EU) Countries • EU has adopted legislation for EU countries to have companies sign up for a supplier Prompt Pay Rule (PPR)

10. Credit Team’s Form Response to TPS 8677 Logo Athletic Court Indianapolis, Indiana 46219 T +317.895.7000

11. Supplier Strategy for Dealing with TPS

12. Supplier Strategy for Dealing with TPS Contract Controls

13. Supplier Strategy for Dealing with TPS

14. Exhibit A U.S. Public Companies with Industry Leading DPO’s

15. Exhibit B [Customer’s Letterhead] Dear [Vendor (your company)], This letter confirms that [Competitor] has offered us a sales arrangement for extended terms which includes: Product/Service involved:______________________________________ Terms of payment:____________________________________________ Date of offer:________________________________________________ Quantity of product/service involved:_____________________________ This information is provided to allow [Supplier] to meet the offer of [Competitor]. Sincerely, [Customer] Meet the Competition Form

16. Trends in Extended Terms Survey • What is your firms annual sales revenue? • In the last 12 months, how many existing customers requested extended payment terms beyond standard? What is generally your first action? Is there a formal policy to address these? Is the Robinson Patman Act considered? What are the driving factors that lead to accepting these? • What percentage offered a Supplier Financing Option as a means to discount invoices before payment terms maturity? How does your team view the recent increase in these types of requests and the effect on working capital? When you accept requests, do you charge interest for additional carrying costs or charge back discount fees incurred from SFO? • Have you lost business/revenue after refusing a request? Do you think a company’s brand strength/recognition/size can help refusing these requests without loss of revenue? • Do you believe stronger legislation should be passed to protect smaller regional suppliers with lower brand recognition, against larger companies demanding extensive credit terms?