Transcript
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Ihr Erfolg im US-Luftfahrtmarkt: Die juristischen Schlüsselstrategien

Williams Mullen8300 Greensboro DriveSuite 1100Tysons Corner, VA 22102USADirect: 001.804.420.6482Eliot Norman [email protected]/practice/international-law

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The New Southeast Aerospace Cluster

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• Mobile, AL (Airbus)• Melbourne, FL (Embr)• Savannah, GA (Gulfstream-General Dynamics) • Charleston, SC (Boeing)• Greensboro, NC (Hondajet)• Durham, NC (GE Aviation)• Prince George, VA (Rolls-Royce) 3

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WHY THE SOUTHEAST?• Large Number of Graduates from

University Engineering Programs • NASA (provides a highly qualified

aerospace engineering pool)– NASA Langley (VA)

– NASA Stennis (AL)

– NASA Melbourne (FL) 4

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Best-in-class manufacturers & Virginia’s flagship universities

Delivering “production-ready” manufacturing solutions while combining the speed & ROI expectations of business with the intellectual rigor and innovation of universities.

CCAM (Virginia)

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• A global Center of Excellence in advanced manufacturing research

– Manufacturing Systems– Surface Engineering

• Focus on translation research– Accelerate new technologies into

commercialization– Reduce cost and improve quality– Complement with workforce training

efforts• CCAM growth in 5-10 years to:

– 10 year business plan & financial model complete

– ~60 Employees (49 PhD Researchers)– 35 graduate research assistants resident

at CCAM– 35 undergraduate interns resident at

CCAM– More than 30 Industry Members– $15-20 Million annual research budget

Aerospace

Energy

Shipbuilding

Transportation

Electronics

Automotive

Defense

VisionCCAM

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The Opportunities: Fairfax County (Va) Location

• Washington, D.C. metro area (8.7 million people)

• 60% of the U.S. population within one to two-hour flight of Fairfax County:

• Immediate Access to U.S. Government and Dept. of Defense $55 Billion market

• 24 Hour deliveries to New Southeast Aerospace Cluster 7

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Einführung: Amerika als Herausforderung

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Gelten für Sie faire Bedingungen?

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For example: Will the BUY AMERICA ACT Stop your Sales?

•Waivers under Buy America Act( BAA); •Substantial Transformation after importation; or •50% test for U.S. content; and •Use of Trade Agreements Act to overrule the Buy America Act

– FAR 225.872-1 provides: it is “inconsistent to apply restrictions of BAA to acquisition of certain qualifying country end products from the following countries: Germany, France, Belgium, Sweden, UK, other EU countries, Canada and Israel

– Products must have value greater than $203,000

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Seien Sie zuversichtlich: Das Frühstück Ihrer amerikanischen

Anwälte

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Level Playing Field? Yes, but • To be competitive, German aerospace companies

should:– Consider assembling or manufacturing in the dollar zone– Respect and comply with U.S. government regulations:

FAA, Export Controls, Government contracts, FCPA, antitrust

– Americanize or localize your supply agreements; – Know how to limit your liability under standard American

supply agreements; – Take advantage of the international commercial treaties

favoring German trade with and investment in the USA: E-2 visas; Tax Protocols; Trade Agreements Act, NAFTA;

– Consider using Southeast USA as additional center for your worldwide exports, taking advantage of U.S. government subsidies for exports from the USA and local commercial advantages (Exim Bank; IC DISC)

– Work with an attorney who knows how to make the U.S. legal system work in favor of German suppliers 12

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The Top 6 1. Visas: Moving your key personnel to the USA

can be the key to your success2. What corporate structure for what project? 3. U.S. employment laws: « Right to Work » But

U.Sl laws may not always be that liberal?4. Export Controls and use of export subsidies5. Contract administration and negotiation 6. Legal strategies to help accelerate your

growth in the U.S. market

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Nr. 1 Visa und praktische Immigrationslösungen

(Handbook FAQ # 6)

 

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Hiermit fängt alles an

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Attention! Homeland Security is in charge of

immigration to the USA

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Case Illustration: L-1 ou E-2 Intra-Company New Office Transfers

X&Z Aerosupply , Inc. Fairfax, Virginia USA

X&Z Aerosupply GmbHMunich, Germany

Managers, Executives Software DevelopersElectrical Engineers

Project Managersand

SpecialistsComposites

Engineers

X&Z, Ltd. Bucharest, Romania

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Visas: Practical Solutions for Visitors • Reforms in use of «  Shengen » type visas

– Visa Waivers (ESTA); – Can work under B-1 in support of

interntional supply agreement– B-1 in lieu of H-1B (design engineers)

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Nr. 2 Welche Gesellschaftsstruktur für welches Projekt?

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C Corporation

Limited Liability

Company

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USA Holding Co.

US FactoryUS Startup Business

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Joint Venture

German US Subsidiary US Company

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Letzte Frage: Wo wird die Gesellschaft gegründet?• Delaware or other states

• Qualifying to do business in other states• See Handbook FAQ # 6

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Last Word? Taxes Choice of LLC or C Corporation:

100% “Tax Driven” • Consult your fiscal advisors in the United States and

in Europe before deciding which entity to use

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IC DISC StructureSummary of Benefits1. IC DISC can be paid commissions

• Statutory formula – not required to be Arms Length• Greater of 40% of gross export sales from the

USA, or 50% of taxable income on those sales2. Can get Rate Arbitrage

• Commission deduction – up to 40% benefit (Fed & States)

• Payment from IC DISC to Qualified Foreign Co – likely zero Withholding Tax.

• Replaces dividends from fully taxed income of ABC Aerospace, Inc. (USA) with deductible commissions followed by Dividend from IC-DISC

3. IC DISC may also be used for export finance• May receive factoring fees of 2-3%• Additional Commission $3M for $100M export

sales, resulting in additional $1.2M tax savings

Issues4. Need to structure properly to get rate benefit

ABC Aerospace GmbH (Munich

ABC Aerospace USA Inc. (Virginia) )

(deducts Commissions)

IC DISC (ABC Exports, Inc.Non-taxable(Virginia )

Commissions

Dividends

Bottom Line: Reduce U.S. Taxes on Exports by 35% to 40%.

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BehördenmarktGovernment Classified Market

• Very important market • Foreign companies can participate by • Using a SSA or Proxy • Examples: Fairfax County Companies

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European Companies

Sources: Fairfax County Economic Development Authority, Dun & Bradstreet27

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.. of which are Aerospace Firms

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Nr. 3 Arbeitsrecht: „Recht auf Arbeit“, aber vielleicht nicht so liberal, wie es sich deutsche Unternehmen vorstellen?

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Human Capital

• Role of federal government• Role of the states• Real advantages of Virginia,

for example, as a “right to work” state?– Example of Boeing

• With « Right to Work » also comes « Employment at Will »

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Must still conform to Federal Laws • FLSA (overtime rules) • IRS et DOL: controls on use and abuse of independent

contractors • FMLA: family medical leave act• Strict controls with jury damage verdicts for discrimination

(race, sex, age, disability ) (Title VII, ADEA, ADA), above all sexual harassment and retaliation claims: solution: proper training of management, employment handbooks.

• Whistleblowers and liability: be careful when entering into federal government contracts

• Benefits and federal regulation under ERISA• OHSA safety enforcement • IRCA (Immigration Reform Control Act) to control illegal

workers, immigration reform will only complicate obligations of employers (Alabama example)

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Umsetzung am Arbeitsplatz in den USA

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Key Considerations Your legal advisor can help you to: • Prepare your employment agreements, your handbooks and

manuals and effectively train your managers in compliance with federal employment statutes

• Non-competition, confidentiality agreements: protect trade secrets

• Advise on formulating a benefits plan, incorporting the new regulations under Obama Care (Affordable Health Care Act), as well as stock options life and medical insurance, to make your company competitive with other U.S. employers.

• Help you take advantage of “Right to Work” laws to minimize union activity

• Defend you in case of employee claims under any of the federal or state laws regulating employment

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Nr. 4 Ausfuhrkontrollen.

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U.S. Export Laws & RegulationsInternational Traffic in Arms Regulations (ITAR)

– Requires registration and licenses for the export and temporary import of defense articles and technical data, provision of defense services, and brokering of defense articles. U.S. Dept. of State

Export Administration Regulations (EAR)– Requires export licenses for exports of commercial

equipment, software and technologies to certain countries, end-users and end-uses.

– Enforces Anti-Boycott Laws: U.S. Dept. of Commerce.

– OFAC Sanctions Programs – In most cases, US corporations are prohibited from

transacting any business with sanctioned countries (e.g., Cuba, Iran, Syria) and entities (e.g., narcotics traffickers, terrorism supporters, WMD proliferators). 35

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Export Defined: actual and “deemed” “Exports” include:• Sending or taking an item out of the U.S.• Providing technical data or technologies to

foreign persons, whether in the US or abroad:

• Emailing technical data to foreign persons

• Discussing technical data with foreign persons

• Giving a facility tour to a foreign person

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Regulierte Güter– Defense Hardware,

Technical Data & Services controlled for export by State Department

– Commercial Goods, Software and Technologies controlled for export by the Commerce Department

– Only Public Domain Information is not controlled

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Unternehmen mit dem höchsten RisikoDefense Contractors: Almost all items/services are defense articles subject to strict export control.

• Examples include everything from drones (UAVs) to navigation systems to military encryption.

• Also includes parts, components, software, etc.

High Tech Companies: More sophisticated products and technologies are subject to more strict export controls.

• Examples include navigation and avionics, sensors and lasers, commercial encryption, certain materials, etc.

• Companies may need to collaborate with foreign vendors to outsource part and component manufacturing

• Many companies have foreign employees38

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Reformen der Ausfuhrkontrollen

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COMSAT • On January 3, 2013 President Barack Obama

signed the National Defense Authorization Act for Fiscal Year 2013 (NDAA) into law, restoring the President's authority to transfer commercial communications satellites and related items (COMSATs) from International Traffic in Arms Regulations (ITAR) jurisdiction to the less restrictive dual-use (dual military and commercial or consumer use) export controls under the Export Administration Regulations (EAR).

• Recent Announcement: March 8: moving aircraft and turbine engines to CCL from ITAR list – Eliminate duplication in licensing

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Impact of Reforms

Impact on German companies in Germany– Increased ability to purchase certain US

systems, subsystems, parts and components without being subject to strict ITAR controls

– increases competition in Europe & Germany from U.S. exporters of components and parts

Impact on German companies in US– Increased ability to manufacture certain aircraft,

systems, subsystems, parts and components in the US without being subject to strict ITAR controls

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Wie können wir Ihnen helfen?1. Determine export jurisdiction and classification for

the company’s products (ITAR or EAR): “Are my products on the List”?

2. Strategize with the company to determine which products are appropriate for production in the United States

3. Assist with obtaining any necessary export licenses, including resolving “deemed export” issues for foreign persons working in the US

4. Advise on export issues related to brokers, distributors and resellers [B.A.E. issues]

5. Establish an effective Compliance Program

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U.S. Munitions List (USML)

• Category 1: Firearms, weapons• Category 2: Guns and armaments• Category 3: Ammunition, ordinance• Category 4: Launch vehicles, missiles,

rockets• Category 5: Explosives, incendiary

agents• Category 6: Naval vessels• Category 7: Military vehicles• Category 8: Aircraft and equipment• Category 9: Military training services,

equipment• Category 10: Protective personnel

equipment and shelters• Category 11: Military electronics• Category 12: Optical and guidance

control equipment

• Category 13: Auxiliary equipment (cameras, encryption, camouflage)

• Category 14: Toxicological, chemical, biological agents, protective equipment

• Category 15: Space systems and equipment

• Category 16: Nuclear weapons, technology

• Category 17: Classified technical data and services

• Category 18: Directed energy weapons

• Category 19: Reserved• Category 20: Oceanographic

equipment• Category 21: Other items designed

or adapted for military use

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Examples of USML Items• Electronic equipment which is

specifically designed, modified or configured for military application

• Drone aircraft• Navigation systems• Command, control and

communications systems including radios (transceivers) and identification equipment

• Military training services and equipment

• Underwater sound equipment• Flight control products, software

and technologies

• Satellites, launch vehicles and ground control equipment, including parts, technologies and software

• Classified products, technical data and software• Anti-gravity and pressure suits, atmosphere diving suits• Body armor• Naval vessels and related equipment, parts, technologies and software• Protective personnel equipment and shelters• Auxiliary military equipment

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Nr. 5 Vertragsmanagement und Verhandlung

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Contracts: the American way

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Warnhinweis! • Read the entire contract• The traps can be found in articles

with such names as : – « miscellaneous »– « definitions » – « flow-through »  ou « incorporation by reference »

• RTBC!  RTBC!

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Key Contract Clauses • Liquidated Damages• Limitations on consequential damages• Limitations on Punitive damages• Maximum liability for damages • Seller Indemnification of buyer for 3rd party claims

only • Best efforts, • Time is of the essence • Product warranties & representations• Choice of Law: which state? UCC? • Dispute resolution Solution: Use a Model Manufacturing Supply Agreement as a starting point in the negotiations 48

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Konventionalstrafen: Die Vorzüge (Liquidated Damages)

• “ liquidated damages” for late deliveries • Seller: reduces its uncertainty by capping its liability, even if the cap

turns out to be greater than actual damages to Buyer• Buyer: reduces its uncertainty by fixing at least acceptable level of

compensation• Dispute Resolution: Eliminates calculation of damages, streamlines

dispute resolution to proof of delay only, reduces litigation costs• U.S. Law: Uniform Commercial Code: UCC 2-719:

– Be specific –fix the amount to type of breach – State difficulty to estimate damages – Liquidated damages are reasonable estimate of damages – Liquidated damages are the exclusive remedy for the specified

breach ( , late delivery, defective medical devices etc. ) – Avoid right to elect alternative remedies– creates risk that

liquidated damages will be viewed as penalty and unenforceable

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Liquidated Damages: Model Clause

Liquidated Damages. If the Seller fails to deliver the Products by the Delivery Date (the "Seller Breach"), the Seller shall pay to the Customer an amount equal to $2500 per day for each day a Seller Breach continues (the "Liquidated Damages"). The parties intend that the Liquidated Damages constitute compensation, and not a penalty. The parties acknowledge and agree that the Customer's harm caused by a Seller Breach would be impossible or very difficult to accurately estimate at the time of contract, and that the Liquidated Damages are a reasonable estimate of the anticipated or actual harm that might arise from a Seller Breach. The Seller's payment of the Liquidated Damages is the Seller's sole liability and entire obligation and the Customer's exclusive remedy for any Seller Breach. 50

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FolgeschädenConsequential Damages

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Lösung: Ausschließen von Folgeschäden/indirekten Schäden

11.1. NO LIABILITY FOR CONSEQUENTIAL OR INDIRECT DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR ENHANCED DAMAGES[, LOST PROFITS OR REVENUES OR DIMINUTION IN VALUE], ARISING OUT OF OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF (A) WHETHER SUCH DAMAGES WERE FORESEEABLE, (B) WHETHER OR NOT THE OTHER PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND (C) THE LEGAL OR EQUITABLE THEORY (CONTRACT, TORT OR OTHERWISE) UPON WHICH THE CLAIM IS BASED, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE.

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Schadloshaltung: Fallen für Verkäufer

• Clearly Limit Indemnification to 3rd Party Claims only against the Buyer

• You will need language that says: – « Seller indemnifies Buyer solely for losses

arising out of a Third Party Claim directly caused by a breach of the contract by Seller, subject to certain exceptions, etc.  »

• Obtain insurance coverage

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Final Points: Management of Contracts • « Americanize » your agreements !• Examine with care your commercial contracts: ask for legal

advice to interpret and apply under the law of the state that will govern any dispute:

• Pay close attention to liability provisions, including responsbility for defective products, liquidated and consequential damages, and the obligation to indemnify against third party claims.

• Government contracts present special problems and all provisions must be understood and respected;

• Consider dispute resolution solutions: Mediation Arbitration

• It is often far less expensive and must faster to resolve disputes before the Federal U.S. District Courts.

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Bußgelder für Produkthaftung:

• McDonald’s: customer spilled coffee, millions in damages ?

• Legal reality is different• limitations on punitive damage by Supreme Court and Courts in Virginia

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Products Liabiity • Adopt the same steps and good sense that

you use to sell in Germany and to other markets

• Matter of insurance coverage • Advantages of mediation and federal courts

in Virginia: rapid decisions and pro-business

• American laws protect businesses against frivolous lawsuits and set a ceiling or limit on punitive damages.

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Other Important Contracts • See Handbook FAQ #7• Manufacturer Supply Agreements • Other sales agreements • Technology license agreements • Government contracts and subcontracts • Distribution and agency agreements• Teaming agreements • Joint Ventures (JV)

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Teaming Agreements• Teaming Agreement: Defined• Major Elements and Protections

for French Company as Teaming Partner & subcontractor: exclusivity, scope of work, data exchange subject to NDA (accords de confidentialite), pricing within prime contractor’s target ranges, easy termination.

• Sample Teaming Agreement Checklist: PDF from [email protected]

• Substantial advantages over typical prime-sub relationships

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Example: Joint Venture

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Joint Venture Common development of a new landing gear and landing gear doorQuestions to Consider:

– Division of profits; – Liability: one venture partner binds the other– Resolution of disputes– What acts can be undertaken independent of and

outside the JV– Who owns the improvements? Cross-licensing – Termination and grounds for withdrawal– What structure for the JV?

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Final Thoughts: Joint Venture • Define well the scope of the joint venture

agreement and use an american contract • Know how to end it before you sign it• Plan for the divorce before you get married

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Nr. 6 Rechtsstrategien zur Förderung Ihres Wachstums auf dem US-Markt

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Strategie 1: Ihr Wachstum auf dem US-Markt mit Fusionen und Übernahmen beschleunigen

• Benefits of M&A– localize and americanize your business– add to your competitivity – create a level playing field with your american

competitiors– Less complex, ultimately more profitable than a JV– Gives your company the ability to raise capital from

private equity and commercial banks in the USA

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M&A: Practical Considerations • Legal concept: New York Minute! • Legal point: Importance of non-binding Letter of Intent (LOI)

to give you exclusivity until signing of Stock Purchase Agreement

• Legal Point: Great American Bait and Switch in Reverse!– Bid at $11 million , buy at $9 million– your weapon: your lawyers and their due diligence.

• Stock Purchase Agreement: Representations and Warranties

• Post-Acquisition Issues: Deal with Them Pre-Acquisition to cement the deal: Employment Agreements; Golden Parachutes, Consulting/Non-compete Agreements:

• Momentum to close the deal• IP/ employment and immigration issues post-acquisition• Deposits and Break-Up Fees: Be Prepared

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Strategie 2: Südöstliche Bundesstaaten als Zentrum für den Export aus den USA

• Manufacture or assemble in the dollar zone: avoid Euro/Dollar exchange issues. Your contracts may be in dollars.

• Benefit from savings of 15% or more on the costs of production in Europe

• Export from the United States with subsidies from U.S. government: – IC DISC : 2 companies, one tax free receives

commissions on the sales – reduces by 35% to 40% the taxes on profits

from exports– availability of financing from Ex-Im Bank

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Strategie 3: Kapitalaufnahmen für Expansion in den USA

• Your expansion to the USA presents an opportunity for raising private equity capital

• U.S. sources will finance an acquisition (M&A)• « the dry powder » of Private Equity • Key point: show a contract to obtain the financing • Documentation:   American-style Term Sheet  or

Private Placement Memorandum• US JOBS ACT: makes capital raises easier• Commercial bank financing…. yes and no

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Strategy # 4: Negotiation of Financial Incentives

• Be cautious of “conditions” in offers of financial incentives• Seek legal advice in negotiations • Proper analysis of long-term costs and benefits of your

location decision may depend more these factors than incentives:

• Availability of qualified professional workforce and education levels – R&D resources– multiple markets: commercial and government– quality of life– Pro-business environmental regulations– transportation and infrastructure: ports, airports– long term cost of doing business in the location

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Zusammenfassung

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Conclusion : Your success for a Soft Landing in the USA will depend upon:

• Choice of correct visa solutions for key personnel: “It all starts here”

• Choice of correct corporate structure• Careful planning of your approach to handling

employment questions while maximizing use of “Right to Work” laws in states like Virginia

• Recognizing importance of government regulations, notably Export Controls

• Proper management and negotiation of your Manufacturing Supply Agreements and other important contracts to limit your liability and reduce your risks

• Adopt strategies for M&A, Exporting and Raising Capital to permit you to accelerate your growth in the U.S. market and

• Finding legal advisors with the experience and expertise to help you succeed with your investment project in the USA.

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The desired results

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Thank You

Eliot Norman, [email protected]

www.williamsmullen.com001/804.420.6000

Fairfax County/Washington, DC USA www.williamsmullen.com/practice/international-law

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QUESTIONS ?

Eliot Norman

Williams Mullen 8300 Greensboro DriveSuite 1100Tysons Corner (Fairfax County) Virginia 22102 USADirect Line: [email protected]/practice/international-law