(2)

(After break,Mr.Smith and Mr.Li resume their discussion)

L:Mr.Smith,I think we can now focus our discussion on specific terms and conditions in the licensing agreement so that a draft contract can be worked out very soon.

S:I appreciate your working efficiency and practicality.Let’s strike while the iron is hot.

L:What are the payment terms for the technology?

S:Apart from an initial down payment for disclosure of our know-how,your factory shall pay us either 15% of your annual net sale resulting from using our new technology or a fixed amount of royalty fee.Whichever you prefer.

L:Well,I cannot decide which term to agree right now but 15% annual sale is somewhat too high.How long do we have to pay?

S:As long as the licensing agreement is valid,10 years I suppose.

L:What about technical assistance and training? How are you able to help us,Mr.Smith?

S:We shall send you eight sets of technical blueprints after the effective date of contract.Meanwhile we shall send our technicians for technical assistance and training.

L:We cannot specify how many training sessions and technical personnel we need.But on the whole we’re satisfied with your plan.Well,since the technology transferred by you is in the form of technical blueprints,what if they are not practical and feasible during our production process?

S:In that case,our company will cooperate with your party under the principle of integrity and mutual trust.So you’re assured to have the most-advanced technology of our company.However,it is possible that you might meet some problems during the production process since the technology is new to you.If that really happens,we can cooperate together to solve the problems to make sure that the production process is not affected.

L:Thank you for your assurance.What about new technological improvements? Are you going to share with us information on improvements and developments of the technology made during this license agreement?

S:That is guaranteed.After visiting your factory I feel the information exchange process must be a mutual one.

L:The agreement should also guarantee that the entire licensing process will meet the specifications in the technical documentation.

S:There is no doubt about that.I agree.

L:I have consulted relevant licensing and franchising laws and find the following terms:In case the seller fails to deliver technical documentation,the equipment or its spare parts as stipulated in the contract the buyer shall have the right to cancel the contract and the seller shall return the buyer all the payment already made to the seller plus interest at a rate of prevalent interest rate per annum.Should any delay in delivery arise,a penalty for delay shall be calculated based on the duration of the delay.

S:I can understand why you check all the legal articles and want to put them into our contract stipulations.Business is business.I have no objection to that.Since it is the first time that we cooperate I would like to voice my own concern.

L:Speak up please.

S:What I’m concerned with is the problem of confidentiality and non-transferability.

L:We promise to do our best to protect your technical information and know-how.What about we have a separate confidential and non-transferable agreement attached with relative penalty provisions?

S:I agree.I think we have covered nearly all the important provisions of contract.It seems that we can make out a draft contract in a few days.

L:Yes,we have agreed on the major points.Mr.Smith,I believe that our future cooperation will be a successful one.It’s almost the time for dinner.Let’s go and celebrate.

S:OK,thanks a lot.