Some comments on our business philosophy

For general precision instrument(machine) shop and specialty welding purposes where the customer can provide complete, industry standard, engineering drawings (or something approaching thereof unless the project is so simple that the napkin will suffice), Three Links will tender a fixed price and delivery bid.

Developmental work is quite something else again. We define developmental work as that which comes to us as a gleam in the customer's eye and need in his pocket and perhaps a sketch on that napkin but short a set of professional engineering drawings for all parts needed.

From the school of hard knocks (none of which have been totally fatal - yet) we at Three Links have learned that there is simply no substitute for developing a clear, concise, and written understnding before the fact of all expectations on both the customer's and our parts pertaining to any and all product development business transactions undertaken.

Given the highly demanding, uncertain, and risky nature of the product development process or other R & D and the near impossibility of accurately estimating all the costs thereof, Three Links will utilize one of following four modes of contract, depending upon the customer's needs and situation:

• Contract labor billed by the hour: From our standpoint, this is the preferred method for R &D or product development effort. Using this mode there is no question as to the ownership of intellectual property rights, special tooling, documentation, etc. The customer retains ownership of all time product and material for which he/she has been billed and has paid. In the event of customer default on payment of contract terms, Three Links shall retain all rights to intellectual property or materials which we have created or purchased on the customers behalf. Three Links will keep a detailed daily labor time/action record and submit same with each month's billing. In this mode and all following modes an up front fee will be assessed that is due and payable prior to commencement of any work to cover the needed materials and special tooling and/or other incidental expenses that are anticipated during the first 30 days of the contract.

   

• Fixed price, best effort basis: This is, in essence, a contract labor mode and all caveats above apply. The difference being that a mutually agreed upon upper contract limit for time, materials, and tooling has been negotiated between the customer and Three Links prior to commencement of any work on the project. Three Links will make every reasonable effort within its power to achieve contract goals within the dollar amount agreed upon, but, given the nature of the creative process, cannot and will not guarantee a completed project within the price limit established. There are always hidden alligators in every R & D or product development swamp. The best approach to this method is to arrive at a price that all parties believe the project could require and then multiply that price by a factor of three to arrive at a contract price. If the project comes in under that price then the customer pays only for the actual time, materials, and tooling expended. It is our experience that most developmental projects cost two to three times the original best guesses. Sorry folks, it just seems to work out that way not matter how much experience we acquire at the guessing game.

   

• Fixed price, equity position: Three Links may consider taking on a product development project in exchange for a fixed price plus anticipated costs and a guaranteed (in writing) equity position in a promising entrepreneurial endeavor. This mode is highly dependent on our own financial situation at the time and our assessment of the marketability of the potential product (s) as well as our assessment of the customers managerial capabilities and astuteness.

   

• Fixed price, fixed delivery: We take the firm position that this mode is no different, in essence, than when the customer picks up our catalog and orders a pre-existing item from that catalog and as such can have no expectations of gaining any intellectual property rights or copy rights associated therewith. When Three Links must shoulder all risks inherent in the creative process we reserve all intellectual, material, and documentation copyrights and ownership to ourselves. This mode of contract will be entered into for R & D or product development only as a last resort as it is fraught with potential conflicts from top to bottom of both the human and legal kind. The up front estimated costs fee assuredly applies here as well.

  ŠThree Links Scientific - 6/18/99 All rights reserved

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