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OVERVIEW OF LEGAL
 STRUCTURES FOR
  OUTSOURCING

  January 20, 2004


   Fred Greguras
 Fenwick & West LLP


                                  1

                      1403992.1
MAJOR LEGAL STRUCTURES


Contract for services with an
independent entity
Build, operate and transfer
Contract for services with a
controlled subsidiary




                                            2

                                1403992.1
DELIVERY MODELS
MAY IMPACT LEGAL STRUCTURE


On-site

Off-site

Off-shore

Domestic

Global

                                         3

                             1403992.1
CONTRACT FOR SERVICES WITH AN
          INDEPENDENT ENTITY




Service         Agreement
                                 Customer
Provider
                 Services

                 Payment


                                                   4

                                       1403992.1
CONTRACT FOR SERVICES WITH AN
     INDEPENDENT ENTITY


 U.S. corporation/foreign parent

 Master agreement/single engagement

 Independent contractor relationship

 Performance requirements
    Project with fixed price (“spec”)
    Time and materials
    SLA

                                                    5

                                        1403992.1
CONTRACT FOR SERVICES WITH AN
  INDEPENDENT ENTITY (CONT’D)


 Use of employees or contractors

 Confidentiality
    Subsidiary issue

 Assignment of Intellectual Property
    Moral rights

 Governing Law

 Dispute Resolution

 Tax Considerations
                                                   6
 Registration requirements             1403992.1
CONTRACT FOR SERVICES WITH AN
  INDEPENDENT ENTITY (CONT’D)

Time to Implement


Cost


Risk
       Intellectual Property
       Business
       Crime
       Privacy

                                            7

                                1403992.1
CONTRACT FOR SERVICES WITH AN
         INDEPENDENT ENTITY
   DEDICATED OPERATION STRUCTURE




Service        Agreement
                               Customer
Provider

   Dedicated   Payment
   Operation
               Services


                                                8

                                    1403992.1
CONTRACT FOR SERVICES WITH AN
         INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE (CONT’D)

    Independent contractor

    Separate/virtual facility

    T&M pricing/cost plus pricing

    Performance requirements

    Use of employees or contractors

    Confidentiality

                                                     9

                                         1403992.1
CONTRACT FOR SERVICES WITH AN
         INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE (CONT’D)

     Assignment of Intellectual Property
       Moral rights

     Governing law

     Dispute resolution

     Tax considerations

     Registration requirements

                                                       10

                                           1403992.1
CONTRACT FOR SERVICES WITH AN
         INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE (CONT’D)



     Time to implement

     Cost

     Risk
        Intellectual Property
        Business
        Crime
        Privacy

                                                     11

                                         1403992.1
BUILD/OPERATE/TRANSFER STRUCTURE




Service        Agreement
                               Customer
Provider

   Dedicated   Payment
   Operation
               Services

                Option
                                                12

                                    1403992.1
BUILD/OPERATE/TRANSFER STRUCTURE
               (CONT’D)



  Independent contractor

  Virtual team with option to transfer team
  and possibly facility at a specified cost

  T&M pricing/cost plus pricing

  Option pricing



                                                          13

                                              1403992.1
BUILD/OPERATE/TRANSFER STRUCTURE
                    (CONT’D)



  Performance requirements

  Use of employees or contractors

  Confidentiality

  Assignment of Intellectual Property
     Moral rights

  Governing law

  Dispute resolution

                                                    14

                                        1403992.1
BUILD/OPERATE/TRANSFER STRUCTURE
                  (CONT’D)



  Tax Considerations

  Registration requirements

  Time to implement

  Cost

  Risk
     Intellectual Property
     Business
     Crime
     Privacy
                                               15

                                   1403992.1
CONTRACT FOR SERVICES WITH A
                 CONTROLLED SUBSIDIARY




       Service           Agreement           Customer
       Provider
                                             (Parent)
     (Subsidiary)
                          Services

                          Payment
Controlling
Shareholder
 (Parent)
                                                             16

                                                 1403992.1
CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY (CONT’D)


Control

Usually a general services agreement rather than
project oriented

Arms length contractual terms

Cost plus pricing (transfer pricing)

Performance requirements

Use of employees or contractors

Confidentiality

                                                               17

                                                   1403992.1
CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY (CONT’D)


Assignment of Intellectual Property
   Moral Rights

Governing law

Dispute resolution

Other tax considerations

Registration requirements

Time to implement

                                                  18

                                      1403992.1
CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY (CONT’D)


Cost

Risk
   Intellectual Property
   Business
   Crime
   Privacy




                                             19

                                 1403992.1
SUMMARY


Blocking and tackling usually with an
international twist

Vendor’s track record

Intellectual property comes in many
forms




                                                    20

                                        1403992.1

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Overview of Legal Structures for Outsourcing

  • 1. OVERVIEW OF LEGAL STRUCTURES FOR OUTSOURCING January 20, 2004 Fred Greguras Fenwick & West LLP 1 1403992.1
  • 2. MAJOR LEGAL STRUCTURES Contract for services with an independent entity Build, operate and transfer Contract for services with a controlled subsidiary 2 1403992.1
  • 3. DELIVERY MODELS MAY IMPACT LEGAL STRUCTURE On-site Off-site Off-shore Domestic Global 3 1403992.1
  • 4. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY Service Agreement Customer Provider Services Payment 4 1403992.1
  • 5. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY U.S. corporation/foreign parent Master agreement/single engagement Independent contractor relationship Performance requirements Project with fixed price (“spec”) Time and materials SLA 5 1403992.1
  • 6. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY (CONT’D) Use of employees or contractors Confidentiality Subsidiary issue Assignment of Intellectual Property Moral rights Governing Law Dispute Resolution Tax Considerations 6 Registration requirements 1403992.1
  • 7. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY (CONT’D) Time to Implement Cost Risk Intellectual Property Business Crime Privacy 7 1403992.1
  • 8. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE Service Agreement Customer Provider Dedicated Payment Operation Services 8 1403992.1
  • 9. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE (CONT’D) Independent contractor Separate/virtual facility T&M pricing/cost plus pricing Performance requirements Use of employees or contractors Confidentiality 9 1403992.1
  • 10. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE (CONT’D) Assignment of Intellectual Property Moral rights Governing law Dispute resolution Tax considerations Registration requirements 10 1403992.1
  • 11. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE (CONT’D) Time to implement Cost Risk Intellectual Property Business Crime Privacy 11 1403992.1
  • 12. BUILD/OPERATE/TRANSFER STRUCTURE Service Agreement Customer Provider Dedicated Payment Operation Services Option 12 1403992.1
  • 13. BUILD/OPERATE/TRANSFER STRUCTURE (CONT’D) Independent contractor Virtual team with option to transfer team and possibly facility at a specified cost T&M pricing/cost plus pricing Option pricing 13 1403992.1
  • 14. BUILD/OPERATE/TRANSFER STRUCTURE (CONT’D) Performance requirements Use of employees or contractors Confidentiality Assignment of Intellectual Property Moral rights Governing law Dispute resolution 14 1403992.1
  • 15. BUILD/OPERATE/TRANSFER STRUCTURE (CONT’D) Tax Considerations Registration requirements Time to implement Cost Risk Intellectual Property Business Crime Privacy 15 1403992.1
  • 16. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY Service Agreement Customer Provider (Parent) (Subsidiary) Services Payment Controlling Shareholder (Parent) 16 1403992.1
  • 17. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Control Usually a general services agreement rather than project oriented Arms length contractual terms Cost plus pricing (transfer pricing) Performance requirements Use of employees or contractors Confidentiality 17 1403992.1
  • 18. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Assignment of Intellectual Property Moral Rights Governing law Dispute resolution Other tax considerations Registration requirements Time to implement 18 1403992.1
  • 19. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Cost Risk Intellectual Property Business Crime Privacy 19 1403992.1
  • 20. SUMMARY Blocking and tackling usually with an international twist Vendor’s track record Intellectual property comes in many forms 20 1403992.1