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OVERVIEW OF LEGALSTRUCTURES FOR

OUTSOURCING

January 20, 2004

Fred Greguras

Fenwick & West LLP

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MAJOR LEGAL STRUCTURES

Contract for services with an

independent entity Build, operate and transfer

Contract for services with acontrolled subsidiary

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CONTRACT FOR SERVICES WITH AN

INDEPENDENT ENTITY

Service

ProviderCustomer

Agreement

Services

Payment

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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

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CONTRACT FOR SERVICES WITH ANINDEPENDENT ENTITY (CONTD)

Use of employees or contractors

Confidentiality

Subsidiary issue

Assignment of Intellectual Property

Moral rights

Governing Law

Dispute Resolution

Tax Considerations

Registration requirements

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CONTRACT FOR SERVICES WITH AN

INDEPENDENT ENTITY (CONTD)

Time to Implement

Cost

Risk

Intellectual Property

Business

Crime

Privacy

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CONTRACT FOR SERVICES WITH ANINDEPENDENT ENTITY

DEDICATED OPERATION STRUCTURE

Service

ProviderCustomer

Agreement

Services

PaymentDedicated

Operation

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CONTRACT FOR SERVICES WITH ANINDEPENDENT ENTITY

DEDICATED OPERATION STRUCTURE (CONTD)

Independent contractor

Separate/virtual facility

T&M pricing/cost plus pricing

Performance requirements

Use of employees or contractors

Confidentiality

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CONTRACT FOR SERVICES WITH ANINDEPENDENT ENTITY

DEDICATED OPERATION STRUCTURE (CONTD)

Assignment of Intellectual Property

Moral rights

Governing law

Dispute resolution

Tax considerations

Registration requirements

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CONTRACT FOR SERVICES WITH ANINDEPENDENT ENTITY

DEDICATED OPERATION STRUCTURE (CONTD)

Time to implement

Cost

Risk Intellectual Property

Business

Crime Privacy

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BUILD/OPERATE/TRANSFER STRUCTURE

Service

ProviderCustomer

Services

PaymentDedicated

Operation

Option

Agreement

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BUILD/OPERATE/TRANSFER STRUCTURE(CONTD)

Independent contractor

Virtual team with option to transfer team

and possibly facility at a specified cost

T&M pricing/cost plus pricing

Option pricing

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BUILD/OPERATE/TRANSFER STRUCTURE(CONTD)

Performance requirements

Use of employees or contractors

Confidentiality

Assignment of Intellectual Property

Moral rights

Governing law

Dispute resolution

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CONTRACT FOR SERVICES WITH ACONTROLLED SUBSIDIARY

Service

Provider

(Subsidiary)

Customer

(Parent)

Agreement

Services

Payment

Controlling

Shareholder

(Parent)

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CONTRACT FOR SERVICES WITH ACONTROLLED SUBSIDIARY (CONTD)

Control

Usually a general services agreement rather thanproject oriented

Arms length contractual terms

Cost plus pricing (transfer pricing)

Performance requirements

Use of employees or contractors

Confidentiality

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CONTRACT FOR SERVICES WITH A

CONTROLLED SUBSIDIARY (CONTD)

Assignment of Intellectual Property

Moral Rights

Governing law

Dispute resolution

Other tax considerations

Registration requirements

Time to implement

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CONTRACT FOR SERVICES WITH A

CONTROLLED SUBSIDIARY (CONTD)

Cost

Risk

Intellectual Property

Business Crime

Privacy

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SUMMARY

Blocking and tackling usually with an

international twist

Vendors track record

Intellectual property comes in many

forms