OVERVIEW OF LEGAL

STRUCTURES 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 a
controlled subsidiary

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 DELIVERY MODELS
MAY IMPACT LEGAL STRUCTURE

„ On-site

„ Off-site

„ Off-shore

„ Domestic

„ Global

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 CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY

Service Agreement
Customer
Provider
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 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

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 CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE

Service Agreement
Customer
Provider

Dedicated Payment
Operation
Services

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 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

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

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 BUILD/OPERATE/TRANSFER STRUCTURE

Service Agreement
Customer
Provider

Dedicated Payment
Operation
Services

Option
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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

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BUILD/OPERATE/TRANSFER STRUCTURE
(CONT’D)

„ Performance requirements

„ Use of employees or contractors

„ Confidentiality

„ Assignment of Intellectual Property

† Moral rights

„ Governing law

„ Dispute resolution

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BUILD/OPERATE/TRANSFER STRUCTURE
(CONT’D)

„ Tax Considerations

„ Registration requirements

„ Time to implement

„ Cost

„ Risk
† Intellectual Property

† Business

† Crime

† Privacy

15

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 CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY

Service Agreement Customer

Provider
(Parent)
(Subsidiary)
Services

Payment
Controlling
Shareholder
(Parent)
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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

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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

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 SUMMARY

„ Blocking and tackling usually with an

international twist

„ Vendor’s track record

„ Intellectual property comes in many

forms

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