Technology transactions and outsourcing deals: a practitioner s perspective. Michel Jaccard

Transcription

1 Technology transactions and outsourcing deals: a practitioner s perspective Michel Jaccard

2 Overview Introduction : IT transactions specifics and outsourcing deals Typical content of an IT outsourcing agreement Selected issues and provisions Description / scope of the services Service Level Agreements (SLA) Pricing model Intellectual property issues Termination

3 The IT industry Early years ( ): Hardware purchase OS licensing Apps development Growth years ( ): Standard software licensing terms Growth of the services departments (advisory, development, integration, AM, migration, maintenance, support) Hardware leasing / Delivery platforms

4 The IT industry Mature / Competitive / Fragmented industry: Business process outsourcing / selective sourcing Cloud computing Data privacy / security Data aggregation / mining Open source New delivery models: SaaS / ASPs / OEM

5 The legal documentation Information technology agreements are: Agreements Intent? Long term agreements Governance? Termination? Services agreements Measurement of performance? Business agreements Pricing? Market standards? Role of outside counsel : Understanding of the non-legal issues Completing the risk grid Negotiating / Leveraging the customer s position Sophisticated Vendor terms Example of a typical IT / BP outsourcing agreement

6 The ITO agreement: Overview Description / scope of the services Service Level Agreements (SLA) Pricing model Employment issues Assets transfer Intellectual property Termination Liability Governance Dispute resolution

7 SERVICES Generally During the Term, [VENDOR] shall provide to [CLIENT], and [CLIENT] shall purchase from [VENDOR], the services described in Exhibit 2, which shall include in particular the Infrastructure Hosting Services, the Operating Services, the Application Management Services and the Supplemental Services (the Services ). Service Locations ITO: Selected issues [VENDOR] shall provide the Services to the [CLIENT] Service Locations. Each Party, while on the other Party s premises, shall comply with the reasonable requests, standard rules and regulations of such Party regarding safety and health and personal and professional conduct generally applicable to such premises.

8 SERVICE LEVELS Service Levels Within [ ] days after the Effective Date, the Parties shall agree to the (1) service levels that [VENDOR] shall meet in the performance of the Services in the categories set forth in Exhibit 3 (the Service Levels ) and (2) time period during which the Service Levels shall be measured. Reporting ITO: Selected issues [VENDOR] shall provide to [CLIENT] performance reports according to a schedule and in the format agreed upon by the Parties.

9 ITO: Selected issues Remedies In the event [VENDOR] fails to provide the Services in accordance with the Service Levels, [VENDOR] shall incur the performance credits identified in and according to the schedule set forth in Exhibit 3. [CLIENT] agrees that (1) [VENDOR] shall not be obligated to issue a Performance Credit to [CLIENT] if the failure to meet the Service Level was not caused by [VENDOR] or [VENDOR] Agents; (2) any Performance Credit due to [CLIENT] shall be applied against amounts otherwise payable to [VENDOR] by [CLIENT] pursuant to this Agreement within 90 days after the end of the applicable Contract Year; and (3) the Performance Credits shall be [CLIENT] s sole and exclusive remedy for [VENDOR] s failure to meet such Service Level [, subject only to such failure amounting to a ground for termination of this Agreement pursuant to Section 16.2.]

10 CHANGES IN THE SERVICES In general ITO: Selected issues In the event a Party wishes to make a Change to the Services and the Services Levels (a Change ), such Party shall submit a written proposal to the other Party describing such desired Change. The other Party shall reject or accept the proposal in writing within a reasonable period of time, but in no event more than 30 days after receipt of the proposal. In the event the proposal is rejected, the writing shall include the reason for the rejection. In the event the proposal is accepted, the Parties shall determine the additions or modifications to be made to this Agreement (including the Fees). Any such addition or modification shall be set forth in a written Change Order signed by the Parties.

11 Regulatory Changes ITO: Selected issues [CLIENT] shall promptly identify and notify [VENDOR] of any changes in Law, including [CLIENT] s regulatory requirements, that may relate to [CLIENT] s use of the Services. The Parties shall work together to identify the impact of such changes on how [CLIENT] uses, and [VENDOR] delivers, the Services. [CLIENT] shall be responsible for any fines and penalties arising from any noncompliance by [CLIENT] with any Law relating to [CLIENT] s use of the Services. Subject to the following sentence, if a change in Law prevents or delays [VENDOR] from performing its obligations under this Agreement, the Parties shall develop and implement a suitable workaround until such time as [VENDOR] can perform its obligations under this Agreement without such workaround. If a change in Law, including the development or implementation of a workaround, results in [VENDOR]' use of additional resources or an increase in [VENDOR]' costs of providing the Services, [CLIENT] shall reimburse [VENDOR] for such additional resources and increased costs.

12 THIRD PARTY SERVICES [VENDOR] Opportunity ITO: Selected issues With respect to any Out-of-Scope Service, [CLIENT] shall (1) notify [VENDOR] at or about the same time that it notifies other vendors that it is considering acquiring an Out-of-Scope Service and provide [VENDOR] with the same information that it provides such other vendors and (2) allow [VENDOR] the opportunity to compete with such other vendors for the provision of such Out-of-Scope Service. If [VENDOR] is selected by [CLIENT] to provide such Out-of-Scope Service, [VENDOR] and [CLIENT] shall negotiate a Change Order or separate agreement, as the case may be, including [VENDOR]' charges for such Out-of-Scope Service.

13 ITO: Selected issues CUSTOMER RESPONSIBILITIES [CLIENT] shall, at its expense: (1) be responsible for the obligations and responsibilities set forth in Exhibit 4; (2) upon [VENDOR]' request, make available to [VENDOR] personnel familiar with [CLIENT] s business requirements; (3) provide to [VENDOR] complete and accurate information regarding [CLIENT] s business requirements in respect of any work to be performed by [VENDOR] under this Agreement; (4) respond within the time period specified in this Agreement (or if no time period is specified within 10 business days) to all deliverables presented to [CLIENT] by [VENDOR] for [CLIENT] s approval, which approval shall not be unreasonably withheld (if [CLIENT] fails to respond within such 10 days or other specified period, [CLIENT] shall be deemed to have accepted such deliverable); (5) cooperate with [VENDOR]; (6) promptly notify [VENDOR] of any (a) third-party claims that may have an impact on this Agreement and (b) invalid or nonexistent licenses; and (7) perform all other obligations of [CLIENT] described in this Agreement.

14 ITO: Selected issues PROPRIETARY RIGHTS [CLIENT] Intellectual Property [CLIENT] hereby grants to [VENDOR] at no cost to [VENDOR] a nonexclusive right to access and Use in connection with the provision of the Services (1) the [CLIENT] Proprietary Intellectual Property and (2) the [CLIENT] Third-Party Intellectual Property. Upon the later of the expiration of this Agreement or termination of this Agreement and the end of the Termination Assistance Period, the rights granted to [VENDOR] in this Section shall immediately revert to [CLIENT] and [VENDOR] shall, at [CLIENT] s cost and expense, deliver to [CLIENT] a current copy of all the [CLIENT] Intellectual Property (including any related source code in [VENDOR]' possession) in the form in use as of such date. [CLIENT] shall pay all costs and expenses with respect to the [CLIENT] Intellectual Property, including the costs associated with maintenance, license payments, insurance, taxes, and the Consents.

15 [VENDOR] Intellectual Property All [VENDOR] Intellectual Property shall be and shall remain the exclusive property of [VENDOR] or its licensor and [CLIENT] shall have no rights or interests in the [VENDOR] Intellectual Property. [CLIENT] hereby irrevocably assigns to [VENDOR] any and all rights or interests in the [VENDOR] Intellectual Property. Tools ITO: Selected issues Notwithstanding anything contrary in this Agreement, [VENDOR] shall retain all right, title, and interest in and to any and all ideas, concepts, know-how, development tools, methodologies, processes, procedures, technologies, or algorithms ( Tools ), which are based on trade secrets or proprietary information of [VENDOR]. Nothing contained in this Agreement shall restrict [VENDOR] from the use of any Tools that [VENDOR] specifically develops for [CLIENT].

16 PAYMENTS Disputed Amounts ITO: Selected issues If [CLIENT], in good faith, disputes any invoice charges regarding the Services, it may withhold from its payment of the relevant invoice any such disputed amounts (except for applicable taxes), up to a maximum of the lesser of the amount for the Services to which the dispute relates and 75% percent of the average monthly Fees for the previous 12 months. [CLIENT] shall pay to [VENDOR] withheld amounts, plus interest at a rate of 7% measured from the date such amount was due until the date such amount is paid by [CLIENT] to [VENDOR], in accordance with the resolution of the dispute. Notwithstanding any dispute and in accordance with this Section, [CLIENT] shall remit to [VENDOR] the invoiced amount, less the disputed amount, in accordance with this Section.

17 TERMINATION By [VENDOR] [VENDOR] shall have the right to terminate this Agreement if: (1) [CLIENT] fails to pay any amounts payable under this Agreement more than 90 days after they are due; (2) [CLIENT] fails to perform any of its material nonmonetary obligations under this Agreement, and does not cure such default within 60 days of receipt of notice of default from [VENDOR]; (3) [CLIENT] becomes or is declared insolvent or bankrupt, is the subject of any proceedings relating to its liquidation, insolvency, or for the appointment of a receiver or similar officer for it, makes an assignment for the benefit of all or substantially all of its creditors or enters into an agreement for the composition, extension, or readjustment of all or substantially all of its obligations; or (4) a change of control occurs within [CLIENT] or its owners. ITO: Selected issues

18 TERMINATION By [CLIENT] If [VENDOR] materially fails to perform any of its material obligations under this Agreement, [CLIENT] may give [VENDOR] notice of such failure. [VENDOR] shall within 60 days of receipt of such notice remedy the failure specified therein. In the event [VENDOR] fails to remedy the failure within such 60 period, [CLIENT] may give a termination notice to [VENDOR] and may terminate this Agreement under which the breach occurred; provided, however, that the time to cure a breach shall be extended if [VENDOR] has promptly commenced to cure the breach and continues to use reasonable efforts to cure such breach. ITO: Selected issues

19 ITO: Selected issues In addition, [CLIENT] may terminate this Agreement, as a whole, with effect from the end of any quarter by (1) at least one quarter's prior notice to [VENDOR] before the Effective Date and (2) two quarters' notice to [VENDOR] after the Effective Date, provided however that [VENDOR] has failed to reach the Service Levels by at least one of the two following indicators: [(i) overall minimal percentage not reached for two consecutive periods or (ii) maximal service credits ]. If [CLIENT] terminates this Agreement for convenience, [CLIENT] shall pay to [VENDOR] all amounts due for the Services provided by [VENDOR] until the effective termination date of such Services and all actual additional costs suffered and duly documented by [VENDOR] resulting directly from such early termination.

20 ITO: Selected issues Except in the event this Agreement is terminated by [VENDOR] pursuant to Section 16.1, upon the expiration or termination of this Agreement, if (1) all payments due to [VENDOR] under this Agreement have been paid and (2) [CLIENT] has requested termination assistance at least [ ] days prior to the expiration of this Agreement or upon notice of termination of this Agreement, [VENDOR] shall (a) cooperate with [CLIENT] in effecting the orderly transfer of the Services to a third party or the resumption of the Services by [CLIENT] upon [CLIENT] s request and (b) continue to perform such portion of the Services requested by [CLIENT] ((a) and (b) collectively, the Termination Assistance Services ).

21 Except in the event this Agreement is terminated by [VENDOR] pursuant to Section 16.1, [VENDOR] shall provide the Termination Assistance Services for up to 180 days after the effective date of the termination of this Agreement by [CLIENT] (the Termination Assistance Period ). To the extent such Termination Assistance Services cause [VENDOR] to use resources beyond those otherwise then being provided by [VENDOR] as part of the Services or incur additional costs, such Termination Assistance Services shall constitute and be performed as Out-of-Scope Services. Exit Rights ITO: Selected issues Upon the expiration or termination of this Agreement (except in the event this Agreement is terminated by [VENDOR] pursuant to Section 16.1): [VENDOR] shall provide the Termination Assistance Services in accordance with Section 16.3;

22 ITO: Selected issues [CLIENT] shall allow [VENDOR] to use, at no charge, those [CLIENT] facilities and [CLIENT] Intellectual Property being used to perform the Termination Assistance Services for as long as [VENDOR] is providing the Termination Assistance Services to enable [VENDOR] to effect an orderly transition of [VENDOR]' resources; upon [CLIENT] s request, with respect to generally commercially available [VENDOR] Third Party Intellectual Property, which [VENDOR] has licensed and is dedicated full-time to providing the Services as of the date of the expiration or termination of this Agreement, [VENDOR] shall transfer, assign, or sublicense such [VENDOR] Third Party Intellectual Property to [CLIENT]; provided, however, that [CLIENT] provided [VENDOR] with reasonable notice prior to the acquisition of a license to such [VENDOR] Third Party Intellectual Property that [CLIENT] may desire such assignment or sublicense and [CLIENT] pays any costs associated with such assignment or sublicense;

23 Thank you for your attention. Questions? Contact : michel.jaccard@idest.pro