1. Strategic AlliancesStrategic Alliances By: William A. Price, Attorney at LawBy: William A. Price, Attorney at Law wprice@growthlaw.comwprice@growthlaw.com

2. Possible Legal RelationshipsPossible Legal Relationships Resulting From Alliance FormationResulting From Alliance Formation Parallel PlayNo Explicit Agreements Alliances For Profit, With or Without Agreements Nonprofit Alliances 3. Alliances for ProfitAlliances for Profit Partnershiptwo or more persons engaged in an activity for their mutual profit Joint VentureExplicit agreement for one or more profit-making activities 4. Nonprofit AlliancesNonprofit Alliances Unincorporated Associationtwo or more persons engaged in an activity not for profit ConsortiumExplicit agreement for one or more nonprofit activities 5. Parallel Play: Microsoft vs. LinuxParallel Play: Microsoft vs. Linux Microsoft: We are the World Proprietary design standard Alliance partners We make software, Intel the chips, others the boxes Linux: Cooperative Play Open license Design community Proprietary systems built on open license cores: eg Linux + Apache Cross-platform software design 6. More Parallel PlayMore Parallel Play Infomediary-Mediated Play: Independent truckers and shippers (multiple exchanges), Lawyers and clients (Guru.com, elance.com) 7. Parallel Play With RulesParallel Play With Rules Formal Exchanges: Chicago Board of Trade, wheat pit, or other defined transaction environments Parallel networks: Archipelago and other interbroker trades, using exchange contract definitions 8. Unregulated PlayUnregulated Play Non-exchange defined contracts, hedge fund players: can be risky business Amaranth Advisors: $9.2 billion to $3.5 billion, August-September 2006 gas trade loss 9. Partnerships:805 ILCS 202Partnerships:805 ILCS 202 Formation of partnership. the association of 2 or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership. 10. Consequences of PartnershipConsequences of Partnership RelationsRelations All partners are general agents for the partnership: they can make contracts that bind the other partner Partners have fiduciary duties to the partnership and to each other: they may not be able to compete or to fail to inform each other in areas of information relevant to their partnership Partnership tax rules apply to all partnership income and expenses: partners realize their share of each every tax year. 11. Are These People Legal Partners?Are These People Legal Partners? IMI and Can-Am Form Strategic Alliance - Packaging OnLine - Sep 22 10:55 PM Claris in Strategic Alliance for Spanish Market - New Kerala - Sep 22 11:15 PM SmartCare Family Medical Centers Enters Deeper Strategic Alliance With Wal-Mart Stores - RedNova - Sep 20 7:24 AM 12. IMI and CAN-Am:A Joint VentureIMI and CAN-Am:A Joint Venture (From PACKAGING WORLD): Independent Machinery, Inc. (IMI), Palatine, Ill., and Can-Am Packaging Equipment Corp. have formed a strategic alliance encompassing joint representation for quality finishing equipment, excellence in engineering, and service and training in North America, South and Central America, and Mexico. This joint venture is a commitment to supply the most advanced finishing equipment to the folding carton and corrugated container markets. 13. A Joint Venture Is A PartnershipA Joint Venture Is A Partnership A joint venture is not regarded as identical with a partnership, although, as a practical matter, the only distinction between the two is that the former relates to a single specific enterprise or transaction while the latter relates to a general business of a particular kind. -- Ambuul v. Swanson, 162 Ill. App. 3d 1065, 114 Ill. Dec. 272, 516 N.E.2d 427 (1 Dist. 1987). 14. Marketing Agreement=PartnershipMarketing Agreement=Partnership Example: Claris Lifesciences Ltd today announced its foray into the Spanish market with the signing of a marketing agreement with one of the country's leading firm Juste Pharmaceuticals. 15. Additional Legal ComplicationsAdditional Legal Complications Unbreakable Deals: EU, for instance, may create a quasi-property right in local dealerships: no termination allowed without a legal basis Antitrust Law: All agreements in restraint of trade are potentially illegal 16. Dancing With ElephantsDancing With Elephants To survive, you are either quick Or dead 17. A Pygmy-Elephant AllianceA Pygmy-Elephant Alliance SmartCare Family Medical Centers, a rapidly growing operator of retail healthcare centers, will increase its expansion into the Denver area with an agreement to design, build and operate a significant number of SmartCare Centers inside Denver-area Wal-Mart stores. 18. Two Levels of PlayTwo Levels of Play Equals: Compete or Play, By Agreement or in Paralell Small and Big Business: Big Business Makes The Market, Small Has The Product Big Doesnt Have 19. Nonprofit AlliancesNonprofit Alliances Religious Organization Example: Short- Term Mission Parallel Play: Immanuel Presbyterian, Warrenville and Interlagos Presbyterian, Sao Paulo: Both exchange visits, prayer, communication 20. Nonprofit AlliancesNonprofit Alliances Infomediary Example: www.strategicalliance.org Sets up short-term mission trips for many mission agencies and churches 21. Formal Nonprofit AlliancesFormal Nonprofit Alliances A consortium example: http://www.preventioninstitute.org/sa The Strategic Alliance for Healthy Food and Activity Environments (Strategic Alliance) is a coalition of nutrition and physical activity advocates in California. 22. Common Issues, For-Profit AndCommon Issues, For-Profit And Nonprofit AlliancesNonprofit Alliances Control: Parallel play and undefined exchanges, alliance without ownership or agreement, present risks for all parties Liability: Partnership, antitrust (e.g. ADM and Lysine), other liabilities from joint market activity and discussions Property: IP (new and old), customers, employee loyalty may be with one, not all partners 23. For-Profit Special Issues (I)For-Profit Special Issues (I) Antitrust is of particular concern if product pricing may be at issue: joint ventures or other joint ownership may avoid problems Greed may be the opposite of trust: have a formal exit agreement if significant property is involved Players need rules: if there are predefined boundaries, then unfair play can be detected 24. For-Profit Issues (II)For-Profit Issues (II) Capital Availability may dictate alliance elements: corporate venture capital or opportunities may defined alliance rules Liability allocation (or at least appropriate insurance cover) is essential (e.g. builders vs. architects vs. owners) 25. For-Profit Issues (III)For-Profit Issues (III) Cash Flow Issues Are Important: Lack of cash flow kills alliances as well as businesses Taxes need to be paid: local, state, federal, and international jurisdictions try to reach as many income streams and property elements as possible: try to arrange alliance affairs to eliminate tax liability 26. Example, Tax PlanningExample, Tax Planning Boeing, other U.S. companies have international trade and leasing companies in tax-advantaged jurisdictions Boeing still may use more than of all U.S. Eximbank financing every yearbut may not pay U.S. tax on all sale proceeds. 27. Example, Liability PlanningExample, Liability Planning Chicago Board of Trade, NYSE considering incorporation Eliminates Illinois liability shield for nonprofit directors But: allows payment of dividends for exchanges infomediary profits Expect large Director and Officer Errors and Omissions Insurance premium payments 28. Small Business AlliancesSmall Business Alliances Example: Event Cosponsorship Regional Chamber Business Networking events, with sponsors IIT/MEF meetings, Rice campus What organization could you help support, with others, to get visibility? 29. Small Business AlliancesSmall Business Alliances Parallel Play: Leads Clubs: Noncompeting organization meetings Formal Alliances: Certified grocers, common trademark car care providers 30. Your Alliance PortfolioYour Alliance Portfolio Parallel Play: What sandboxes am I in/could I be in? Formal Alliances: Who wants to talk to the same people I do, and doesnt do what I do? What value chains am I in? What rules do we need? Nonprofit alliances: do well, by doing good.