An Introduction For Law Firms

December 2014

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What does Neota Logic do?

We create softwarewith which people who are not

programmersbuild powerful applicationsto serve the firm’s clients

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What kinds of apps?

1 Online, self-service guidance to clients’ employees on routine legal, compliance and policy questions

2 Routing of more-than-routine questions to counsel

3 Fact investigation and legal analysis for claims and case evaluation

4 Drafting complex documents5 Fact investigation for due diligence and

contract review6 Other legal process improvements

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Evolution of Professional Services

Richard Susskind, The End of Lawyers?Reproduced with permission.

Opportunities for Innovation

Neota Logic

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How We Do It

Financial problems

Microsoft Excel

Law, compliance, business &

policy problems

Neota Logic

Server

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Law, Rules & Policy As TextArticle 6Recognition of title transfer financial collateral arrangements1. Member States shall ensure that a title transfer financial collateral arrangement can take effect in accordance with its terms.2. If an enforcement event occurs while any obligation of the collateral taker to transfer equivalent collateral under a title transfer financial collateral arrangement remains outstanding, the obligation may be the subject of a close-out netting provision.Article 7Recognition of close-out netting provisions1. Member States shall ensure that a close-out netting provision can take effect in accordance with its terms:(a) notwithstanding the commencement or continuation of winding-up proceedings or reorganisation measures in respect of the collateral provider and/or the collateral taker; and/or(b) notwithstanding any purported assignment, judicial or other attachment or other disposition of or in respect of such rights.2. Member States shall ensure that the operation of a close-out netting provision may not be subject to any of the requirements that are mentioned in Article 4(4), unless otherwise agreed by the parties.Article 8Certain insolvency provisions disapplied1. Member States shall ensure that a financial collateral arrangement, as well as the provision of financial collateral under such arrangement, may not be declared invalid or void or be reversed on the sole basis that the financial collateral arrangement has come into existence, or the financial collateral has been provided:(a) on the day of the commencement of winding-up proceedings or reorganisation measures, but prior to the order or decree making that commencement; or(b) in a prescribed period prior to, and defined by reference to, the commencement of such proceedings or measures or by reference to the making of any order or decree or the taking of any other action or occurrence of any other event in the course of such proceedings or measures.2. Member States shall ensure that where a financial collateral arrangement or a relevant financial obligation has come into existence, or financial collateral has been provided on the day of, but after the moment of the commencement of, winding-up proceedings or reorganisation measures, it shall be legally enforceable and binding on third parties if the collateral taker can prove that he was not aware, nor should have been aware, of the commencement of such proceedings or measures.3. Where a financial collateral arrangement contains:(a) an obligation to provide financial collateral or additional financial collateral in order to take account of changes in the value of the financial collateral or in the amount of the relevant financial obligations, or(b) a right to withdraw financial collateral on providing, by way of substitution or exchange, financial collateral of substantially the same value,Member States shall ensure that the provision of financial collateral, additional financial collateral or substitute or replacement financial collateral under such an obligation or right shall not be treated as invalid or reversed or declared void on the sole basis that:(i) such provision was made on the day of the commencement of winding-up proceedings or reorganisation measures, but prior to the order or decree making that commencement or in a prescribed period prior to, and defined by reference to, the commencement of winding-up proceedings or reorganisation measures or by reference to the making of any order or decree or the taking of any other action or occurrence of any other event in the course of such proceedings or measures; and/or(ii) the relevant financial obligations were incurred prior to the date of the provision of the financial collateral, additional financial collateral or substitute or replacement financial collateral.4. Without prejudice to paragraphs 1, 2 and 3, this Directive leaves unaffected the general rules of national insolvency law in relation to the voidance of transactions entered into during the prescribed period referred to in paragraph 1(b) and in paragraph 3(i).

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As Software – Rules(Among Many Reasoning Tools)

IF[counterparty bankruptcy jurisdiction is France]

AND [counterparty is a regulated broker-dealer]

AND[collateral is cash]

AND[collateral document is an ISDA English Law Transfer annex]

AND[transaction is a cash-settled credit default swap or commodity price collar]

THEN[collateral directive applies]

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To Generate This …

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And This …

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Context — Law Firms

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What We Do — For Law Firms

We enable law firms to leverage without associates

and bill without hours

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Fee Arrangements May Be “Alternative”

• Hourly• Fixed or Flat• Phased• Collared• Holdback• Blended Rate• Contingent• Value-Based

But they all are built on ...Lawyers x Hours

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There Are Other Models

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Legal Problems

Neota Logic

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Why Expert Systems for Law Firms?

• Create differentiating services that enable clients to —• Improve outcomes and reduce risks by delivering legal and regulatory

guidance to business people when and where they need it — while business is being done, 24/7, anywhere

• Enable business people to get good advice on questions that today have no legal guidance at all (because consulting counsel is too time-consuming and costly) or that divert lawyers from more valuable (and interesting) work

• Audit transaction streams and portfolios to identify and measure risks• Embed legal & compliance rules directly in operational systems

• Create new revenue streams not dependent on the billable hour• Improve the stickiness of client relationships• Position for high-value work on the traditional billing model• Leverage the firm’s expertise more effectively

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Application Examples:Answers & Audits

• Advertising, Marketing & Promotion Law• Affordable Care Act• Consumer Financial Products & Services• Cross-Border Securities Regulation• Data Security & Privacy• Derivatives Counterparty Insolvency Risks• Employment Law• Environmental Compliance• Export Controls• Foreign Corrupt Practices Act• Healthcare regulation• Immigration• Liability Insurance Coverage• Tax

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The Business Case – Answers & Audits

ROI is positive when …• Clients’ business operations generate a

steady flow of questions in a topic area• The topic is complex enough to warrant

having advice of counsel—that is, wrong answers have bad consequences

• Yet routine, repetitive, frequent or organizationally dispersed enough that consulting counsel (in-house or external) is not practical

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Application Examples:Intake & Analysis

• Employment discrimination claims evaluation

• Products liability case evaluation• IP case evaluation• Contract review for contract management• Due diligence• Other high-volume work conducted by

company staff, outside counsel, managed services, LPO’s or contract lawyers

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The Business Case: Intake & Analysis

• Neota Logic applications assure that high-volume work is done with high quality as well as efficiency

• Assist staff/contract lawyers to identify all the relevant issues, consider every relevant sub-issue, identify the facts that support or oppose client positions, evaluate claims

• Report the lawyers’ review and analysis in a structured, consistent, electronic form; automatically create chronologies and potential witness lists

• Reduce the time and cost of senior lawyer review and re-work

• Integrate with existing case management and workflow systems

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Technology

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Neota Logic Server is a …

• Hybrid reasoning & business rules platform

• Optimized for complex legal, regulatory and compliance problems

• Incorporating advanced document automation

• Enabling business analysts to create and maintain sophisticated applications without programmers

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Key Capabilities

• Solves problems from simple to very complex — ten to ten thousand rules• Visual construction tools for non-programmers, with continuous automatic

error-checking — no code• Uniquely comprehensive and efficient construction of reasoning

• Hybrid reasoning methods — rules, formulas, etc. – all in one system with one development tool, adaptable to a very wide range of problems

• Multiple forms of rule representation — if/then mappings, decision trees, decision tables, situation sets (reusable logic constructs)

• Declarative, not procedural — set goals, NLS does the rest• Prioritization, applying simultaneous backward and forward chaining, automatically

integrates all reasoning methods with maximum efficiency• Optimization of conclusions to minimum or maximum values allows independent

construction of parallel reasoning paths• One-step reasoning on all elements of matrix data structures

• Integrated, automated validation, verification & testing tools• Sophisticated HTML/CSS user interfaces are generated automatically and are

completely customizable; designed for desktops, tablets and smartphones• Logic-driven document automation in HTML, Word, PDF and PDF forms

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Reasoning Methods:Many, Hybrid, Integrated

• Mappings (if/then rules)• Decision trees (complex, asymmetrical rules in graphical form)• Decision tables (multiple if/then rules of same structure)• Situation sets (reusable Boolean structures)• Weighted scorings (dynamic weighted factors analysis)• Formulas (operators for numbers, dates, strings, etc.)• Spreadsheets (direct integration of Excel)• Optimization (best/worst answer achievable via any logic path)• Multi-value answers (first or all, via different logic paths)• Complex calculations & optimization (e.g., Mathematica)• Special-purpose and custom algorithms (e.g., AlchemyAPI text

analysis, BigML machine learning)* * * *

Applications can use any or all forms of reasoning, which are integrated automatically; backward- as well as forward-chaining

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Neota Logic Server Document Engine

• State-of-the-art logic representation and reasoning tools deliver advanced document automation in Word, PDF and HTML

• Begin with the basics:• Variable Substitution - insert the current values of

variables

You indicated that you work in <<Value of State Where Employed>> and you are seeking time off from work because <<Value of Reason For Family Leave>>.

• Conditional Text – include specific words, paragraphs or other blocks based on logical conditions

<<IF Value of State Where Employed=New York>>Under state law, you are entitled to three days’ leave in addition to the six days provided by Federal law.<<ENDIF>>

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Add Unique NLS Capabilities

• Document logic is built with the same robust and efficient tools used in the NLS reasoning engine

• Hybrid reasoning is available for use by document applications

• Comprehensive documentation, validation, verification and testing tools are applied to document automation

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Unique Capabilities (continued)

• Integration via inbound and outbound API’s with any system having an API, including HR, ERP, CRM, contract management, document management and workflow.

• Close integration with Word and PDF enables NLS Author to parse fields in Word templates and PDF forms automatically, then present the fields in Author for easy drag-and-drop linking to NLS variables.

• User interfaces for document applications, like all NLS applications, can be 100% customized via the NLS template and style mechanisms, and can include any elements available in web applications – graphics, video, audio, etc.

• Applications use responsive design techniques to run well on desktops, tablets and smartphones.

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Application Structure

DataFrom Users

DataFrom Systems

Analysis & Reasoning

Conclusions

Outputs DataTo Systems

ReportsTo Users

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Self-Documenting for Experts’ ReviewFROM

Germany TO agreement qualified (Netting Law)

IF applicable law = Germany1. IF agreement = AFTB Master Agreement for Foreign Exchange and Derivatives Transactions 1994 OR FBF Master Agreement relating to Transactions on Forward Financial Instruments 2001 or 2007 OR [agreements omitted from example] … TBMA Master Securities Loan Agreement, 2000 version ("MSLA")

THEN agreement qualified = Yes2. IF agreement = FXNET Foreign Exchange Netting and Close-out Agreement OR [agreements omitted from example] … OR Master Agreement for Options on Emerging Market Instruments

1. IF single agreement provision = YesTHEN agreement qualified = Yes

2. IF single agreement provision = NoTHEN agreement qualified = No

3. IF single agreement provision = UnknownTHEN agreement qualified = TBD

3. IF agreement = ISDA Interest Rate and Currency Exchange Agreement 19871. IF full two-way payment provision = Yes

THEN agreement qualified = Yes2. IF full two-way payment provision = No

THEN agreement qualified = No3. IF full two-way payment provision = Unknown

THEN agreement qualified = TBD4. IF agreement = EFET General Agreement concerning the Delivery and Acceptance of Electricity, versions 2.1/2.1(a) OR EFET General Agreement concerning the Delivery and Acceptance of Natural Gas, versions 2.0/2.0(a)

1. IF EFET governing law = Austria OR England OR Germany OR Luxembourg OR Netherlands OR Switzerland

THEN agreement qualified = Yes2. IF EFET governing law = other

THEN agreement qualified = TBD

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Neota Logic Architecture

Using Applications

• Applications can be used two ways –• Via web browser on desktop, tablet or smartphone: input a fact pattern to

evaluate a situation, receive a report• Integrated with operational systems via APIs: deliver answers to other

applications on demand; batch processes to evaluate hundreds of thousands of records or events daily, receive a report of problematic cases

• Hosted by Neota Logic• Secure reliable, redundant data center—Amazon Web Services

(certifications: SOC 1, ISO 270001, PCI DSS Level 1, HIPAA, etc.)• Encrypted communications and data; virtual private cloud &

network• Private domain—applications.companyx.com• Integration with applications and directory services• Usage reports• Clustered servers to scale on demand

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Transforming expertise into answers & action

Michael MillsPresident & Chief Strategy Officer

mills@neotalogic.com(646) 402-6214

m: (917) 885-1517

Matt WadleySenior Vice President, Business

Developmentwadley@neotalogic.com

(646) 402-6233

Neota Logic Inc.60 East 42nd Street

Suite 1810New York, NY 10165

(646) 402-6225

neotalogic.com