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It’s been one year since attorney Tim Young left private practice to move in-house as vice president and general counsel of Austin, Texas-based Pavilion Technologies Inc. and its Belgium-, Japan- and New Zealand-based subsidiaries. Pavilion is a privately held software company that specializes in helping other companies maximize their potential with regard to performance, efficiency and profitability through the use of Pavilion’s specifically designed software “optimization” solutions. Established in 1991, Pavilion has implemented more than 1,700 solutions in numerous industries, including energy, pulp and paper, financial services, health care, chemicals, minerals and consumer products markets, and at more than 200 facilities worldwide. Major Pavilion customers include: Anchor Products Limited (now known as Fonterra Co-operative Group Ltd.), BP, Chevron Phillips Chemical Co., Dow, DuPont, Exxon, Nestl� and Reliant Energy. The company has approximately 160 employees, including about 40 in New Zealand, five in Japan and 10 in Europe. Prior to joining Pavilion, Young was a shareholder in Winstead Sechrest & Minick, where he represented high-tech companies in a variety of corporate legal matters. The opportunity to move in-house arose from having served as Pavilion’s outside legal counsel since 2000, during which time he guided the company through a $30 million financing to accelerate global sales efforts, launch new enterprise solutions and expand into new markets. For the past several years, under the stewardship of CEO and president Pete Perialas, the company has been on a growth trajectory. A 1999 merger with Trajecta, an Austin-based company that provides customer portfolio profitability solutions to the financial services industry, was followed by a 2000 acquisition of Computer Sciences Engineering, a systems integration and Internet service provider in New Zealand. Technology alliances with a number of global entities, such as Nestl� and BP, haven’t hurt either. In fact, says Perialas, despite the downturn in the economy in the aftermath of the terrorist attacks of Sept. 11, Pavilion managed to turn a $10 million loss in fiscal year 2001 into a $3 million profit in fiscal year 2002, which ended on March 31, far exceeding projections. Whether the company opts to go public any time soon remains to be seen, say Perialas and Young. However, they note, by the end of fiscal year 2002 the company had six successive quarters of hitting its projections. In the meantime, the company employs a public company business model that holds Pavilion accountable to the investors, the employees and the board. Not surprisingly, Pavilion’s legal needs are complex, running the gamut from sophisticated corporate transactions to cutting-edge intellectual property matters. In November 2001, the company hired veteran IP attorney Heinz Grether as chief intellectual property counsel to protect and leverage the value of Pavilion’s portfolio of nearly 100 patents, processes, trademarks and intellectual capital. On the eve of Young’s first anniversary at Pavilion, Young and Perialas took a few moments to describe to Texas Lawyer reporter Erica Lehrer Goldman what they have achieved since Young’s arrival last April and what lies ahead. What follows is an edited transcript of the discussion. Texas Lawyer: What did you look for when hiring a general counsel? What characteristics were most important to you? Perialas: The primary characteristics I was looking for break down into professional credentials and personality, and the way the general counsel executes [his] duties… . The GC I need has to be very strong in what I call corporate governance. Pavilion has a fairly complex structure for what is still a pretty small company, so we needed somebody very comfortable navigating through a lot of capital structure kind of issues. The second thing was I wanted a GC who was willing to be a full partner in the business decision-making process. I’ve been in other organizations where … the lawyers were treated as after-the-fact, paper-this-agreement -that-has-already-been-made … I wanted a GC … with a full business hat on … that was very willing to play key decision-making roles on the business side. TL: How much autonomy does your GC have? Perialas: On what I would call traditional legal matters, 100 percent autonomy. TL: And the role the GC plays in key business decisions? Perialas: … Because of his unique characteristics, [Tim] is the conscience of the team. He’s the person most likely to … challenge our underlying thoughts and assumptions and make sure we’re being true to … our vision… . I think that has less to do with his being a lawyer and more to do with … the kind of person he is. Certainly, outside the traditional GC realm in business discussions, I’ve come to count on Tim as the person who says: “You may be straying from your vision by making this decision and here’s why I think that… .” I don’t think they teach you that in law school. TL: What’s your view on how much autonomy you have? Young: I probably have far more autonomy than I actually use. As an attorney, I’ve always felt my job was to be an adviser, to provide the best legal advice you can to the business people for them to make the decision. One of the most challenging tasks here has been to unlearn that and really step into the role of the business person acting on the advice… . [T]hat’s been a challenge for me and also very exciting — one of the most rewarding aspects of this job. TL: Are you a member of the board? Young: I am not… . I spend a lot of my time in board meetings advising the board on policy and legal issues. I think there would be an inherent conflict of interest. TL: What’s your weekly interaction with the legal department on average? Perialas: On average, Tim and I spend time together three or four times every day in person — his office is three doors down from mine. I know I don’t make any major business decisions without talking to Tim about it at length. Tim’s also … my after-hours [sounding board], when I’m having difficulties organizing my thoughts or … have a decision to make that I’m very split or conflicted on… . When I’m on the road, I use Tim as my touch point back here to learn what’s going on and to make sure what’s going on is fine… . I probably interact with [Heinz Grether] three or four times a week. But most of the direct interaction is with Tim. GETTING THINGS DONE TL: How do you attract and motivate your legal staff? Perialas: The way I tried to attract someone of Tim’s background and caliber was to make it pretty clear that this was a slight change from the traditional lawyer role and that, like it or not … he was going to be involved in taking action and making decisions, as Tim says, not just advising. The motivation is: Because Tim’s on deals on the teams that deliver strategic initiatives, there’s the same kind of immediate feedback for success for Tim … as [there is] for any executive or salesperson or business development person. So he gets rewarded for the good work he does both as a businessperson on the team and … as a very high-caliber general counsel… . [Also,] I try to pay attention to what he’s doing, I try to make sure he understands that I believe the things he thinks are important are important… . I think part of the motivation is he’s right there, involved with everything that’s going on in the company. TL: Tim, when you were shopping for a job, what attracted you to this company and what you were looking for? Young: I really wasn’t shopping. I’d been at Winstead Sechrest & Minick for 16-and-a-half years. I enjoyed my work, had great clients, had a lot of autonomy. I’d been working with Pavilion as outside counsel for about a year. In December of 2000, we were counsel to the company on a $30 million round of financing. I was an integral part of trying to get that done. Toward the end of that process, the CEO and CFO started talking with me about potentially coming in-house. I really thought I was at the place I was going to be for the rest of my working life and had no thought of doing anything different — but they changed my mind. And part of it was the opportunity to do something different. I’ve always been very interested in doing international law and that’s difficult to do in Austin. Pavilion has offices in Japan, Belgium and New Zealand. TL: What are the differences between working inside a firm and working as a GC of a growing company? Young: I think the biggest thing is execution — much of the time on the outside as legal counsel, you’re just giving advice or preparing drafts or preparing for a closing. Inside, you have to get things done. You have to get everyone educated on the team, up to speed and moving the ball across the line. I think that’s probably the biggest difference… . TL: What kinds of issues have you had to handle? Young: I’ve handled everything from corporate governance to securities, financing, labor and employment, tax, patent, trademark, copyright, IP issues, foreign export issues, employee benefits, litigation, non-competes, immigration, nondisclosure, acquisitions — a wide variety of things… . TL: How do you coordinate with your operations in Belgium, New Zealand and Japan? Young: I have counsel in all those countries that I work with on a regular basis. We use private firms — and typically it’s on labor and employment issues. TL: You’ve been CEO and president since 1999. What has been the greatest legal challenge in the past three years? Perialas: The greatest legal challenge was unwinding nine years of a private company’s fits and starts. It’s unusual for a company our size to have been around as long as we were — the result being [a] very complicated capital structure, very complicated interaction between investors and founders… . Legal issues [arose from] … unwinding and reconfiguring the corporate governance, structure, procedures and how we view our capital structure… . Like a lot of subsidiaries, I like to set up a lot of entities, so from my perspective, Tim’s had a whole lot of work to do on that regard. But I think the most challenging [legal issue] from an intellectual standpoint, from a business standpoint, has really been our leveraged intellectual property strategy. We’re very aggressive at creating shareholder value from our patents and technology [and] copyrights, in a way that is kind of unique. It’s … a very aggressive shareholder value kind of model and I think Tim … is working to … figure out the best way to balance traditional IP leveraging from our unique brand… . Young: I’d agree … the corporate governance was … very complicated. We had to simplify, and we had to do it in a very short period of time. It was challenging and also very rewarding to the company. The IP strategy I’d say is more difficult because we’ve had to educate our board on how this works … Our technology is really very cutting edge, but it’s also very difficult to understand … and presents very unique challenges. TL: What are your long-term and short-term legal goals with regard to the company? Young: One of the goals is to continue to build our IP group and bring more of that function in-house. TL: To bring another more junior IP attorney on staff? Young: Yes — [one] who can help prosecute, file patent applications … work daily with inventors, make sure we’re protecting our trade secrets [and] inventions, maximizing our R&D dollars. The other goal [concerns Pete's and my belief that] the company ought to be run as a public company kind of model — accountable to the investors, accountable to the employees, accountable to our board. We need to make sure there’s the same kind of decision-making going on, the same kind of information flow … the same integrity, the same accounting standards and legal standards that you have in a public company and bring that to bear on a smaller private company.

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