Best Practices in Converging and Building a High-Value

Best Practices in Converging and Building a High-Value Outside Counsel Network Sheila Kennedy, Director, Legal Operations – Medtronic, Inc. Deborah Ratterman, Director, Legal Operations – Sears Holdings Management Corp. Joe Otterstetter, Managing Counsel and Associate General Counsel – 3 M Company

Overview and Objectives • Preparing to converge • Building team alignment • Processes, templates, and tools • Managing a preferred counsel network Law department size or budget are not barriers to sensible convergence

Preparing for Convergence

Sears’ Goals/Objectives • Eliminate “jump ball” mentality for complex high risk cases – Too many “my favorite” firms selected – Develop true partnerships vs. once/twice a year use • Consolidate firm use from over 100 to under a dozen – Exceptions to consolidation were identified • Already consolidated, unique area, doesn’t meet selection criteria • 80% of our work lived with 20% of our firms – Identify 4 -6 full service that effectively provide services in multiple areas – 1 -2 Specialty firms (select areas/high volume) – 1 -2 Local firms (per region) • Regional firm that specialized in specific jurisdiction

Sears “At the Starting Line” • Understand current state • Develop criteria for future state • Develop standards for firm selection • Develop KPIs for spend management • Review and update OC guidelines • Identify internal controls/changes • Identify external controls/changes • Timeline for implementation • Measure once, measure twice • Socialize concepts • Socialize objections • Socialize, socialize • Make sure the right people are in the room – not necessarily leadership © 3 M 3/16/2018. All Rights Reserved. 3 M Confidential. 5

Medtronic Preferred Provider Program “MP 3” • Strategy first. Develop STRATEGIC, LONG‐TERM RELATIONSHIPS WITH A SMALL NUMBER of firms, with the goal of concentrating about 80% spend in Network • Determine Value. We will work with these firms to establish innovative service models and competitive rates, and build collaborative relationships between Medtronic and the firms and among the firms themselves. • Implement PM tools • Define Goals, Scope, • Risk and complexity of our matters • Identify Stakeholders – Internal and External • Timeline • Measure ROI • Partner with Sourcing – SME in Legal Ops working with Sourcing or benchmark sourcing tools and processes • REFRESH

3 M Preferred Counsel Network First Principles § No compromises on quality or responsiveness of legal service § We want fewer, deeper relationships with our firms § Pay for value and results, not activity § Select the right firm for each engagement § Reward risk sharing, risk avoidance, and early resolution § Work with firms that share our values, including our commitment to diversity and pro bono Portfolio teams lead the selection with support from our GC and our core team

3 M “Portfolios” • • • Commercial & Products Litigation IP Litigation (patent and TM) Insurance Coverage & Recovery M&A and Equity Investments U. S. Trademark Policing Mass Tort Mass tort local counsel © 3 M 3/16/2018. All Rights Reserved. 3 M Confidential. 8

Lessons Learned + Preparation Δ • Clarity of objectives and “why” • Benchmarking – huge ROI • Data mining and clean-up • Portfolio definitions and exceptions • Portfolio teams • Sourcing and Ops engagement • Communications – OVERcommunicate • Overly-aggressive schedule • Change management underestimated • Prepare for continuous change- GC, integration/ divestiture -retain process tools for re-use

Medtronic Preferred Provider Program “MP 3” Ø Align Practice Group leads and GC/Steering committee on overall risk profile and needs of Medtronic – refresh regularly but not too often Ø Develop MP 3 Council with representation across business unites and shared services supported by an overall Program Charter Ø Continuous reporting Ø Align and connect law firm experts with Medtronic teams to ensure capabilities needs are met Ø Measure on-going MP 3 program VALUE Ø Continuous communication: legal department, GC and Ex Com

Lessons Learned Alignment + Δ • General Counsel support • Team leader appointment and engagement • Make it easy for the colleagues who have to execute • Change management challenges underestimated • OVER-communicate – early and often

Processes, Resources, Tools

Sears Holdings Developing Questions for RFI General Questions • How do you leverage technology to better communicate with clients? • Describe your early case assessment process? • How do you approach budgeting a matter? Is there a formula? How do you avoid highly unpredictable cost overruns? • What programs have you implemented with other clients to reduce incidents that result in litigation? • How does the firm utilize project management to avoid the following: Overwork or overstaff a matter or use more expensive staff than needed on a case? Data Security • Questions • How many data breaches have you advised on? What kinds of information were at risk and how were they handled? • How many regulatory investigations have you have handled with respect to data security matters? Who were the regulators and what were the results of those investigations? Specialized Core Competencies Incident Response Data breach notification laws Data breach regulatory investigations (federal and state) PCI compliance and process Security Standards and Frameworks: HIPAA, GLB, NIST, etc. In-house Technology Expertise © 3 M 3/16/2018. All Rights Reserved. 3 M Confidential. 14

MEDTRONIC DEVELOP CRITERIA The selected firms shall at a minimum have: Expertise in the identified practice area. A strong bench with broad experience. Strong value proposition. Demonstrated successful experience with AFAs. Demonstrated ability to deliver innovative and successful legal outcomes. KNOWLEDGE OF MEDICAL DEVICE INDUSTRY AND TECHNOLOGIES. Proactive, solutions-based approach. Strong project management capabilities, efficient staffing strategies. Ability to collaborate/ build relationships with Medtronic and other core MP 3 firms. Commitment to diversity. RESULTS • • • Reduced Legal Service Cost Effective portfolio management with year over year cost savings Focused Customer Interaction & Competitive Edge Responsiveness to legal requests Keeping Medtronic informed of relevant trending in key practice areas COLLABORATION

Medtronic Tools

Process Maps and Checklists

Request for Information

Request for Proposal

Interviewing & Scoring

Lessons Learned + Process & Tools Δ 3 -step process Sourcing engagement Objective questions Word limits – and fewer open-ended questions • Asking for hourly rates • Target # of portfolio firms • • • Still too many questions that do not help us separate firms • RFI not needed if pool is small • Communications • Use MS Word rather than online tools

Working with and managing your preferred counsel network

Firm Name Sears Holdings Sample Internal Firm Survey Rating Scale (1 Lowest/Worst - 10 Highest/Best) How would you rate the firms responsiveness to your questions or requests? 12345678910 Is the firm proactive in its approach toward issue spotting, strategic advice and risk reduction? 12345678910 What rating would you give the firm for their communication style and method? 12345678910 Does the firm provide proper notice and clarify of deadlines? 12345678910 © 3 M 3/16/2018. All Rights Reserved. 3 M Confidential. 23

Medtronic Preferred Provider Program “MP 3”

3 M’s Preferred Counsel Network • Transparency builds trust • Managing exceptions • Communication – Annual summit – Business review meetings • Regular feedback and evaluations