A Way to Avoid Costly Legal Mistakes

Sourcing + Lawyers =

Unum Group

J. David Canarie, Jr.Vice President & Managing Counsel, Transactions Practice

Mayer Brown, LLP

Brad L. PetersonPartner

sig.org/eval

Sourcing + Lawyers = A Way To Avoid Costly Legal Mistakes

J. David Canarie, Jr.Vice President & Managing Counsel, Transactions Practice Unum Groupdcanarie@unum.com

Brad L. PetersonPartnerMayer Brown, LLP+1 312 701 8568bpeterson@mayerbrown.com

For 165 years, Unum has provided employee benefits solutions that help employers manage their businesses and employees protect their families and livelihoods.

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About Mayer Brown’s Business & Technology Sourcing Practice

“They're very practical in terms of trying to identify solutions and giving very good advice on areas where it's reasonable for us to compromise or, alternatively, where to hold our ground.”

~ Chambers USA 2015

“An excellent team of people for outsourcing agreements globally -pragmatic in their approach, with a wealth of experts they can call on.”

~ Chambers Global 2014

“Mayer Brown is universally regarded as a leading player in the technology and outsourcing arena, with market commentators commending the ease with which its lawyers integrate with clients, delivering business-focused advice and guidance.”

~ Chambers Global 2013

“Their knowledge in this area is tremendous. They know us so well they blend into our deal teams and become a natural extension to our in-house team.”

~ Chambers USA 2014

• More than 50 lawyers around the world focused on helping clients improve their business operations by sourcing services and technology

• Advised on more than 300 significant outsourcing transactions valued at an aggregate of more than $100 billion

RECOGNIZED MARKET LEADER

“Band 1” ranking in IT/Outsourcing for12 consecutive years (Chambers 2004-2015)

Named “MTT Outsourcing Team of the Year” in 2014 and ranked in the top tier from 2010 through 2015

Ranked as one of the top law firms in 2009 through 2016 on The World’s Best Outsourcing Advisors list for The Global Outsourcing 100™

• Key legal pitfalls and how to sidestep them

• How the legal issues change during the sourcing life cycle

• How to effectively and efficiently use lawyers

• New strategies and issues for Digital Age agreements

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Agenda

KEY LEGAL PITFALLS AND HOW TO SIDESTEP THEM

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• Contracts

– Breaching your contractual obligations

– Not having the contractual rights that you need or expect

– Inadvertently losing rights that you thought you had

• Laws

– Violating laws yourself

– Putting your company in violation of laws

– Being held liable for violations of law by your suppliers

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Key Legal Pitfalls

PrivacyData

SecurityAnti-

Corruption

Export Control

MarketingIndustry

Regulations

Financial Controls

Immigration Other

Examples of Laws

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• Understand the laws and regulations governing your business

– Pay attention to the compliance training and materials that you receive from your company, including your code of ethics

• Understand the rights and obligations that you have under your contracts

• Have checklists and follow them

• Confer with lawyers before problems arise, particularly on ideas that seem too good to be true or conduct that would embarrass you if it were made public

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Avoiding Key Legal Pitfalls

HOW THE LEGAL ISSUES CHANGE DURING THE SOURCING LIFE CYCLE

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Strategy

Contracting

Transition

Governance

Renegotiation

Exit

The Sourcing Life Cycle

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Strategy

Contracting

Transition

Governance

Renegotiation

Exit

Structuring

Compliance

Value Preservation

The Sourcing Life Cycle

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HOW TO EFFECTIVELY AND EFFICIENTLY USE LAWYERS

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• Comfortable with ambiguity

• Precise and detail-oriented

• Able to understand/argue both sides of an issue

• Pragmatic

• Critical and comfortable with conflict

• Persuasive

• Analytical

• Service-oriented

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Understanding Lawyers

• Objectively as possible

• Looks at all angles to see all possible risks and issues

• Research as needed to better understand risks and issues

• Prioritizes based on likelihood and potential impact of risk

• Presents analysis of situation with possible solutions to achieveclient’s objectives

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How Lawyers Approach Problems

When to Confer?

• As early as possible in the course of a project or dispute

• This is Rule #1

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When to Confer?

Advantages of early involvement:

1. Improve the lawyer’s knowledge of your business;

2. Improve your knowledge of trends and developments in the law that relate to your business; and

3. Develop and improve working relationships.

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When to Confer

Ability of Lawyer to Add Value in a Project

Early Middle Late

High

Low

Examples of Value of Legal Guidance

• Risk mitigation in that particular project

• Improved bargaining position

• Smoother contract administration

• Improved customer/supplier working relationships

• Attorney-client privilege

• Better analytical diversity on project team

• Fewer regulatory sanctions and third-party actions

• Better outcomes in disputes

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Confer with Which Lawyer?

• Different lawyers have different specialties

• Most companies have specific support for the sourcing function, with a central lawyer leading you to specialists

• Most companies also have a specific lawyer for escalation of possible controls issues

• Your company’s lawyer represents your company, not you

Measuring the Value of Legal Guidance

Challenges to measurement

– No control group

– Small sample size

– Qualitative nature of most terms and conditions

Measuring the Value of Legal Guidance

Measures

• Liability caps and carve-outs

• Scope of indemnification

• Data breach protection

• Termination and transition support

• Coverage for (or exclusion of) consequential damages

NEW STRATEGIES AND ISSUES FOR DIGITAL AGE AGREEMENTS

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• Interface Technologies

– Social media

– Mobile computing

– Internet of Things (IoT)

• Computing Technologies

– “Big Data” analytics

– Private and public cloud

– Software as a Service (SaaS)

– Autonomics/Robotic Process Automation

– Cognitive computing

– X as a Service (XaaS)

Examples of Digital Age Services

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“Occasionally, however, disruptive technologies emerge: innovations that result in worse product performance, at least in the near term. . . . Products based on disruptive technologies are generally cheaper, simpler, smaller and, frequently, more convenient to use.”

The Innovators Dilemma,by Clayton M. Christianson, Harvard Business School Press, 1997

Digital Age Services Tend To Be Disruptive Technologies

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Typical Benefits

• Exciting new capabilities

• Flexibility on volumes

• Targeted solutions

• Easy access via Internet

• Low fees and no investment

• Ability to terminate on short notice without fees

• Cost savings

Typical Legal Problems

• “AS IS” terms

• Supplier may change or terminate its promises at will

• Little commitment to compliance with laws

• Disclaimers of responsibility for privacy, infringement, etc.

• Displacing people

How Digital Age Services Compare To Established Alternatives

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• Inadvertent disclosure of confidential information or trade secrets by permitting use of customer data in “big data” analysis

• Cybersecurity and privacy law compliance

• Failure to comply with records retention requirements

• Inability to comply with litigation holds and e-discovery requirements

• Export law violations in global clouds

Examples: New Sources of Risk – Legal

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Traditional Provision Digital Age Provision?

Services will conform to customer’s past practices, policies and standards in addition to the services description in the contract.

Services will conform to specifications.

Customer owns all intellectual property developed by Supplier as part of the Services.

Customer owns its data and data generated by the Services. Supplier owns all changes to its systems.

Supplier shall use trained, acceptable, verified, qualified personnel and keep its software at n-1 currency.

Commitments based more on outcomes or outputs and less on the people or machines.

Supplier shall comply with customer’s security standards and policies.

Supplier shall comply with express agreements and remain certified under industry standards (such as ISO 270XX).

Supplier will change Services to remain current and meet changing customer requirements.

Supplier will not promise to improve services, but will provide any improvements made to the platform at no additional charge with adequate notice.

Examples – Changes in Contract Provisions

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RiskProviderMitigation

Customer MitigationLevel of Risk after Mitigation

Commentsand Considerations

Provider(cloud platform provider) reserves right to discontinue services on 30 days’ notice to Customer

Provider will agree to extend notice to 90 days

Customer will (a) maintain back-up platform arrangements with other providers, (b) confirm that all data and apps may be extracted within a 90-day period, and (c) develop migration plan now that assesses how Customer will migrate out in 90 days without business interruption, including leveraging a “SWAT” team to work on APIs and integration issues during 90-day migration out period

Medium Customer will continuously assess Provider status to determine if this risk changes in level based on Provider performance, financial health and direction in market

Example: Risk-Based Contracting Tool

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• Lawyers can help you avoid contract and legal problems

• You aren’t “done” with the lawyers when you sign the contract, because the issues change throughout the process

• Conferring with lawyers early and often can help you maximize value and avoid costly pitfalls

• The need to talk with lawyers has only increased with emerging Digital Age technologies

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Summary

QUESTIONS

J. David Canarie, Jr.Vice President & Managing Counsel, Transactions Practice Unum Groupdcanarie@unum.com

Brad L. PetersonPartnerMayer Brown, LLP+1 312 701 8568bpeterson@mayerbrown.com

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Sourcing + Lawyers =

A Way to Avoid Costly Legal Mistakes

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J. David Canarie, Jr.Vice President & Managing Counsel,

Transactions Practice

Unum Group

dcanarie@unum.com

Brad L. PetersonPartner

Mayer Brown, LLP+1 312 701 8568

bpeterson@mayerbrown.com