Contract analysis

Section 1: Parties 1.1 Quorum Insurance Holdings Corp. Quorum Insurance Holdings Corp. ("Quorum"), a corporation duly organized and existing under the laws of the State of Delaware, publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC," with its principal offices located at 400 Constitution Plaza, Suite 2200, Hartford, Connecticut 06103 (EIN: 06-4832197). Quorum is represented in this matter by Ca

Section 2: Recitals / Background 2.1 Master Services Agreement The Parties entered into a Master Services Agreement dated November 12, 2019 (the "Original MSA"), pursuant to which Palomar agreed to provide claims data processing, document management, and analytics services to Quorum's personal lines division. The Original MSA has been amended on two occasions: by Amendment 1, dated March 3, 2021 (effective April 1, 2

Section 3: Defined Terms As used in this Term Sheet, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the MSA. "Definitive Agreement" means the Settlement Agreement and Mutual Release to be executed by the Parties incorporating the terms set forth in this Term Sheet, together with all exhibits, schedules, a

Section 4: Financial Terms 4.1 Cash Payment Palomar shall pay to Quorum the sum of Four Million Two Hundred Thousand Dollars ($4,200,000) (the "Settlement Payment") within thirty (30) calendar days of the Effective Date. Payment shall be made by wire transfer of immediately available funds to a bank account designated by Quorum in writing no later than ten (10) business days following the Effective Date. The Settleme

Section 5: Non-Financial Terms — Enhanced Security Obligations 5.1 Enhanced Patch Management and Endpoint Detection Within ninety (90) calendar days of the Effective Date, Palomar shall implement the following enhanced security measures (collectively, the "Enhanced Security Measures") with respect to all systems, networks, and infrastructure that process, store, or transmit Quorum data: Patch Management Enhancement.

Section 9.4 of the MSA shall be amended to require Palomar to notify Quorum of any security incident (as defined in the MSA) affecting Quorum data within twenty-four (24) hours of discovery, replacing the current forty-eight (48) hour notification requirement. For purposes of this provision, "Discovery" shall mean the point at which Palomar has a reasonable basis to believe that a security incident has occurred that

Section 6: Mutual Release 6.1 Quorum Release Effective upon the Effective Date and Quorum's receipt of the Settlement Payment in full, Quorum, on behalf of itself and its subsidiaries, affiliates, parent companies, successors, assigns, officers, directors, employees, agents, and representatives, hereby releases and forever discharges Palomar, together with its officers, directors, employees, agents, representatives,

Section 7: Confidentiality 7.1 Confidential Treatment The terms and conditions of this Term Sheet and the Definitive Agreement, including without limitation the financial terms, the existence of the settlement, the amount of the Settlement Payment, and the fee reduction, shall be treated as strictly confidential by both Parties and shall not be disclosed to any third party except as expressly permitted herein or as r

Section 8: Representations and Warranties 8.1 Palomar Representations Palomar hereby represents and warrants to Quorum as follows: (a) Palomar has the full corporate power and authority to enter into this Term Sheet and the Definitive Agreement, and to perform its obligations hereunder and thereunder. The execution, delivery, and performance of the Definitive Agreement and Amendment 3 have been, or will be, duly auth

Section 9: Conditions Precedent to Definitive Agreement The obligation of each Party to execute and deliver the Definitive Agreement shall be subject to the satisfaction (or written waiver by the applicable Party) of the following conditions precedent:

1. Quorum Internal Approval. Approval of the settlement terms set forth in this Term Sheet by Quorum's General Counsel, Thomas R. Whitfield, and Quorum's Chief Executive Officer, Margaret D. Calloway.

2. Palomar Internal Approval. Approval of the settlement terms set forth in this Term Sheet by Palomar's General Counsel, Derek Copeland, and Palomar's Chief Executive Officer, Marcus J. Trevino.

3. Execution of Definitive Agreement and Amendment 3. Negotiation, finalization, execution, and delivery of the Definitive Agreement (Settlement Agreement and Mutual Release) and MSA Amendment 3, both of which shall be in form and substance reasonably satisfactory to both Parties and their respective counsel and shall be consistent in all material respects with the terms set forth in this Term Sheet.

4. Target Execution Date. The Parties shall use commercially reasonable efforts to finalize and execute the Definitive Agreement and Amendment 3 on or before October 27, 2023. The failure to meet this target date shall not, in and of itself, constitute a termination or abandonment of the settlement negotiations, and the Parties may mutually agree in writing to extend such date.

Section 10: Governing Law and Dispute Resolution The Definitive Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles, consistent with the governing law provision set forth in Section 17.1 of the MSA. Any dispute, controversy, or claim arising out of or relating to the Definitive Agreement, or the breach, termination, or in

Section 11: Preservation of MSA Except as expressly modified by Amendment 3 and the Definitive Agreement, the MSA shall remain in full force and effect in accordance with its terms. Nothing in this Term Sheet or the Definitive Agreement shall be construed as a termination, rescission, or material modification of the MSA, except to the extent specifically set forth in Amendment 3. The Parties hereby affirm their inten

Section 12: Binding Effect / Non-Binding Nature of Term Sheet This Term Sheet sets forth the principal terms and conditions upon which the Parties have agreed to resolve Quorum's claims arising from the Security Incident. This Term Sheet is intended to facilitate the preparation, negotiation, and execution of a binding Definitive Agreement (Settlement Agreement and Mutual Release) and MSA Amendment 3. This Term Sheet

Section 13: Counterparts and Execution This Term Sheet may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Term Sheet by facsimile, electronic mail (including PDF), or other electronic transmission shall be equally effective as delivery of an original executed counterp

Section 9.4 of the MSA shall be amended to require Palomar to notify Quorum of any security incident affecting Quorum data within twenty-four (24) hours of discovery, replacing the current forty-eight (48) hour requirement. Notification shall be provided simultaneously via email and telephone to Quorum's General Counsel, CISO, and CPO. B.7 Fee Reduction (Section 4.2 of Term Sheet) Amendment 3 shall incorporate the ei