Contract analysis

Section 1.1 — Defined Terms As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined in this Article I shall have the meanings ascribed to them elsewhere in this Agreement or in the Recitals, which are incorporated herein by reference. (a) "Agreement" means this Settlement Agreement and Mutual Release, including all exhibits and schedules

Section 1.2 — Rules of Construction Unless the context otherwise requires: (a) words importing the singular include the plural and vice versa; (b) references to "including" mean "including, without limitation"; (c) references to any statute or regulation include all amendments, replacements, and successor statutes and regulations; and (d) references to "dollars" or "$" mean United States dollars.

ARTICLE II — SETTLEMENT CONSIDERATION

Section 2.1 — Cash Payment (a) Within thirty (30) calendar days of the Effective Date, Palomar shall pay to Quorum the Settlement Payment in the amount of Four Million Two Hundred Thousand Dollars ($4,200,000). Payment shall be made by wire transfer of immediately available funds to a bank account designated by Quorum in writing in accordance with the wire transfer instructions to be provided pursuant to Section 2.1(

Section 2.2 — Fee Reduction (a) During the Fee Reduction Period (the eighteen (18) month period beginning November 1, 2023 and ending April 30, 2025), the annual contract value under the MSA, as amended, shall be reduced by eight percent (8%), from Sixteen Million Three Hundred Thousand Dollars ($16,300,000) per annum to Fourteen Million Nine Hundred Ninety-Six Thousand Dollars ($14,996,000) per annum. (b) The total

Section 2.3 — Total Effective Recovery The Parties acknowledge and agree that the total effective value of the settlement consideration provided for under Sections 2.1 and 2.2 of this Agreement is Six Million One Hundred Fifty-Six Thousand Dollars ($6,156,000), comprised of the Settlement Payment in the amount of Four Million Two Hundred Thousand Dollars ($4,200,000) and the aggregate fee reduction in the amount of O

Section 2.4 — Tax Treatment (a) Each Party shall be solely responsible for its own tax obligations, including any federal, state, or local income taxes, arising from or in connection with the settlement consideration provided for under this Article II. Neither Party makes any representation or warranty to the other Party regarding the tax treatment or consequences of the settlement consideration. (b) No Party shall b

ARTICLE III — ENHANCED SECURITY AND REMEDIATION OBLIGATIONS

Section 3.1 — Independent Third-Party Security Assessment (a) Within sixty (60) calendar days of the Effective Date, Palomar shall engage an independent, nationally recognized third-party information security assessment firm (the "Independent Assessor"), subject to Quorum's reasonable prior approval of the selection of such firm. Palomar shall submit the names of no fewer than three (3) proposed firms to Quorum for a

Section 3.2 — Enhanced Patch Management (a) Within ninety (90) calendar days of the Effective Date, Palomar shall implement an enhanced patch management program that meets or exceeds the following requirements: (i) Critical Vulnerabilities. Patching of all critical-severity vulnerabilities (as rated by the Common Vulnerability Scoring System ("CVSS") with a base score of 9.0 or higher, or as designated "critical" by

Section 3.3 — Endpoint Detection and Response (a) Within ninety (90) calendar days of the Effective Date, Palomar shall deploy enterprise-grade endpoint detection and response ("EDR") solutions across all systems that process, store, or transmit Quorum data, and across all systems that have network connectivity to such systems, including all servers, workstations, laptops, and virtual machines within the scope of Quo

Section 3.4 — Enhanced Incident Notification (a) The Parties acknowledge that MSA Amendment 3 reduces the contractual incident notification window from forty-eight (48) hours to twenty-four (24) hours, effective as of the Effective Date. (b) In connection with any future security incident, suspected security incident, or data breach (each, a "Reportable Event") affecting Quorum data or systems processing Quorum data,

Section 3.5 — Quarterly Vulnerability Scanning (a) Palomar shall conduct quarterly vulnerability scans of all systems, applications, and network infrastructure that process, store, or transmit Quorum data. Such scans shall be conducted using industry-standard vulnerability scanning tools and methodologies and shall cover both internal and external attack surfaces. (b) Palomar shall provide Quorum with summary reports

Section 3.6 — Verification and Audit Rights (a) Quorum (or its designated representative, including its internal audit team, its external auditors, or a qualified third-party assessor engaged by Quorum) shall have the right, upon no fewer than fifteen (15) business days' prior written notice and during normal business hours, to verify Palomar's compliance with the obligations set forth in this Article III and in MSA

Section 4.1 — Release by Quorum Effective upon receipt by Quorum of the full Settlement Payment in accordance with Section 2.1, Quorum, on behalf of itself and its subsidiaries, affiliates, parent companies, divisions, officers, directors (including, without limitation, Franklin Reeves), employees, agents, representatives, attorneys, successors, and assigns (collectively, the "Quorum Releasing Parties"), hereby fully

Section 4.2 — Release by Palomar Palomar, on behalf of itself and its subsidiaries, affiliates, parent companies, divisions, officers, directors, employees, agents, representatives, attorneys, successors, and assigns (collectively, the "Palomar Releasing Parties"), hereby fully and forever releases and discharges Quorum and its subsidiaries, affiliates, parent companies, divisions, officers (including, without limita

Section 4.3 — Scope of Release — Carve-Outs Notwithstanding the foregoing, the releases set forth in Sections 4.1 and 4.2 do not release or affect: (a) the Parties' respective ongoing obligations under the MSA, as amended (including, without limitation, MSA Amendment 3), which shall continue in full force and effect in accordance with their terms; (b) the Parties' respective obligations under this Agreement, includin

Section 4.4 — Unknown Claims Waiver Each Party acknowledges that it may discover facts in addition to or different from those it now knows or believes to be true regarding the Security Incident, the Claims, or the subject matter of this Agreement, and each Party expressly agrees that this Agreement shall be and remain effective in all respects notwithstanding any such discovery. Each Party assumes the risk of any suc

ARTICLE V — REPRESENTATIONS AND WARRANTIES

Section 5.1 — Mutual Representations and Warranties Each Party represents and warrants to the other Party as of the Effective Date as follows: (a) Organization and Good Standing. Such Party is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization (in the case of Quorum, the State of Delaware; in the case of Palomar, the State of Texas) and has all requisite corporat

Section 5.2 — Quorum's Additional Representations and Warranties Quorum further represents and warrants to Palomar as of the Effective Date as follows: (a) No Assignment of Claims. Quorum has not sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered, in whole or in part, any of the Claims released herein, and no person or entity other than Quorum has any ownership interest in or lien upon any of

Section 5.3 — Palomar's Additional Representations and Warranties Palomar further represents and warrants to Quorum as of the Effective Date as follows: (a) Financial Capacity. Palomar has the financial capacity and available resources to make the Settlement Payment in accordance with Section 2.1 and to perform all of its obligations under Article III of this Agreement and under MSA Amendment 3. (b) Insurance. Paloma

Section 6.1 — Confidential Treatment The terms and conditions of this Agreement, including, without limitation, the amount of the Settlement Payment, the fee reduction, and the specific security remediation obligations set forth herein, shall be treated as strictly confidential by both Parties and shall not be disclosed to any third party, except: (a) as required by applicable law, regulation, or legal process, inclu

Section 6.2 — Public Statements (a) Neither Party shall issue any press release, public statement, or public filing regarding this Agreement or the terms hereof without the prior written consent of the other Party, except as required by applicable law or regulation. (b) Notwithstanding the foregoing, the Parties acknowledge that Quorum may be required to make disclosures regarding this Agreement and the settlement co

ARTICLE VII — NO ADMISSION OF LIABILITY

Section 7.1 — No Admission (a) This Agreement is entered into by the Parties solely for the purpose of resolving a disputed matter and avoiding the expense, burden, and uncertainty of continued dispute and potential litigation. Nothing in this Agreement, including the payment of the Settlement Payment, the fee reduction, or the implementation of enhanced security measures, shall be construed as, or deemed to constitu

ARTICLE VIII — INDEMNIFICATION FOR THIRD-PARTY CLAIMS

Section 8.1 — Continuing Indemnification Obligations Under the MSA The Parties acknowledge and agree that the mutual releases set forth in Article IV of this Agreement apply only to Claims between the Parties and do not extinguish, release, or modify Palomar's indemnification obligations under Section 12.2 of the MSA with respect to third-party claims arising from or related to the Security Incident. For the avoidanc

Section 8.2 — Regulatory Matters (a) The Parties acknowledge that, as of the Effective Date, the following regulatory matters are pending or ongoing in connection with the Security Incident: (i) The multistate attorney general coalition, consisting of twenty-nine (29) states and led jointly by the Connecticut Attorney General and the New York Attorney General, issued a joint demand letter dated September 8, 2023 addr

ARTICLE IX — RELATIONSHIP OF THIS AGREEMENT TO THE MSA

Section 9.1 — MSA Remains in Effect Except as expressly modified by MSA Amendment 3 (executed contemporaneously herewith and attached as Exhibit B), the MSA, as amended, shall remain in full force and effect in accordance with its terms through the expiration of its current term on November 11, 2024, and through any renewal term to the extent the MSA is renewed in accordance with its terms. The Parties' entry into th

Section 9.2 — MSA Amendment 3 (a) The Parties acknowledge that MSA Amendment 3, executed contemporaneously herewith and attached as Exhibit B, incorporates the enhanced data security obligations set forth in Article III of this Agreement and the fee reduction set forth in Section 2.2 of this Agreement into the MSA. MSA Amendment 3 is an integral part of the settlement contemplated by this Agreement and is executed in

Section 9.3 — No Modification of Indemnification Cap Except as specifically provided in this Agreement, the indemnification cap set forth in Section 12.2 of the MSA, which provides for a maximum aggregate liability of two times (2×) the trailing twelve-month fees paid (currently equal to Thirty-Two Million Six Hundred Thousand Dollars ($32,600,000)), shall remain in full force and effect and shall not be deemed waive

ARTICLE X — DISPUTE RESOLUTION

Section 10.1 — Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of Connecticut or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Connecticut. The Parties acknowledge that this g

Section 10.2 — Mediation Any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or validity thereof, shall first be submitted to non-binding mediation before a mutually agreed-upon mediator. The mediation shall be conducted in Hartford, Connecticut, in accordance with the mediation procedures of the American Arbitration Association then in effect, unless the Parti

Section 10.3 — Jurisdiction and Venue If mediation is unsuccessful or if a Party seeks emergency or injunctive relief, each Party irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state courts of the State of Connecticut located in Hartford County and the United States District Court for the District of Connecticut sitting in Hartford, Connecticut, for any action, sui

Section 10.4 — Attorneys' Fees In any action, suit, or proceeding to enforce this Agreement or to resolve any dispute arising hereunder, the prevailing Party shall be entitled to recover its reasonable attorneys' fees, costs, and expenses (including expert witness fees and court costs) from the non-prevailing Party, in addition to any other relief to which such prevailing Party may be entitled.

ARTICLE XI — MISCELLANEOUS PROVISIONS

Section 11.1 — Entire Agreement This Agreement, together with MSA Amendment 3 (attached as Exhibit B) and the Exhibits attached hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous discussions, negotiations, proposals, term sheets, letters of intent, memoranda of understanding, and agreements (whether oral or written) betwe

Section 11.2 — Amendments This Agreement may not be amended, modified, supplemented, or otherwise changed except by a written instrument duly executed by an authorized representative of each Party. No course of dealing between the Parties and no delay or failure by either Party in exercising any right under this Agreement shall constitute an amendment or modification of the terms of this Agreement.

Section 11.3 — Severability If any provision of this Agreement is held by a court of competent jurisdiction or arbitral body to be invalid, illegal, void, or unenforceable under any applicable law, such provision shall be modified to the minimum extent necessary to make it valid and enforceable, and the validity, legality, and enforceability of the remaining provisions of this Agreement shall not be affected or impai

Section 11.4 — Waiver No waiver of any provision of this Agreement shall be effective unless made in writing and signed by the waiving Party. No failure or delay by either Party in exercising any right, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege preclude any other or further exercise thereof or the exercise of

Section 11.5 — Notices All notices, demands, requests, consents, approvals, and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given when: (a) delivered personally; (b) sent by confirmed email transmission (with a copy sent by one of the other methods specified herein); (c) sent by nationally recognized overnight courier service, prepaid; or (

Section 11.6 — Counterparts and Electronic Signatures This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by portable document format (PDF) or other electronic transmission shall be effective as delivery of an origin

Section 11.7 — Assignment Neither Party may assign, delegate, or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either Party may assign this Agreement, without the other Party's consent, in connection with a merger, consolidation, reorganiza

Section 11.8 — Successors and Assigns This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns.

Section 11.9 — No Third-Party Beneficiaries This Agreement is entered into for the sole and exclusive benefit of the Parties hereto and their respective successors and permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any right, benefit, remedy, or claim of any kind or nature whatsoever under or by reason of this Agreement, including, without lim

Section 11.10 — Construction This Agreement has been jointly drafted and negotiated by the Parties hereto and their respective legal counsel, and the language of this Agreement shall not be construed for or against any Party as the drafter hereof. Each Party acknowledges that it has had the opportunity to consult with independent legal counsel of its choice regarding the terms of this Agreement and has done so to the

Section 11.11 — Headings The titles of the Articles and Sections of this Agreement and the headings of any subsections or paragraphs are inserted for convenience of reference only and shall not be deemed a part of or affect the meaning, construction, or interpretation of this Agreement. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Parties hereto have caused this Settlement Agreement and Mutual Release to be execu