Contract analysis

I. Executive Summary The second in-person negotiation session between Quorum Insurance Holdings Corp. ("Quorum") and Meridian Credit intelligence, Inc. ("Meridian" or "MCI") was held on Thursday, March 9, 2023, at Meridian's corporate headquarters located at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326. The session ran from approximately 9:00 AM ET to 5:30 PM ET, with a working lunch. Quorum Attendees:

II. Background and Context By way of brief procedural recap, the negotiation history of the proposed Master Data License Agreement ("MDLA") between Quorum and Meridian is as follows: Meridian's form MDLA was delivered by KP&A to Calderwood & Harkness on November 4, 2022. Calderwood & Harkness prepared and delivered a comprehensive redline of the MDLA to KP&A on December 2, 2022. The redline addressed all material pro

III. Detailed Discussion by Agenda Topic A. Most Favored Nation Pricing Clause The MFN pricing issue consumed approximately three hours of the session and remains the single most contentious commercial term in the MDLA negotiation.

1. Quorum's Position Restated. Quorum reiterated its demand — first articulated at the January 18 session and set forth in detail in Section 4.07 of C&H's December 2, 2022 redline — for a most favored nation pricing clause covering all U.S.-domiciled insurance carriers, managing general agents ("MGAs"), and insurtech firms with annual premiums written of $500 million or more ("Comparable Licensees"). Under Quorum's p

2. Meridian's Response. Graham Whitley, lead outside counsel for Meridian at KP&A, stated in clear terms that Meridian's position on MFN has not changed since the January 18 session: Meridian categorically refuses to include any MFN pricing clause in the MDLA, in any formulation. Keith Marlow, Meridian's SVP of Data Licensing & Partnerships, articulated four specific reasons underpinning this refusal: (a) Confidentia

3. Quorum's Fallback — Pricing Audit Right. In anticipation of Meridian's continued refusal of a full MFN clause, Wendy Schultz previewed — without formal written proposal at this stage — Quorum's potential fallback concept: a limited annual pricing audit right. Under this concept, Quorum would have the right, exercisable once per contract year, to engage an independent third-party auditor (to be mutually approved by

4. Meridian's Counter-Concept. Near the conclusion of the MFN discussion, Graham Whitley floated — on an informal, non-committal basis — a counter-concept under which Meridian might be willing to offer a "most favored terms" commitment (as distinct from a most favored pricing commitment) limited in scope to data-delivery SLAs, uptime commitments, and technical service levels. Under this concept, Meridian would commit

1. Quorum's Position Restated. Omar Siddiqui presented Quorum's position on derived-data rights, which is set forth in detail in C&H's proposed Article VII of the December 2, 2022 redline. Quorum's position is as follows: Quorum should own all intellectual property rights in any data, models, scores, indices, analytical outputs, or other work product created by or on behalf of Quorum using licensed Meridian data as a

2. Meridian's Response. Graham Whitley and Ben Overstreet reiterated Meridian's position on derived-data rights with considerable specificity. Meridian's position comprises four principal elements: (a) Derivative Work Classification. Meridian views any Derived Data that incorporates, is based on, or is traceable to Meridian's raw data as a "derivative work" under Section 101 of the Copyright Act (17 U.S.C. § 101), an

3. Technical Dispute — Model Weights vs. Inference Outputs. A significant and technically nuanced discussion took place regarding whether the outputs of Quorum's machine-learning models — which are trained on, among other data sources, Meridian data — constitute "derived data" within the meaning of the MDLA. Quorum's Position: Rajesh Anand, with legal framing provided by Omar Siddiqui, articulated the following techn

4. Areas of Potential Compromise Explored. Despite the fundamental disagreement on the underlying legal and technical characterization of ML model outputs, the parties explored several potential avenues for compromise during the session: Objective Transformation Standard. Wendy Schultz proposed, on a conceptual basis, that the "sufficient transformation" standard in Meridian's draft — which currently vests sole discr

IV. Assessment of Meridian's Negotiating Dynamics Based on the discussions at the March 9 session, we offer the following assessment of the negotiating dynamics on Meridian's side, which we believe has important implications for Quorum's negotiating strategy going forward. Breckenridge Capital Partners' influence over Meridian's negotiating positions is significant and direct. Keith Marlow referenced Breckenridge's p

V. Standish National Bank Covenant — Status Update We remind the Quorum team that the $60,000,000 total license value of the proposed MDLA exceeds the $25,000,000 threshold for intellectual property licenses and data license agreements set forth in Section 7.12(b) of Quorum's Amended and Restated Credit Agreement, dated as of June 15, 2021 (as amended), with Standish National Bank, N.A., as Administrative Agent (the

VI. Coordination with Caldwell & Strauss LLP Angela Firth, Partner at Caldwell & Strauss LLP (100 Pearl Street, Hartford, Connecticut 06103), continues in her role as Quorum's longstanding outside intellectual property counsel, providing background guidance to Quorum's in-house legal and technology teams on the implications of the MDLA for Quorum's existing IP portfolio and on the derived-data ownership positions bei

VII. Pinnacle Ridge Pricing Benchmark Study — Key Observations Franklin Osei, Managing Director of Pinnacle Ridge Advisory LLC, delivered the final pricing benchmark study to Quorum on February 14, 2023. The study was commissioned to provide an independent, market-based assessment of the pricing terms proposed in the Quorum-Meridian MDLA in comparison to comparable credit-data licensing arrangements in the insurance

VIII. Recommended Next Steps Based on the foregoing, we recommend the following next steps:

1. MFN — Formalize Pricing Audit Right Proposal. Calderwood & Harkness will prepare a formal written proposal for the pricing audit right fallback mechanism. The proposal will include detailed provisions addressing: the annual exercise right, the 110% ceiling on effective per-record rate relative to the lowest comparable insurance-industry licensee rate, the qualifications and selection process for the independent th

2. Derived Data — Develop Compromise Framework. Calderwood & Harkness will prepare a revised Article VII framework for internal review by the Quorum team, incorporating the following elements: • Preservation of Quorum's ownership of all intellectual property rights in Derived Data, including all models, scores, indices, and analytical outputs. • Elimination of the license-back on Derived Data in its current form, but

3. C-Suite Escalation. If the MFN pricing and derived-data rights impasses remain unresolved after the formal proposals described above are exchanged with KP&A, we recommend that Quorum's CEO, Meg Tierney, engage directly with Meridian's CEO, Vince Halstead, to attempt to break the impasse at the principal level. As discussed in Section IV above, Breckenridge Capital Partners' influence on Meridian's negotiating team

4. Dispute Resolution. Continue to defer negotiation of the dispute resolution provisions pending resolution of the principal commercial terms. In the interim, C&H will prepare for the eventual negotiation by maintaining Quorum's preference for exclusive court jurisdiction in the Southern District of New York or the Commercial Division of the New York Supreme Court, and by developing fallback positions (e.g., a hybri

5. Standish Consent. Gregory Stahl should follow up with Philip Yardley at Standish National Bank, N.A., regarding the status of the lender consent request submitted in November 2022 and the follow-up letter transmitted in February 2023. The objective is to maintain an open and productive dialogue with Standish, identify any preliminary concerns, and ensure that the consent process does not become a critical-path obs

6. Data Security and Privacy. Calderwood & Harkness will finalize its redline of the Data Security Addendum, targeting delivery to KP&A by th