Contract analysis

From: Wendy Schultz <wschultz@calderwoodharkness.com> To: Gregory Stahl <gstahl@quoruminsurance.com> Cc: Leonard Cross <lcross@calderwoodharkness.com> Date: Fri, 12 Jan 2024 10:47:00 -0000 Subject: Meridian Data License — Dormancy Status & Next Steps [C&H Matter No. 1025-00008]

I wanted to provide you with a comprehensive status summary now that this matter has effectively gone dormant. As you know, there has been no substantive communication between the parties since Quorum rejected Meridian's October 10, 2023 counter-proposal on November 17, 2023. On November 20, 2023, we transmitted a formal letter to Kessler Pruitt & Ashe confirming the suspension of negotiations and expressly preservin

**1. CURRENT STATUS OF TRANSACTION DOCUMENTS**

**A. Master Data License Agreement (MDLA)**

The most recent draft is the third redline prepared by our team in July 2023, which incorporated the agreements reached during the third negotiation session held on June 30, 2023 in New York. The following substantive terms are agreed:

- *Technical Schedule A (SLA and Data-Delivery Specifications):* Substantially agreed, including uptime commitments of 99.9% monthly availability; data refresh frequencies of daily batch plus real-time API for the MCI Consumer Credit File, weekly batch for MCI CommercialView, and daily batch for MCI AltSignal; and delivery via SFTP and REST API methods.

- *Volume:* Base-tier record cap of 500 million records per month, with a $0.003 per-record overage charge. Quorum's estimated monthly volume of approximately 437 million records falls well within the base tier.

- *Insurance Minimums:* Quorum — CGL at $5M per occurrence, cyber liability at $50M aggregate. Meridian — CGL at $5M per occurrence, cyber/tech E&O at $25M aggregate.

- *Pricing:* $10,800,000 for Year 1; $12,300,000 per year for Years 2–5 ($60,000,000 total over the five-year term); plus a one-time implementation fee of $1,500,000. Payment is quarterly in advance ($2,700,000 per quarter in Year 1; $3,075,000 per quarter in Years 2–5). Late payment interest at 1.5% per month (18% per annum).

**B. Open/Unresolved MDLA Issues (Bracketed)**

The following issues remain unresolved and represent the core impediments to closing:

*Most Favored Nation Pricing.* This remains a fundamental impasse. Meridian categorically rejected the full MFN clause on April 21, 2023, and its board formally resolved against any MFN pricing commitment on August 22, 2023 — a decision we understand was influenced by Breckenridge Capital Partners and Whitmore Zanthor in connection with IPO-related concerns. Quorum's fallback proposal — an annual independent pricing

*Derived-Data Rights (Article VII).* Meridian's position includes (i) a perpetual, royalty-free license-back on all Derived Data, (ii) a prohibition on third-party commercialization unless the data is "sufficiently transformed," with Meridian retaining sole discretion to determine sufficiency, and (iii) a 15% revenue share on any approved external commercialization. Quorum's revised compromise framework, proposed in

*Dispute Resolution.* Quorum proposes exclusive jurisdiction in the U.S. District Court for the Southern District of New York or the Commercial Division of New York Supreme Court, New York County. Meridian proposes binding arbitration under AAA Commercial Rules with a three-arbitrator panel seated in New York. This remains unresolved.

*Post-Termination Treatment of Derived Data.* The parties agree on a 90-day return/destroy period for raw Meridian data, but the treatment of Derived Data following termination remains disputed. This issue is closely linked to the broader Article VII disagreement and will likely need to be resolved in tandem.

Our initial draft was delivered in January 2023, and the redline responding to KP&A's comments was delivered in March 2023. The DSA is substantially progressed but not fully agreed; a few items remain open, including the scope of Quorum's audit rights and sub-processor notification requirements. For reference, both parties hold current SOC 2 Type II certifications — Meridian's was issued by Galloway Nash LLP for the

**D. Data Processing Agreement (DPA — CCPA/CPRA Compliance)**

Our draft was delivered in March 2023. KP&A has not provided substantive comments, and the DPA remains open.

**E. FCRA Permissible Purpose Certification**

The draft schedule was prepared in February 2023 and is substantially agreed in concept. It will need conforming updates once the MDLA is finalized.

Our redline responding to Meridian's counter-markup was delivered in April 2023. As noted above, the SLA is largely resolved. Minor open points on service credit caps and measurement methodology remain but could be closed quickly.

**G. Corporate Authorizations and Closing Documents**

Draft Quorum board resolution, officer's certificate, secretary's certificate, signature page templates, and bring-down certificate have all been prepared and are on file. These remain in template/draft form pending deal resolution.

**2. LENDER CONSENT — STANDISH NATIONAL BANK**

As a reminder, the $60,000,000 aggregate license value exceeds the $25,000,000 threshold in Section 7.12(b) of the Amended and Restated Credit Agreement dated June 15, 2021, with Standish National Bank, N.A., by $35 million. A draft lender consent request letter was prepared in November 2022, and a draft consent/waiver form was prepared in December 2022. We sent a follow-up letter to Philip Yardley (your Standish rel

Given the passage of time, any prior informal discussions with Standish would need to be refreshed, and the consent materials would need to be updated to reflect the current MDLA terms. Marcus Weill is available to handle this when the time comes. As you may recall, Marcus's earlier memo analyzing structuring alternatives concluded that a direct lender consent remains the most prudent path forward.

*Pinnacle Ridge Advisory LLC:* Franklin Osei delivered the pricing benchmark study on February 14, 2023, which underpinned Quorum's MFN negotiating position. If negotiations restart, this study will likely need to be refreshed given market shifts over the past year.

*Caldwell & Strauss LLP:* Angela Firth's team has been providing background IP guidance on Quorum's existing portfolio. Coordination on derived-data and QuorumScore™ positions should resume if deal discussions recommence.

If Quorum elects to re-engage in Q2 2024 or otherwise, I would recommend the following sequence:

1. **Internal strategy session.** Convene a session with C&H and Quorum's team — including Carolyn Whitford, Rajesh Anand, Diane Lowell, and Thomas Ng — to reassess Quorum's priorities and identify potential areas of flexibility on the MFN and derived-data issues.

2. **Updated strategy memorandum.** We can prepare a comprehensive strategy memo analyzing revised approaches, alternative leverage points (including Meridian's anticipated 2025–2026 IPO timeline and whether alternative credit-data providers are viable), and a recommended negotiating posture. This could be initiated at Carolyn's direction.

3. **Refresh Pinnacle Ridge pricing benchmarks.** Commission an updated study from Franklin Osei's team to account for any market changes since the February 2023 study.

4. **Re-engage Kessler Pruitt & Ashe.** Reach out to Graham Whitley to gauge Meridian's current appetite for resuming discussions.

5. **Standish consent process.** Update and re-submit the lender consent request once MDLA terms are substantially agreed.

6. **Regulatory and privacy review update.** David Cartwright and Lisa Johannsen should confirm that there have been no material changes to the regulatory landscape — FCRA, GLBA, CCPA/CPRA, 23 NYCRR 500, and applicable state insurance regulations — that would affect the deal terms.

Billing activity has been minimal since November 2023 given the dormant status. As you know, the negotiation/documentation phase is subject to a $1,800,000 soft cap; we can provide an updated fee summary at any time if that would be helpful. Nathaniel Bower is available to discuss billing matters. Monthly invoicing continues per standard terms (Net 30).

Greg, please share this with Carolyn as you see fit. I am happy to schedule a call at your convenience to discuss any of the foregoing. All work product — including the third redline of the MDLA, the Open Points Tracker, the Annotated Summary of Unresolved MDLA Issues, the November 20, 2023 suspension letter, the draft lender consent materials, the Pinnacle Ridge pricing benchmark study, and all closing document temp

Wendy Schultz Calderwood & Harkness LLP 1251 Avenue of the Americas, 38th Floor New York, NY 10020 Direct: (212) 555-4738 wschultz@calderwoodharkness.com

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