Contract analysis

I. Executive Summary Calderwood & Harkness LLP ("C&H") has been asked to survey market practice for most favored nation ("MFN") pricing clauses in enterprise data-licensing transactions and to analyze their enforceability under New York law in connection with Quorum Insurance Holdings Corp.'s ("Quorum" or the "Company") proposed five-year, $60,000,000 Master Data License Agreement ("MDLA") with Meridian Credit intell

II. Background and Transaction Context A. The Parties Quorum Insurance Holdings Corp. Quorum is a Delaware corporation publicly traded on the Nasdaq Stock Market (ticker: QIHC), with its principal executive offices located at 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901. Quorum operates as a multi-line insurance carrier and insurance-technology platform operator, with business segments spanning prope

III. What Is a Most Favored Nation Clause in Data Licensing? A. Definition and Core Mechanics A most favored nation clause — sometimes referred to as a "most favored customer" clause, "price parity" clause, or "MFN" — is a contractual provision requiring the licensor or vendor to offer the licensee or customer pricing and/or commercial terms at least as favorable as those offered to any other similarly situated custo

1. Triggering event: The licensor enters into a license agreement with a comparator customer (as defined by the MFN clause's comparator class) on terms that are more favorable than those offered to the MFN beneficiary. The triggering event may be defined by reference to specific pricing metrics (e.g., per-record rate, aggregate annual fee) or more broadly to include any commercial terms.

2. Notification obligation: Upon the occurrence of a triggering event, the licensor is typically required to notify the MFN beneficiary within a specified period — commonly 30 to 60 days — of the existence of more favorable terms. Some MFN clauses require only periodic (e.g., annual) disclosure rather than event-driven notification.

3. Adjustment mechanism: The MFN clause specifies how the beneficiary's terms will be adjusted. There are two principal approaches: (a) automatic adjustment, under which the beneficiary's pricing is deemed to be retroactively or prospectively adjusted to match the more favorable terms without further action by either party; and (b) elective adjustment, under which the beneficiary is given the option — but not the obl

4. Temporal application: The clause specifies whether the adjustment applies retroactively (i.e., with a true-up or credit for the period during which the beneficiary was paying more than the comparator customer) or on a prospective-only basis (i.e., adjusting the beneficiary's pricing going forward from the date of the triggering event or notification). A key distinction exists between two categories of MFN clauses:

IV. Market Practice Survey: MFN Clauses in Enterprise Data-Licensing Transactions A. Methodology This market practice survey is based on three principal sources:

1. SEC filings. We reviewed publicly available data-licensing agreements filed as material exhibits to Form 10-K, 10-Q, 8-K, and S-1 registration statements with the U.S. Securities and Exchange Commission. Our review focused on agreements filed by or with financial services companies, insurance carriers, fintech firms, and data analytics providers during the period from January 2017 through September 2022. We identi

2. C&H proprietary deal database. We drew upon C&H's internal database of technology transactions and data-licensing agreements negotiated by the firm's Technology Transactions and intellectual Property practice groups. This database includes approximately 340 enterprise data-licensing transactions in the financial services and insurance sectors from the past five years, of which 142 involved aggregate deal values of

3. Pinnacle Ridge Advisory LLC benchmark study. We supplemented our legal analysis with the market intelligence and pricing data provided by Pinnacle Ridge Advisory LLC (Franklin Osei, Managing Director), which Quorum retained to perform an independent pricing benchmark study of comparable credit-data licensing transactions in the insurance sector. While the Pinnacle Ridge study focuses primarily on pricing levels ra

V. Enforceability of MFN Clauses Under New York Law A. General Enforceability Most favored nation clauses are generally enforceable under New York law as a matter of freedom of contract. New York's well-established policy of enforcing the freely negotiated agreements of sophisticated commercial parties extends fully to MFN provisions. Courts applying New York law have consistently held that MFN clauses — provided the

1. Definiteness. The MFN clause must be sufficiently definite in its material terms to permit a court to determine whether a breach has occurred and to fashion an appropriate remedy. New York law requires that a contractual provision be "sufficiently definite and explicit so that the intention of the parties may be ascertained to a reasonable degree of certainty." Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher,

2. Consideration. Like any contractual obligation, an MFN clause must be supported by adequate consideration. In the context of a negotiated enterprise data-licensing agreement, the consideration requirement is readily satisfied: the licensee's agreement to pay the license fees, to commit to a specified term and volume, and to perform its other obligations under the MDLA constitutes adequate consideration for the lic

3. No conflict with other contractual obligations. An MFN clause that would compel the licensor to breach its confidentiality obligations to other licensees raises a distinct enforceability concern. If performance of the MFN obligation (e.g., disclosing the specific pricing terms of a comparator license) would necessarily require the licensor to violate a pre-existing confidentiality commitment, a court could find th

4. Good faith performance. New York's implied covenant of good faith and fair dealing requires the licensor to perform its MFN obligations in good faith and to refrain from actions that would deprive the beneficiary of the fruits of the MFN bargain. In the MFN context, this implied covenant has particular significance because licensors have incentives — and opportunities — to structure competing license arrangements

VI. Evaluation of Quorum's Proposed MFN Clause A. Proposed Scope Quorum's proposed MFN clause defines the comparator class as all U.S.-domiciled insurance carriers, managing general agents (MGAs), and insurtech firms with annual premiums written of $500 million or more. This comparator class is well-defined and industry-specific. It limits the MFN to Quorum's direct competitors and peers within the insurance sector,