**ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL / ATTORNEY WORK PRODUCT**
Dear Carolyn,
I am writing to provide Calderwood & Harkness's assessment of Meridian Credit intelligence's counter-proposal received on October 10, 2023, delivered through their outside counsel at Kessler Pruitt & Ashe (Graham Whitley) to our office. Wendy Schultz and our team have completed a thorough review of the counter, and I want to share our analysis and recommendation for Quorum's response.
**I. Summary of Meridian's October 10 Counter-Proposal**
Meridian's counter addresses the two core open issues — pricing protections and derived-data rights — but in our view fails to respond meaningfully to either.
**(a) Pricing: Meridian's "Most Favored Terms" (MFT) Clause**
Meridian has offered a "most favored terms" clause that is limited exclusively to data-delivery SLAs and uptime commitments. The clause explicitly excludes any pricing component whatsoever.
As you will recall, this is Meridian's response to Quorum's September 15, 2023 fallback proposal — which was itself a significant concession from the original full most favored nation pricing clause we initially sought. In that September 15 fallback, Quorum proposed a limited pricing audit right, exercisable once per contract year, by an independent third-party auditor (mutually approved), to verify that Quorum's effective per-record rate does not exceed 110% of the lowest per-record rate charged to any comparable insurance-industry licensee. We defined "comparable" narrowly: U.S.-domiciled insurance carriers, MGAs, and insurtech firms with annual premiums written of $500 million or more.
Meridian's MFT counter strips out all pricing protections entirely. It provides no mechanism — none — to ensure that Quorum is not paying materially more than comparable licensees for the same data products.
Our assessment is straightforward: the MFT counter is not a meaningful response to Quorum's pricing concerns. SLA and uptime parity, while useful, are table-stakes provisions that should be negotiated independently of the pricing discussion. They do not address the fundamental economic risk that Quorum could be overpaying relative to peers over the course of a five-year, $60 million commitment.
**(b) Derived-Data Rights: Meridian's 15% Revenue Share and Related Conditions**
Meridian has proposed that if Quorum commercializes Derived Data to third parties, Meridian would receive 15% of net revenues attributable to such Derived Data. This revenue share is coupled with Meridian's continuing insistence on two additional conditions:
- A perpetual, royalty-free license-back to Meridian on all Derived Data for Meridian's own use; and - A prohibition on third-party commercialization unless the Derived Data has been "sufficiently transformed" such that no Meridian raw data can be reverse-engineered — with Meridian retaining *sole discretion* to determine whether "sufficient transformation" has occurred.
This package is commercially unacceptable for three reasons:
First, the **QuorumScore™ impact**. Quorum's proprietary predictive underwriting model (QuorumScore™, USPTO application Serial No. 97/482,116) blends Meridian credit data with Quorum's own first-party claims, policy, and telematics data. The projected B2B licensing revenue from QuorumScore is $40–50 million by 2027. A 15% revenue share on that line would cost Quorum approximately $6–7.5 million annually — effectively negating a substantial portion of the value proposition of the Meridian license itself.
Second, **license-back risk**. Granting Meridian a perpetual, royalty-free license-back on Derived Data — including QuorumScore outputs — would give Meridian, and by extension Breckenridge Capital Partners (its 62.5% majority owner) and any future acquirer or IPO investors, access to Quorum's competitive intelligence and proprietary analytics. This is fundamentally at odds with Quorum's data strategy.
Third, **sole discretion over "sufficient transformation."** Meridian's insistence on retaining sole discretion over whether Derived Data is "sufficiently transformed" creates an effective veto over Quorum's commercialization of any output that touches Meridian data. As we detailed in our May 2023 memorandum, this standard is unworkably subjective and lacks any objective, measurable criteria.
For context, Quorum's June 2023 revised compromise framework — which Meridian also rejected — proposed that Quorum retain full ownership of Derived Data with no license-back to Meridian, no revenue share, and commercialization rights subject to objective, jointly agreed de-identification and transformation standards (not Meridian's sole discretion), with a specific carve-out protecting QuorumScore outputs. That framework remains, in our view, the commercially reasonable middle ground.
**II. Context: Why Meridian's Position Has Hardened**
We believe the rigidity of Meridian's counter is driven by its August 22, 2023 board resolution, in which the board — under the influence of Breckenridge Capital Partners and Whitmore Zanthor & Co. (Meridian's investment banking advisor) — formally resolved against granting any most favored nation pricing provision or unrestricted derived-data commercialization rights to any licensee.
The underlying concern, as we discussed in our September 2023 analysis memorandum, is that broad MFN and derived-data rights in the Quorum license could negatively impact Meridian's valuation narrative around data exclusivity and pricing power in its planned 2025–2026 IPO. Meridian has also cited antitrust sensitivities in credit-data markets and confidentiality obligations to other licensees as additional grounds for resisting the MFN.
The bottom line is that Meridian's October 10 counter reflects a board-mandated floor, not a negotiating position that is likely to move significantly with further back-and-forth at the working-group level.
**III. C&H Recommendation**
We recommend that Quorum reject Meridian's October 10 counter-proposal. Neither the MFT-only clause nor the 15% revenue share / license-back / sole-discretion-transformation package is commercially reasonable or aligned with Quorum's strategic objectives.
That said, we fully acknowledge this is a business judgment for Quorum's leadership. The $60 million license (plus the $1.5 million implementation fee) is a significant commitment, and the data products at issue — MCI Consumer Credit File, MCI CommercialView, and MCI AltSignal — are valuable inputs for Quorum's underwriting, fraud detection, and propensity scoring. There are limited alternative providers offering comparable breadth and depth.
If Quorum agrees with our recommendation, we would suggest communicating the rejection in a measured way that leaves the door open for future engagement should Meridian's position evolve — for example, post-IPO, when the IPO-related constraints on Meridian's board may dissipate.
I also want to flag one procedural point. If the deal is ultimately abandoned or placed on extended hold, there may be implications for the Standish National Bank lender consent process. The $60 million license exceeds the $25 million IP license threshold in Section 7.12(b) of Quorum's Amended and Restated Credit Agreement dated June 15, 2021. We paused further work on the consent request pending the deal outcome and would not need to re-engage Standish if the deal does not proceed.
**IV. Next Steps**
We would like to schedule a call with you — and with Gregory, Rajesh Anand, and Diane Lowell as you think appropriate — to discuss this assessment and Quorum's preferred path forward. A few additional items to note:
- If Quorum decides to reject, we will prepare a formal response letter to Kessler Pruitt & Ashe communicating the rejection and preserving Quorum's ability to re-engage at a later date. - The Mutual NDA (NDA-QIH-MCI-2022-001, dated August 15, 2022) remains in effect and should be preserved regardless of deal outcome. - We will also provide an update to Nathaniel Bower regarding the status of the matter and the soft fee cap ($1,800,000) given the extended timeline of the negotiations.
I am available to discuss at your convenience, Carolyn. Wendy is also available for any detailed follow-up questions on the specific counter-proposal terms or the prior analysis.
Best regards,
Leonard Cross Partner Calderwood & Harkness LLP lcross@calderwoodharkness.com C&H Matter No. 1025-00008
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