1025-00008 · Quorum Insurance Holdings · Diligence & Analysis

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp. Gregory Stahl, Vice President, Legal Affairs, Quorum Insurance Holdings Corp.

FROM: Marcus Weill, Associate, Corporate/Commercial, Calderwood & Harkness LLP With input from Nathaniel Bower, Partner, Bankruptcy & Restructuring, Calderwood & Harkness LLP

DATE: November 2022

RE: Analysis of Section 7.12(b) Negative Covenant — Amended and Restated Credit Agreement dated June 15, 2021, among Quorum Insurance Holdings Corp., the Lenders party thereto, and Standish National Bank, N.A., as Administrative Agent — Impact of Proposed Master Data License Agreement with Meridian Credit intelligence, Inc.

C&H Matter No.: 1025-00008

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I. Executive Summary

Quorum Insurance Holdings Corp. ("Quorum" or the "Company"), a Delaware corporation listed on the Nasdaq Stock Market (ticker: QIHC), with its principal executive offices located at 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901, is currently in active negotiations to enter into a five-year enterprise data-licensing arrangement designated as the Master Data License Agreement (the "MDLA") with Meridian Credit intelligence, Inc. ("Meridian"), a Georgia corporation headquartered at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326. The total deal value of the proposed MDLA over its five-year initial term is Sixty Million Dollars ($60,000,000).

This memorandum analyzes the impact of the proposed MDLA on Quorum's obligations under Section 7.12(b) of the Amended and Restated Credit Agreement, dated as of June 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Quorum, the several lenders from time to time party thereto (the "Lenders"), and Standish National Bank, N.A. ("Standish"), as Administrative Agent. Section 7.12(b) contains a negative covenant restricting Quorum from entering into any license, sublicense, or similar arrangement with respect to intellectual Property (as defined in the Credit Agreement) having an aggregate value in excess of Twenty-Five Million Dollars ($25,000,000) without the prior written consent of the Required Lenders (as defined in the Credit Agreement).

The aggregate value of the MDLA — $60,000,000 — exceeds the Section 7.12(b) threshold of $25,000,000 by $35,000,000, representing an excess of approximately 240% of the covenant threshold (calculated as $60,000,000 ÷ $25,000,000 = 2.4×). This margin is substantial and, in our view, leaves no colorable argument that the covenant is not triggered by the proposed transaction.

Our conclusion is that Quorum must obtain a lender consent letter or covenant waiver from Standish National Bank, N.A. (acting on behalf of and upon approval by the Required Lenders under the Credit Agreement) prior to executing the MDLA. Entry into the MDLA without obtaining such consent would constitute an Event of Default under the Credit Agreement, with potentially severe consequences including acceleration of all outstanding obligations under the Company's $1.2 billion revolving credit facility.

This memorandum (i) provides relevant background on both the Credit Agreement and the proposed MDLA transaction; (ii) sets forth a detailed analysis of Section 7.12(b) and its application to the MDLA; (iii) evaluates potential structuring alternatives that could theoretically mitigate or avoid the covenant trigger; (iv) describes the lender consent process, timeline, and coordination requirements; (v) identifies additional considerations relating to collateral, financial covenants, and related matters; and (vi) provides actionable recommendations and proposed next steps, including timing considerations relative to the MDLA negotiation timeline and anticipated execution date.

II. Background

A. The Standish Credit Facility

Quorum is the borrower under the Amended and Restated Credit Agreement, dated as of June 15, 2021 (the "Credit Agreement"), among Quorum Insurance Holdings Corp. (as Borrower), the several financial institutions and other persons from time to time party thereto as Lenders, and Standish National Bank, N.A. (as Administrative Agent). Standish National Bank, N.A. is a national banking association with its principal office located at 280 Congress Street, Boston, Massachusetts 02210. Philip Yardley serves as the designated Relationship Manager for the Quorum account at Standish.

The Credit Agreement provides for a senior unsecured revolving credit facility in an aggregate principal amount of One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Revolving Credit Facility"). The Revolving Credit Facility was originally documented pursuant to a credit agreement dated as of June 15, 2021, and the current Credit Agreement represents the amended and restated version of that original instrument. The Revolving Credit Facility supports Quorum's general corporate purposes, including working capital requirements, capital expenditures, permitted acquisitions, and other uses consistent with the terms and conditions set forth in the Credit Agreement.

The Credit Agreement contains customary representations and warranties, affirmative covenants, negative covenants (including the restrictive covenant at Section 7.12(b) that is the subject of this memorandum), financial maintenance covenants, and events of default. Standish, as Administrative Agent, administers the Credit Agreement on behalf of the Lender syndicate and serves as the primary point of contact for consent requests, waiver solicitations, and amendment proposals.

B. The Proposed MDLA Transaction

Quorum proposes to enter into a five-year Master Data License Agreement with Meridian Credit intelligence, Inc. Meridian is a privately held consumer and commercial credit-data bureau incorporated in the State of Georgia. Meridian is majority-owned, with a 62.5% equity stake, by Breckenridge Capital Partners Fund IV, L.P., a Delaware limited partnership whose general partner is Breckenridge Capital Management LLC, located at 600 Lexington Avenue, 28th Floor, New York, New York 10022. The remaining equity in Meridian is held by a combination of founding management and other institutional investors whose identities are not material to this analysis.

Under the proposed MDLA, Meridian would grant Quorum a non-exclusive license to access and use certain of Meridian's proprietary data products for integration into Quorum's insurance underwriting, claims management, and customer analytics platforms. The principal data products to be licensed under the MDLA are as follows:

• MCI Consumer Credit File™: A proprietary consumer credit database maintained by Meridian containing approximately 310 million individual consumer credit records, including payment histories, credit utilization metrics, derogatory marks, public records, and related credit attributes.

• MCI CommercialView™: A proprietary commercial credit database maintained by Meridian containing approximately 42 million business entity records, including trade payment data, financial statement summaries, business demographic information, and commercial credit scores.

• MCI AltSignal™: A proprietary alternative-data database maintained by Meridian containing approximately 85 million consumer alternative-data records, including utility payment histories, rental payment data, telecommunications account information, and other non-traditional credit indicators.

The business purpose of the MDLA is to enable Quorum to ingest Meridian's data products into Quorum's proprietary analytics infrastructure in order to enhance the Company's automated underwriting models, claims-fraud detection algorithms, and customer propensity scoring capabilities across its property and casualty ("P&C"), life, and specialty insurance lines of business. The licensed data will also be utilized in connection with Quorum's proprietary QuorumScore™ predictive model, for which a United States Patent and Trademark Office application is currently pending (Serial No. 97/482,116).

The commercial terms of the MDLA, as currently under negotiation, are summarized as follows:

Total Deal Value: $60,000,000 over the five-year initial term, comprised of annual license fees structured as follows:

• Year 1 Annual License Fee: $10,800,000, calculated as $900,000 per month for twelve months. The reduced Year 1 fee reflects an anticipated six-month implementation and ramp-up period during which Quorum will be integrating Meridian's data feeds into its existing systems architecture.

• Years 2–5 Annual License Fee: $12,300,000 per year, calculated as $1,025,000 per month for twelve months, for each of the four remaining years of the initial term.

• Reconciliation: The total five-year license fee is calculated as $10,800,000 (Year 1) + ($12,300,000 × 4 years) = $10,800,000 + $49,200,000 = $60,000,000.

In addition to the annual license fees, the MDLA contemplates a separate one-time implementation and integration fee of $1,500,000, payable upon execution of the MDLA. This implementation fee covers Meridian's costs associated with configuring data feeds, establishing secure API connectivity, conducting initial data validation testing, and providing technical onboarding support. The one-time implementation fee has not been included in the $60,000,000 aggregate license value figure referenced above, though as discussed in Part III.C below, there is a reasonable argument that it should be included in the "aggregate value" calculation under Section 7.12(b), bringing the total to $61,500,000.

Payment Terms: License fees are payable quarterly in advance. Year 1 quarterly installments are $2,700,000 (i.e., $10,800,000 ÷ 4). Years 2–5 quarterly installments are $3,075,000 (i.e., $12,300,000 ÷ 4).

Overage Charges: The MDLA includes a base-tier data access volume of 500 million records per month across all three licensed data products. Usage exceeding the base tier is subject to overage charges at a rate of $0.003 per record. Current estimated monthly volume based on Quorum's projected usage is approximately 437 million records, representing approximately 87.4% of the base tier. Overage charges are therefore not currently anticipated but remain a theoretical possibility, particularly as Quorum's analytics capabilities expand over the term of the agreement.

Current Negotiation Status: The MDLA is in active negotiation between Calderwood & Harkness LLP (on behalf of Quorum) and Kessler Pruitt & Ashe LLP (on behalf of Meridian), with Graham Whitley serving as lead partner for Meridian's outside counsel. Key open issues that remain subject to ongoing negotiation include (i) most-favored-nation ("MFN") pricing provisions, pursuant to which Quorum seeks assurance that the license fees under the MDLA will not exceed the fees charged by Meridian to any other similarly situated licensee, and (ii) derived-data intellectual property ownership, addressing the question of which party will own data outputs, models, scores, and other derivative works generated by Quorum using Meridian's licensed data as an input.

C. Quorum's Financial Profile (for Context)

The following financial data is provided for contextual purposes in evaluating the materiality of the MDLA relative to Quorum's overall financial position:

As discussed in Part VI.B below, the annual MDLA fees ($10.8 million in Year 1, $12.3 million in Years 2–5) are relatively modest in the context of Quorum's financial profile and are not expected to create financial covenant compliance concerns. However, we recommend that this assessment be confirmed with Quorum's internal finance team and its external auditor.

III. Analysis of Section 7.12(b)

A. Text of the Covenant

Section 7.12(b) of the Credit Agreement provides as follows:

"The Borrower shall not enter into any license, sublicense, or similar arrangement with respect to intellectual Property having an aggregate value in excess of $25,000,000 without the prior written consent of the Required Lenders."

This provision is located within Article VII of the Credit Agreement, which sets forth the negative covenants applicable to Quorum as Borrower during the term of the Credit Agreement. Negative covenants of this nature are standard features of syndicated credit facilities and are designed to protect lenders by restricting the borrower's ability to incur material obligations or dispose of significant assets — including intellectual property assets — without lender oversight and approval. Section 7.12(b) specifically addresses intellectual property arrangements, reflecting the increasing recognition in modern credit documentation that IP-related transactions can represent significant value commitments that may affect a borrower's financial condition, asset base, and collateral coverage.

The covenant operates as a bright-line restriction: any license, sublicense, or similar IP arrangement with an aggregate value exceeding $25,000,000 requires the prior written consent of the Required Lenders. There is no materiality qualifier, no basket, and no exception for ordinary-course transactions. The covenant is absolute in its application, subject only to the mechanism of obtaining lender consent.

B. Key Defined Terms

A proper analysis of Section 7.12(b) requires close examination of the key defined terms employed in the covenant. We address each in turn.

"Borrower." The Credit Agreement defines "Borrower" as Quorum Insurance Holdings Corp., the party that executed the Credit Agreement as borrower. Quorum is the entity that proposes to enter into the MDLA with Meridian. Accordingly, there is no question that the covenant applies to Quorum's entry into the MDLA. The "Borrower" definition is straightforwardly satisfied.

"Intellectual Property." The Credit Agreement defines "Intellectual Property" in a manner consistent with prevailing market practice for syndicated credit facilities. While we defer to the specific defined term as set forth in the Credit Agreement (reproduced in Appendix A), credit agreements of this vintage and type typically define "Intellectual Property" broadly to encompass patents, patent applications, trademarks, service marks, trade names, copyrights, trade secrets, know-how, proprietary software, databases, licenses, and all similar rights and interests in intellectual property of any kind or nature. The MDLA involves a license of access to and use of Meridian's proprietary data products — the MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™ — each of which constitutes a proprietary database containing confidential and proprietary information that may qualify as a trade secret or database compilation under applicable law. The arrangement grants Quorum defined use rights with respect to these data assets. Accordingly, the MDLA constitutes an "arrangement with respect to intellectual Property" within the meaning of Section 7.12(b). The breadth of the defined term, which encompasses not only the IP itself but any "arrangement with respect to" IP, reinforces the conclusion that the MDLA falls squarely within the covenant's scope.

"license, sublicense, or similar arrangement." The MDLA is expressly structured and titled as a "Master Data License Agreement." It grants Quorum a defined license to access and use Meridian's proprietary data products pursuant to specified terms and conditions, including restrictions on use, redistribution limitations, confidentiality obligations, and defined scope of licensed rights. The MDLA thus plainly constitutes a "license" within the ordinary meaning of that term as used in Section 7.12(b). Even if one were to argue that a data-access arrangement is somehow distinguishable from a traditional intellectual property license (a position we do not endorse, as discussed in Part IV.C below), the catch-all phrase "similar arrangement" would independently capture the MDLA. The disjunctive phrasing of the covenant — "license, sublicense, or similar arrangement" — was plainly intended to sweep broadly and to prevent narrow construction that might exclude arrangements that are functionally equivalent to licenses but structured or labeled differently.

"aggregate value." The covenant restricts arrangements "having an aggregate value in excess of $25,000,000." The term "aggregate value" is not separately defined in the Credit Agreement, which means it must be interpreted according to its plain and ordinary meaning in the context of the covenant. The most natural reading of "aggregate value" in the context of a multi-year license arrangement is the total committed consideration payable over the full contractual term — here, $60,000,000 over the five-year initial term of the MDLA.

We have considered whether "aggregate value" could be interpreted to refer only to the annual license fee payable in any single year. Under such an interpretation, the Year 1 fee of $10,800,000 and the Years 2–5 fee of $12,300,000 per year would each fall below the $25,000,000 threshold. However, this interpretation is inconsistent with the plain meaning of "aggregate," which connotes a total or cumulative amount. Had the drafters intended the restriction to apply on an annual or per-period basis, the covenant would have referred to "annual value" or "value in any fiscal year" rather than "aggregate value." The use of "aggregate" indicates that the drafters intended the total value of the arrangement — calculated over its entire term — to be measured against the $25,000,000 threshold.

This interpretation is consistent with prevailing market practice and with the protective purpose of the covenant. A contrary reading would permit a borrower to enter into an IP license of virtually unlimited total value simply by structuring the payments over a sufficiently long term, thereby reducing any single year's payment below the threshold. Such a result would render the covenant largely meaningless and would be inconsistent with the lenders' reasonable expectations in negotiating the restriction.

"Required Lenders." The Credit Agreement defines "Required Lenders" in a manner consistent with standard syndicated credit agreement practice — typically as those Lenders holding in the aggregate more than 50% (or, in some facilities, 66⅔%) of the total revolving commitments under the facility. Standish, as Administrative Agent, would be responsible for soliciting the consent of the Required Lenders and for delivering the written consent or waiver to Quorum upon receipt of the requisite lender votes. The specific voting threshold applicable to the Required Lenders definition should be confirmed by reference to the Credit Agreement (see Appendix A), but for purposes of this memorandum we proceed on the assumption that it follows the standard majority-in-commitment formulation.

C. Application to the MDLA

Having analyzed the key defined terms and the structure of the covenant, we now apply Section 7.12(b) to the facts of the proposed MDLA transaction. Our analysis addresses each element of the covenant in turn.

First, the MDLA is a "license" or at minimum a "similar arrangement" with respect to "Intellectual Property." As discussed in Part III.B above, the MDLA is expressly structured as a data license agreement granting Quorum defined rights to access and use Meridian's proprietary data products. These data products constitute intellectual property within the meaning of the Credit Agreement's broad IP definition, and the MDLA constitutes a license arrangement with respect thereto. This element is clearly satisfied.

Second, the "aggregate value" of the MDLA is $60,000,000 over its five-year initial term. This figure represents the total committed license fees payable by Quorum to Meridian over the term of the agreement, calculated as set forth in Part II.B above. The $60,000,000 aggregate value exceeds the $25,000,000 threshold set forth in Section 7.12(b) by $35,000,000 — an excess of approximately 240% of the covenant threshold. This margin is substantial, unambiguous, and not subject to reasonable dispute. There is no colorable argument that the covenant is not triggered by a transaction of this magnitude.

Third, with respect to the one-time implementation and integration fee of $1,500,000, we note that there is a reasonable argument that this fee should be included in the "aggregate value" calculation, as it is payable in connection with and as an integral part of the same MDLA arrangement. If included, the total aggregate value of the MDLA would be $61,500,000. However, even excluding the implementation fee, the $60,000,000 aggregate license value clearly and substantially exceeds the $25,000,000 threshold. The inclusion or exclusion of the implementation fee is therefore immaterial to the overall conclusion, though the conservative and more defensible approach would be to include it.

Fourth, we have considered whether the MDLA's overage charges — assessed at $0.003 per record above the 500 million records per month base tier — should be included in the "aggregate value" calculation. Current estimated monthly volume is approximately 437 million records, representing approximately 87.4% of the base tier, which suggests that overage charges are unlikely to be incurred during the ordinary course of the MDLA term. Moreover, overage charges are inherently contingent and unquantifiable at the time of contract execution, as they depend entirely on Quorum's actual data usage volumes during each month of the term. We believe the more appropriate approach is to exclude contingent overage charges from the aggregate value calculation for purposes of Section 7.12(b), while noting their existence for completeness. This exclusion is consistent with the general principle that covenant calculations should be based on committed or determinable amounts rather than speculative contingencies. Regardless, the base license fees alone far exceed the covenant threshold.

Conclusion: Section 7.12(b) is unambiguously triggered by the proposed MDLA. Prior written consent of the Required Lenders is required before Quorum may enter into the MDLA. There is no reasonable basis on which to conclude otherwise, and we advise against any attempt to proceed with the MDLA without first obtaining such consent.

D. Consequences of Non-Compliance

The consequences of entering into the MDLA without obtaining the required consent of the Required Lenders under Section 7.12(b) would be severe and potentially catastrophic for Quorum's financial position and banking relationships.

Entry into the MDLA in violation of Section 7.12(b) would constitute a breach of the negative covenants set forth in Article VII of the Credit Agreement. Under the Events of Default provisions of the Credit Agreement (typically found in Article VIII), a breach of any negative covenant constitutes an immediate Event of Default (without the benefit of any grace or cure period, as is standard for negative covenant breaches in syndicated credit facilities). Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and upon the direction of the Required Lenders shall, take any or all of the following actions:

(a) declare all outstanding principal, accrued interest, fees, and other obligations under the $1,200,000,000 Revolving Credit Facility to be immediately due and payable, without presentment, demand, protest, or further notice of any kind;

(b) terminate all remaining commitments of the Lenders under the Revolving Credit Facility, thereby eliminating Quorum's access to undrawn borrowing capacity;

(c) exercise all rights and remedies available to the Administrative Agent and the Lenders under the Credit Agreement, applicable law, and any related security or collateral documents, including the enforcement of liens and security interests against pledged collateral; and

(d) pursue any other remedies available at law or in equity.

In addition to the direct consequences under the Credit Agreement, a default thereunder would likely trigger cross-default provisions in other Quorum credit instruments, debt agreements, and financial contracts. Calderwood & Harkness recommends that Quorum's legal team conduct a separate review of all outstanding debt instruments and material contracts to identify any cross-default provisions that reference the Credit Agreement or that are triggered by a default under any material indebtedness.

Beyond the legal and financial consequences, an uncured or unconsented violation of Section 7.12(b) would cause significant reputational harm to Quorum in the eyes of Standish and the broader lending syndicate. The banking relationship with Standish — which has served as Administrative Agent since the inception of the Credit Agreement — is a valuable institutional relationship that Quorum should be careful to preserve. A willful or negligent violation of a negative covenant would undermine lender confidence and could adversely affect Quorum's ability to obtain future credit accommodations, amendments, or waivers on favorable terms.

For all of these reasons, we emphasize in the strongest possible terms that the risk of proceeding without lender consent is unacceptable. The consent must be obtained prior to execution of the MDLA, without exception.

IV. Structuring Alternatives to Avoid or Mitigate the Covenant Trigger

We have considered several potential structuring alternatives that could, in theory, be deployed to avoid triggering Section 7.12(b) or to reduce the aggregate value of the MDLA below the $25,000,000 threshold. Each alternative is analyzed below. For the reasons stated, we do not recommend any of these alternatives as a substitute for obtaining direct lender consent.

A. Alternative 1: Split the License Across Quorum Subsidiaries

Description. Under this approach, the MDLA would be restructured as multiple separate license agreements, each entered into between Meridian and a different Quorum operating subsidiary (e.g., Quorum P&C Insurance Company, Quorum Life Insurance Company, Quorum Specialty Underwriters, Inc.), with each individual agreement having an aggregate value below the $25,000,000 threshold.

Analysis. This approach is likely ineffective for several reasons. First, most syndicated credit agreements — including, we expect, the Credit Agreement — contain anti-evasion provisions that prohibit the Borrower from taking indirectly any action that the Borrower is restricted from taking directly. A deliberate splitting of a single economic arrangement into multiple subsidiary-level agreements for the purpose of avoiding a covenant threshold would likely be viewed as precisely the kind of evasion that such provisions are designed to prevent.

Second, the definition of "Borrower" in the Credit Agreement may be construed to encompass Quorum's subsidiaries through guaranty provisions, joinder agreements, or consolidated reporting requirements. Many credit agreements apply negative covenants not only to the named Borrower but also to its Restricted Subsidiaries on a consolidated basis. If the Credit Agreement contains such provisions — and we expect that it does, consistent with market practice — splitting the license across subsidiaries would not avoid the covenant trigger because the aggregate value of the arrangements would still be measured on a consolidated basis.

Third, even if the subsidiary-splitting approach were technically permissible under a narrow reading of the Credit Agreement, we believe that pursuing such a strategy would be viewed by Standish and the Lender syndicate as an attempt to circumvent the spirit and purpose of the covenant through artifice. This would damage the banking relationship and could be characterized as a breach of the implied covenant of good faith and fair dealing. The reputational cost of being perceived as engaging in covenant arbitrage far outweighs any potential benefit of avoiding a consent process that is, in our experience, unlikely to be problematic given the underlying merits of the MDLA transaction.

Recommendation. Not recommended as a primary strategy. The risks of this approach — both legal and reputational — outweigh any potential benefits.

B. Alternative 2: Phased Commitment Structure

Description. Under this approach, the MDLA would be restructured as an initial one-year or two-year commitment with renewal options (exercisable at Quorum's sole discretion) for subsequent years. The purpose of this structure would be to limit the "aggregate value" of the committed arrangement to an amount below the $25,000,000 threshold.

Analysis. This approach has greater theoretical viability than the subsidiary-splitting alternative, but presents significant practical and interpretive challenges.

If the MDLA were structured as a one-year commitment, the Year 1 fee of $10,800,000 would fall well below the $25,000,000 threshold. If structured as a two-year commitment, the combined Year 1 and Year 2 fees of $23,100,000 ($10,800,000 + $12,300,000) would also fall below the threshold, though with considerably less margin.

The critical question is whether "aggregate value" under Section 7.12(b) includes the value of optional renewal periods. If renewal is at Quorum's sole and unfettered discretion — with no obligation, penalty, or economic compulsion to renew — there is a reasonable argument that only the committed term value should be counted toward the "aggregate value" calculation. Under this interpretation, renewal periods would represent separate arrangements entered into at the time of renewal exercise, each of which would need to be independently evaluated against the $25,000,000 threshold.

However, this argument is subject to several important caveats and risks:

(i) If the agreement contains automatic renewal provisions (i.e., the term automatically extends unless one party provides timely notice of non-renewal), the aggregate value would likely be calculated to include all renewal periods, as the renewal is the default outcome and requires affirmative action to avoid.

(ii) If renewal is commercially inevitable — for example, because Quorum will have invested significant resources in integrating Meridian's data feeds, trained its underwriting models on Meridian's data, and become operationally dependent on continued access — lenders may argue that the economic substance of the arrangement is a five-year commitment regardless of the technical optionality. Lenders are sophisticated parties who will look beyond the form of the agreement to its substance.

(iii) The phased approach may undermine the commercial negotiation with Meridian. Meridian is seeking a five-year commitment to provide revenue visibility and to justify the investment required to configure and maintain the data feeds for a large enterprise customer. A structure that gives Quorum unilateral walk-away rights after Year 1 or Year 2 would fundamentally alter the economic bargain from Meridian's perspective and would likely result in either (a) Meridian refusing to agree to the structure, or (b) Meridian demanding significantly higher annual fees to compensate for the reduced commitment, which could itself push the aggregate value above the threshold even over a shorter term.

Recommendation. Partially viable in theory but creates significant commercial negotiation complications and may not fully resolve the covenant issue. Not recommended as the primary strategy. If pursued, this approach would need to be coordinated closely with the MDLA negotiation team and would require careful drafting to ensure that the renewal provisions are structured in a manner that supports the argument for excluding renewal periods from the aggregate value calculation.

C. Alternative 3: Reclassification as a Services Agreement

Description. Under this approach, Quorum would argue that the MDLA is not a "license" of "Intellectual Property" but rather a data-services or data-access agreement — essentially characterizing the arrangement as the purchase of services rather than the licensing of intellectual property.

Analysis. This argument is weak and we do not recommend pursuing it. The following factors undermine the reclassification theory:

(i) The agreement is expressly titled a "Master Data License Agreement." While the title of an agreement is not dispositive of its legal character, it is indicative of the parties' intent and understanding of the nature of the arrangement. An agreement that is titled and structured as a license will be difficult to credibly recharacterize as a services agreement.

(ii) The MDLA involves licensed access to three proprietary, branded data products — MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™. Each of these products is a proprietary database compilation that is the subject of trademark protection (as evidenced by the trademark designations) and that likely qualifies as a trade secret or protectable database compilation under applicable law. The grant of access to and use rights in such proprietary data assets is the hallmark of an intellectual property license, not a services arrangement.

(iii) The MDLA grants Quorum defined use rights with respect to the licensed data, including the right to ingest the data into Quorum's proprietary systems, to use the data in underwriting and claims processes, and to generate derivative analytical outputs. These are licensing characteristics — the grant of specific rights to use the licensor's intellectual property — rather than service-delivery characteristics.

(iv) The Credit Agreement's definition of "Intellectual Property" is broad and includes "similar rights and interests." Even if a data-access arrangement could theoretically be distinguished from a traditional patent or trademark license, the breadth of the IP definition and the catch-all "similar arrangement" language in Section 7.12(b) would likely capture the MDLA regardless of how it is characterized.

(v) Perhaps most importantly, a reclassification argument would be viewed by Standish and the Lenders as an aggressive and potentially bad-faith interpretation of the covenant. The purpose of Section 7.12(b) is to ensure that the Lenders have visibility into and approval rights over significant IP-related commitments. An attempt to evade this purpose through semantic reclassification would damage the banking relationship and could expose Quorum to allegations of covenant manipulation.

Recommendation. Not recommended. This approach lacks legal merit and would be viewed as aggressive interpretation that could expose Quorum to claims of bad faith.

D. Alternative 4: Amendment to Section 7.12(b)

Description. Rather than seeking a one-time consent for the MDLA, Quorum could seek a formal amendment to the Credit Agreement that raises the $25,000,000 threshold in Section 7.12(b) to a higher level (e.g., $75,000,000 or $100,000,000) or that creates a specific carve-out for data-licensing arrangements of the type contemplated by the MDLA.

Analysis. A credit agreement amendment is a viable approach but is more cumbersome and time-consuming than a one-time consent waiver. Key considerations include:

(i) Approval requirements. Amendment of negative covenants typically requires the consent of the Required Lenders, though certain amendments to fundamental provisions may require the consent of all Lenders depending on the amendment and waiver provisions of the Credit Agreement. A formal amendment may therefore involve a higher approval threshold than a one-time consent or waiver.

(ii) Negotiation complexity. A formal amendment opens the door to broader renegotiation of Credit Agreement terms. Lenders may use the amendment process as an opportunity to seek modifications to other provisions (e.g., tightening of financial covenants, adjustment of pricing or commitment fees), creating additional complexity and delay.

(iii) Fees and expenses. Credit agreement amendments typically require payment of amendment fees to consenting Lenders, as well as reimbursement of the Administrative Agent's legal fees and expenses. These costs can be significant, depending on the size of the syndicate and the complexity of the amendment.

(iv) Timeline. A formal amendment process, including drafting, circulation, negotiation, and execution, typically takes four to eight weeks or longer, depending on the number of Lenders in the syndicate and the complexity of the proposed changes. This timeline may be longer than is necessary for the MDLA, particularly if a one-time consent can be obtained more expeditiously.

(v) Future benefits. On the positive side, an amendment that raises the Section 7.12(b) threshold would provide Quorum with additional headroom for future IP-related transactions without requiring additional lender consents. If Quorum anticipates entering into additional large-scale data-licensing, technology-licensing, or IP-related transactions in the near term, an amendment could provide lasting strategic value.

Recommendation. A formal amendment is worth considering as a secondary or parallel objective, particularly if Quorum anticipates additional large IP-related transactions. However, it should not be pursued as the primary strategy for the MDLA, as the one-time consent process is likely to be faster, simpler, and less costly. If an amendment is desired, it could be pursued on a parallel track while the one-time consent for the MDLA proceeds.

E. Overall Recommendation

Based on our analysis of the foregoing alternatives, we recommend that direct lender consent/waiver is the most prudent, straightforward, and efficient path for addressing the Section 7.12(b) issue in connection with the MDLA. The alternatives either fail to provide a legally clean solution (reclassification, subsidiary split), create unnecessary commercial complications with Meridian (phased commitment), or involve greater time and expense than a one-time consent (amendment). We note that the underlying MDLA transaction is commercially sound, strategically compelling, and financially modest relative to Quorum's overall balance sheet, all of which factors support the expectation that lender consent will be obtained without significant difficulty.

To the extent Quorum wishes to pursue a credit agreement amendment as a longer-term strategic objective, this can be done on a parallel track and need not delay the initiation of the consent process for the MDLA.

V. Lender Consent Process

A. Required Steps

The process for obtaining the required lender consent under Section 7.12(b) involves the following steps:

1. Prepare and submit a formal consent request letter. Calderwood & Harkness will prepare, and Quorum will submit, a formal consent request letter addressed to Standish National Bank, N.A. (Attention: Philip Yardley, Relationship Manager), requesting the prior written consent of the Required Lenders under Section 7.12(b) of the Credit Agreement for Quorum to enter into the MDLA with Meridian. The consent request letter will identify the specific covenant provision at issue, describe the proposed transaction, and request that Standish solicit the consent of the Required Lenders on Quorum's behalf.

2. Include supporting documentation. The consent request letter will be accompanied by a description of the MDLA transaction, including the deal value, term, data products to be licensed, business purpose and strategic rationale, and any additional supporting materials that may be requested by Standish or the Lenders. The level of detail and the specific supporting materials to be provided will be determined in consultation with Quorum and may be refined based on preliminary discussions with Philip Yardley regarding Standish's expectations.

3. Administrative Agent circulates request. Upon receipt of the consent request, Standish, acting in its capacity as Administrative Agent, will circulate the request to the Lenders and solicit their votes on the requested consent. The consent request will specify a deadline for Lender responses and will typically provide that any Lender that does not respond within the specified period will be deemed to have consented (or not consented, depending on the terms of the Credit Agreement's consent solicitation procedures).

4. Written consent/waiver delivered. Upon receipt of consents from Lenders constituting the Required Lenders (i.e., Lenders holding the requisite percentage of total revolving commitments), Standish will execute and deliver to Quorum a written consent and waiver confirming that the Required Lenders have consented to Quorum's entry into the MDLA and waiving any Event of Default that would otherwise arise under Section 7.12(b) as a result thereof.

B. Information Likely Requested by Lenders

Based on our experience with lender consent processes in comparable transactions, we anticipate that Standish and the Lenders will request some or all of the following information in connection with their evaluation of the consent request:

• A clear and concise summary of the MDLA transaction terms, including the identity of the counterparty (Meridian), the total deal value ($60,000,000), the payment structure, the term and renewal provisions, and the principal data products to be licensed.

• A description of the business rationale and strategic importance of the data license to Quorum's operations, including how the licensed data will be used to enhance underwriting, fraud detection, and customer analytics capabilities.

• Confirmation of Quorum's ability to fund the $60,000,000 aggregate license fee commitment (plus the $1,500,000 one-time implementation fee) without materially impacting the Company's liquidity position, revolving credit availability under the Credit Agreement, or compliance with financial maintenance covenants.

• A summary of Quorum's current financial condition, including the most recent quarterly financial statements, and confirmation of ongoing compliance with all other covenants under the Credit Agreement.

• A copy of the MDLA, or a near-final draft thereof, once available. If a final or near-final draft is not yet available at the time the consent request is submitted, a term sheet or summary of the principal commercial terms may suffice for the initial consent solicitation, with the full agreement to follow when available.

• An assessment of intellectual property risk, including whether the MDLA creates any encumbrances, licenses, or restrictions on Quorum's own intellectual property or on any intellectual property that is pledged as collateral under the Credit Agreement or related security documents.

We recommend that Quorum's finance team and legal department begin assembling the supporting materials described above so that the consent request package is ready for submission promptly upon finalization of the consent request letter.

C. Timeline Considerations

Lender consent processes of this nature typically require two to six weeks from the date of formal submission, depending on several factors including the complexity of the underlying transaction, the size and composition of the lender syndicate, the responsiveness of individual lenders, and whether any lender raises substantive objections or requests additional information.

In the present case, we believe the consent process is likely to proceed efficiently for several reasons. The underlying transaction is straightforward — a data-licensing arrangement in the ordinary course of Quorum's insurance business — and the financial impact on Quorum is modest relative to the Company's overall size and financial strength. The Section 7.12(b) covenant is clear in its application, and the consent request does not raise novel or complex legal issues. Moreover, Quorum's relationship with Standish appears to be in good standing, which should facilitate a cooperative and constructive consent process.

Given that the MDLA negotiations are ongoing and currently focused on resolving the MFN pricing and derived-data intellectual property ownership impasse, there is flexibility on timing. However, we recommend initiating the consent request process well in advance of MDLA finalization to avoid the consent becoming a bottleneck to closing. Specifically, there is no reason to wait for fully executed or near-final MDLA terms before submitting the consent request, given that the magnitude of the excess over the $25,000,000 threshold ($35,000,000 excess, representing 240% of the threshold) makes it clear that the covenant is triggered regardless of how the remaining open terms are resolved.

The consent should be structured as a condition precedent to the effectiveness of the MDLA, such that Quorum's obligations under the MDLA do not become effective until the lender consent has been obtained and delivered. This approach protects Quorum from the risk of entering into a binding commitment before the required consent is in hand.

Calderwood & Harkness is currently preparing two companion documents in connection with the consent process:

• Draft Lender Consent Request Letter — Quorum Insurance Holdings Corp. to Standish National Bank, N.A. (the formal letter requesting consent under Section 7.12(b)).

• Draft Lender Consent/Waiver — Standish National Bank, N.A. re: Section 7.12(b) (the proposed form of written consent and waiver to be executed by Standish on behalf of the Required Lenders).

These companion documents are being prepared on a parallel track and will be circulated to Quorum for review in due course.

D. Coordination with MDLA Closing

Effective coordination between the lender consent process and the MDLA negotiation and closing process is essential to ensuring a smooth and efficient transaction execution. We recommend the following coordination steps:

Condition Precedent. The MDLA should include the Standish lender consent as a condition precedent to Quorum's obligations becoming effective. Specifically, the MDLA should provide that the agreement shall not become effective, and Quorum shall have no obligation to make any payments thereunder, until such time as Quorum has received the written consent of the Required Lenders under Section 7.12(b) of the Credit Agreement. This condition precedent protects Quorum from the risk of a binding commitment arising before the consent is obtained and should be a standard provision in the MDLA.

Disclosure to Meridian's Counsel. Meridian's outside counsel, Kessler Pruitt & Ashe LLP (Graham Whitley, lead partner), should be informed at an appropriate time that the lender consent is required so that Meridian can plan accordingly with respect to the MDLA closing timeline. We recommend disclosing the consent requirement in general terms — i.e., that Quorum's credit facility documentation requires lender consent for IP-related arrangements above a specified threshold, and that such consent is being sought — without disclosing the specific terms of the Credit Agreement or the identity of the lender syndicate to the extent Quorum prefers to maintain confidentiality regarding those details.

Closing Checklist. The closing checklist for the MDLA transaction should include the lender consent as a required deliverable item, alongside other closing conditions such as board authorization, officer's certificates, legal opinions, and executed counterpart signature pages. Leonard Cross (C&H Corporate lead) and Wendy Schultz (C&H IP lead) should be advised of the consent requirement so that it is properly tracked and managed within the overall MDLA closing process.

VI. Additional Considerations

A. Collateral and Security Interest Implications

We recommend that Quorum's legal team review the Credit Agreement and any related security or collateral documents to determine whether Quorum's obligations under the Credit Agreement are secured by a pledge of or security interest in Quorum's intellectual property assets. If the Credit Agreement or related security documents grant Standish and the Lenders a security interest in Quorum's IP — as is common in secured credit facilities — several additional considerations arise in connection with the MDLA.

First, the derived data and analytical outputs generated by Quorum using Meridian's licensed data as an input may constitute "after-acquired property" subject to the Lenders' security interest, depending on the scope of the security interest grant and the characterization of the derived data under applicable law. This is particularly relevant given the ongoing dispute between Quorum and Meridian regarding the ownership of derived data under Article VII of the MDLA. If Quorum successfully negotiates ownership of Derived Data — including outputs of the QuorumScore™ predictive model generated using Meridian data inputs — such intellectual property may automatically become subject to the Standish lien upon creation. Quorum should understand this implication before finalizing its negotiating position on derived-data ownership.

Second, the MDLA may contain provisions that purport to restrict Quorum's ability to encumber, assign, or sublicense the licensed data or derived data outputs. If the Lenders' security interest extends to Quorum's rights under the MDLA (including license rights and derived data), there may be a conflict between the MDLA's restrictions and the Lenders' rights under the security documents. This potential conflict should be identified and addressed in the MDLA drafting process.

We recommend coordinating with Wendy Schultz, who is leading the IP aspects of the MDLA negotiation at Calderwood & Harkness, on the interaction between the derived-data ownership positions being negotiated with Meridian and the scope and implications of the Lenders' security interest in Quorum's intellectual property assets.

B. Financial Covenant Impact

We recommend confirming that the MDLA payment obligations — $10,800,000 in Year 1 and $12,300,000 per year in Years 2 through 5 — do not cause Quorum to breach any financial maintenance covenants under the Credit Agreement. Financial maintenance covenants in credit agreements of this type typically include a maximum leverage ratio (total debt to EBITDA), a minimum interest coverage ratio (EBITDA to interest expense), and potentially a minimum net worth or tangible net worth test.

Given Quorum's substantial financial profile — FY 2023 revenue of $4,180,000,000, net income of $312,000,000, and total assets of $27,600,000,000 — the annual MDLA fees are quite modest relative to the Company's overall financial position. The Year 1 fee of $10,800,000 represents approximately 0.26% of FY 2023 revenue and approximately 3.5% of FY 2023 net income. The Years 2–5 fee of $12,300,000 per year represents approximately 0.29% of FY 2023 revenue and approximately 3.9% of FY 2023 net income. At these levels, it would be highly unusual for the MDLA fees to cause a breach of any financial maintenance covenant.

Notwithstanding the apparent immateriality of the MDLA fees relative to Quorum's financial profile, we recommend that Quorum's internal finance team run the applicable covenant compliance calculations incorporating the MDLA payment obligations and confirm that no covenant breach would result. This analysis should also take into account any other pending or anticipated expenditures that, in combination with the MDLA fees, could affect covenant compliance. We further recommend consulting with Felton Thorpe & Co. LLP, Quorum's external auditor, regarding the appropriate accounting treatment of the MDLA fees (e.g., whether they are treated as operating expenses, capitalized as intangible assets, or accounted for under any applicable lease or subscription accounting guidance) and the impact of such treatment on the financial metrics used in covenant calculations.

C. Negative Pledge and Anti-Assignment Provisions

We recommend reviewing the Credit Agreement to determine whether it contains negative pledge or anti-assignment provisions that could restrict Quorum's ability to assign, sublicense, or otherwise transfer its rights under the MDLA to third parties. Such restrictions could be relevant in several scenarios:

• If Quorum seeks to sublicense derived data outputs or analytical products generated using Meridian's licensed data to third-party customers, affiliates, or business partners.

• If Quorum undergoes a change-of-control transaction (merger, acquisition, or sale of all or substantially all assets) in which the MDLA rights would need to be transferred to or assumed by the successor entity.

• If Quorum seeks to contribute or transfer the MDLA to a subsidiary or affiliate as part of a corporate reorganization or operational restructuring.

These issues should be noted for future reference and should be considered in the context of the MDLA's own assignment and change-of-control provisions, which are currently under negotiation with Meridian's counsel.

D. Interaction with Quorum Board Authorization

Separately from the lender consent requirement, Quorum's board of directors will need to authorize the Company's entry into the MDLA. Harrison Kimble, Chairman of the Board of Quorum Insurance Holdings Corp., should be apprised of the MDLA transaction and the lender consent process. Board authorization will typically be evidenced by a board resolution approving the transaction and authorizing one or more officers to execute and deliver the MDLA and related documents on behalf of the Company. An officer's certificate certifying the board resolution, the incumbency of signing officers, and the Company's good standing will typically be required as a closing deliverable.

Board resolutions and officer's certificates for the MDLA are being prepared as separate workstreams at Calderwood & Harkness. To the extent practicable, we recommend that the lender consent be obtained before or contemporaneously with board authorization, so that the board can act with full knowledge that the lender consent requirement has been (or will imminently be) satisfied. This sequencing reduces the risk of a scenario in which the board authorizes the transaction but the lender consent is unexpectedly delayed or withheld, creating uncertainty regarding Quorum's ability to proceed.

VII. Recommendations and Next Steps

Based on our analysis, we recommend the following actions and next steps:

1. Initiate the consent request promptly. Quorum should begin the lender consent process with Standish National Bank, N.A. by submitting the formal consent request letter at the earliest practicable date. There is no need to wait for final or near-final MDLA terms before initiating the consent process, given that the magnitude of the excess over the Section 7.12(b) threshold — $35,000,000, or 240% of the threshold — makes it clear that the covenant is triggered irrespective of how the remaining open commercial terms are resolved. Early initiation of the consent process provides the maximum available runway for obtaining consent and avoids the risk of the consent becoming a closing bottleneck.

2. Pursue direct consent/waiver as the primary path. For the reasons set forth in Part IV above, structuring alternatives (subsidiary splitting, phased commitment, reclassification) are not recommended as the primary strategy for addressing the Section 7.12(b) issue. Direct lender consent is the most prudent, efficient, and legally defensible approach and should be pursued as the primary path.

3. Consider a credit agreement amendment as a secondary objective. If Quorum anticipates entering into additional large-scale intellectual property, data-licensing, or technology-licensing transactions in the near term, the Company should explore raising the Section 7.12(b) threshold as part of a broader credit agreement amendment. This could be pursued on a parallel track with the one-time consent process and should not be permitted to delay the MDLA consent timeline.

4. Coordinate with the MDLA negotiation team. Leonard Cross (C&H Corporate lead) and Wendy Schultz (C&H IP lead) should be informed of the lender consent requirement and its implications for MDLA drafting. Specifically, the MDLA should include the lender consent as a condition precedent to the effectiveness of Quorum's obligations, and the closing checklist should include the lender consent as a required deliverable item.

5. Communicate with Meridian's counsel. At an appropriate time, Quorum should disclose the lender consent requirement to Meridian's counsel, Kessler Pruitt & Ashe LLP (Graham Whitley), so that Meridian can plan accordingly with respect to the MDLA closing timeline and is not surprised by a consent-related delay at or near closing.

6. Review collateral and security interest provisions. Quorum's legal team, with the assistance of Calderwood & Harkness, should review the Credit Agreement and related security documents to confirm the scope of the Lenders' security interest in Quorum's intellectual property and assess the implications for the derived-data ownership negotiations currently underway with Meridian.

7. Confirm financial covenant compliance. Quorum's finance team should confirm that the MDLA payment obligations ($10,800,000 in Year 1, $12,300,000 per year in Years 2–5, plus the $1,500,000 one-time implementation fee) will not cause Quorum to breach any financial maintenance covenants under the Credit Agreement. This confirmation should be coordinated with Felton Thorpe & Co. LLP (external auditor) as appropriate.

8. Timeline target. We recommend aiming to submit the consent request to Standish by late November 2022, with the objective of obtaining the Required Lenders' consent within the first quarter of 2023. This timeline would position the lender consent well in advance of the anticipated MDLA execution date, which remains subject to the resolution of the MFN pricing and derived-data intellectual property ownership issues currently under negotiation between the parties.

We are available to discuss this memorandum and the recommended next steps at your convenience. Please do not hesitate to contact Marcus Weill (212-558-4000; m.weill@calderwoodharkness.com) or Nathaniel Bower (212-558-4200; n.bower@calderwoodharkness.com) with any questions or to arrange a call.

VIII. Appendices (Referenced)

The following appendices are referenced in this memorandum and are being assembled as companion materials:

Appendix A — Relevant Extracts from the Amended and Restated Credit Agreement dated June 15, 2021. This appendix will include the full text of Section 7.12(b), the definitions of "Intellectual Property," "Required Lenders," "Borrower," "Event of Default," and related provisions, as well as any anti-evasion, amendment, and consent solicitation provisions relevant to the analysis set forth in this memorandum.

Appendix B — Summary of MDLA Key Commercial Terms. This appendix will include a summary of the principal commercial terms of the proposed Master Data License Agreement, including the aggregate deal value, annual and quarterly payment schedule, description of data products to be licensed, term and renewal provisions, overage charges, and implementation fee.

Appendix C — Quorum Financial Summary. This appendix will include a summary of Quorum's key financial metrics for the most recent fiscal year, including FY 2023 revenue, net income, total assets, market capitalization, and any other financial data relevant to the lender consent process and financial covenant compliance analysis.

This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. This memorandum does not constitute a legal opinion and is subject to revision based on further review of the Credit Agreement and M

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp. Gregory Stahl, Vice President, Legal Affairs, Quorum Insurance Holdings Corp.
FROM: Marcus Weill, Associate, Corporate/Commercial, Calderwood & Harkness LLP With input from Nathaniel Bower, Partner, Bankruptcy & Restructuring, Calderwood & Harkness LLP
DATE: November 2022
RE: Analysis of Section 7.12(b) Negative Covenant — Amended and Restated Credit Agreement dated June 15, 2021, among Quorum Insurance Holdings Corp., the Lenders party thereto, and Standish National Bank, N.A., as Administrative Agent — Impact of Proposed Master Data License Agreement with Meridian Credit intelligence, Inc.
C&H Matter No.: 1025-00008
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I. Executive Summary
Quorum Insurance Holdings Corp. ("Quorum" or the "Company"), a Delaware corporation listed on the Nasdaq Stock Market (ticker: QIHC), with its principal executive offices located at 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901, is currently in active negotiations to enter into a five-year enterprise data-licensing arrangement designated as the Master Data License Agreement (the "MDLA") with Meridian Credit intelligence, Inc. ("Meridian"), a Georgia corporation headquartered at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326. The total deal value of the proposed MDLA over its five-year initial term is Sixty Million Dollars ($60,000,000).
This memorandum analyzes the impact of the proposed MDLA on Quorum's obligations under Section 7.12(b) of the Amended and Restated Credit Agreement, dated as of June 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Quorum, the several lenders from time to time party thereto (the "Lenders"), and Standish National Bank, N.A. ("Standish"), as Administrative Agent. Section 7.12(b) contains a negative covenant restricting Quorum from entering into any license, sublicense, or similar arrangement with respect to intellectual Property (as defined in the Credit Agreement) having an aggregate value in excess of Twenty-Five Million Dollars ($25,000,000) without the prior written consent of the Required Lenders (as defined in the Credit Agreement).
The aggregate value of the MDLA — $60,000,000 — exceeds the Section 7.12(b) threshold of $25,000,000 by $35,000,000, representing an excess of approximately 240% of the covenant threshold (calculated as $60,000,000 ÷ $25,000,000 = 2.4×). This margin is substantial and, in our view, leaves no colorable argument that the covenant is not triggered by the proposed transaction.
Our conclusion is that Quorum must obtain a lender consent letter or covenant waiver from Standish National Bank, N.A. (acting on behalf of and upon approval by the Required Lenders under the Credit Agreement) prior to executing the MDLA. Entry into the MDLA without obtaining such consent would constitute an Event of Default under the Credit Agreement, with potentially severe consequences including acceleration of all outstanding obligations under the Company's $1.2 billion revolving credit facility.
This memorandum (i) provides relevant background on both the Credit Agreement and the proposed MDLA transaction; (ii) sets forth a detailed analysis of Section 7.12(b) and its application to the MDLA; (iii) evaluates potential structuring alternatives that could theoretically mitigate or avoid the covenant trigger; (iv) describes the lender consent process, timeline, and coordination requirements; (v) identifies additional considerations relating to collateral, financial covenants, and related matters; and (vi) provides actionable recommendations and proposed next steps, including timing considerations relative to the MDLA negotiation timeline and anticipated execution date.
II. Background
A. The Standish Credit Facility
Quorum is the borrower under the Amended and Restated Credit Agreement, dated as of June 15, 2021 (the "Credit Agreement"), among Quorum Insurance Holdings Corp. (as Borrower), the several financial institutions and other persons from time to time party thereto as Lenders, and Standish National Bank, N.A. (as Administrative Agent). Standish National Bank, N.A. is a national banking association with its principal office located at 280 Congress Street, Boston, Massachusetts 02210. Philip Yardley serves as the designated Relationship Manager for the Quorum account at Standish.
The Credit Agreement provides for a senior unsecured revolving credit facility in an aggregate principal amount of One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Revolving Credit Facility"). The Revolving Credit Facility was originally documented pursuant to a credit agreement dated as of June 15, 2021, and the current Credit Agreement represents the amended and restated version of that original instrument. The Revolving Credit Facility supports Quorum's general corporate purposes, including working capital requirements, capital expenditures, permitted acquisitions, and other uses consistent with the terms and conditions set forth in the Credit Agreement.
The Credit Agreement contains customary representations and warranties, affirmative covenants, negative covenants (including the restrictive covenant at Section 7.12(b) that is the subject of this memorandum), financial maintenance covenants, and events of default. Standish, as Administrative Agent, administers the Credit Agreement on behalf of the Lender syndicate and serves as the primary point of contact for consent requests, waiver solicitations, and amendment proposals.
B. The Proposed MDLA Transaction
Quorum proposes to enter into a five-year Master Data License Agreement with Meridian Credit intelligence, Inc. Meridian is a privately held consumer and commercial credit-data bureau incorporated in the State of Georgia. Meridian is majority-owned, with a 62.5% equity stake, by Breckenridge Capital Partners Fund IV, L.P., a Delaware limited partnership whose general partner is Breckenridge Capital Management LLC, located at 600 Lexington Avenue, 28th Floor, New York, New York 10022. The remaining equity in Meridian is held by a combination of founding management and other institutional investors whose identities are not material to this analysis.
Under the proposed MDLA, Meridian would grant Quorum a non-exclusive license to access and use certain of Meridian's proprietary data products for integration into Quorum's insurance underwriting, claims management, and customer analytics platforms. The principal data products to be licensed under the MDLA are as follows:
• MCI Consumer Credit File™: A proprietary consumer credit database maintained by Meridian containing approximately 310 million individual consumer credit records, including payment histories, credit utilization metrics, derogatory marks, public records, and related credit attributes.
• MCI CommercialView™: A proprietary commercial credit database maintained by Meridian containing approximately 42 million business entity records, including trade payment data, financial statement summaries, business demographic information, and commercial credit scores.
• MCI AltSignal™: A proprietary alternative-data database maintained by Meridian containing approximately 85 million consumer alternative-data records, including utility payment histories, rental payment data, telecommunications account information, and other non-traditional credit indicators.
The business purpose of the MDLA is to enable Quorum to ingest Meridian's data products into Quorum's proprietary analytics infrastructure in order to enhance the Company's automated underwriting models, claims-fraud detection algorithms, and customer propensity scoring capabilities across its property and casualty ("P&C"), life, and specialty insurance lines of business. The licensed data will also be utilized in connection with Quorum's proprietary QuorumScore™ predictive model, for which a United States Patent and Trademark Office application is currently pending (Serial No. 97/482,116).
The commercial terms of the MDLA, as currently under negotiation, are summarized as follows:
Total Deal Value: $60,000,000 over the five-year initial term, comprised of annual license fees structured as follows:
• Year 1 Annual License Fee: $10,800,000, calculated as $900,000 per month for twelve months. The reduced Year 1 fee reflects an anticipated six-month implementation and ramp-up period during which Quorum will be integrating Meridian's data feeds into its existing systems architecture.
• Years 2–5 Annual License Fee: $12,300,000 per year, calculated as $1,025,000 per month for twelve months, for each of the four remaining years of the initial term.
• Reconciliation: The total five-year license fee is calculated as $10,800,000 (Year 1) + ($12,300,000 × 4 years) = $10,800,000 + $49,200,000 = $60,000,000.
In addition to the annual license fees, the MDLA contemplates a separate one-time implementation and integration fee of $1,500,000, payable upon execution of the MDLA. This implementation fee covers Meridian's costs associated with configuring data feeds, establishing secure API connectivity, conducting initial data validation testing, and providing technical onboarding support. The one-time implementation fee has not been included in the $60,000,000 aggregate license value figure referenced above, though as discussed in Part III.C below, there is a reasonable argument that it should be included in the "aggregate value" calculation under Section 7.12(b), bringing the total to $61,500,000.
Payment Terms: License fees are payable quarterly in advance. Year 1 quarterly installments are $2,700,000 (i.e., $10,800,000 ÷ 4). Years 2–5 quarterly installments are $3,075,000 (i.e., $12,300,000 ÷ 4).
Overage Charges: The MDLA includes a base-tier data access volume of 500 million records per month across all three licensed data products. Usage exceeding the base tier is subject to overage charges at a rate of $0.003 per record. Current estimated monthly volume based on Quorum's projected usage is approximately 437 million records, representing approximately 87.4% of the base tier. Overage charges are therefore not currently anticipated but remain a theoretical possibility, particularly as Quorum's analytics capabilities expand over the term of the agreement.
Current Negotiation Status: The MDLA is in active negotiation between Calderwood & Harkness LLP (on behalf of Quorum) and Kessler Pruitt & Ashe LLP (on behalf of Meridian), with Graham Whitley serving as lead partner for Meridian's outside counsel. Key open issues that remain subject to ongoing negotiation include (i) most-favored-nation ("MFN") pricing provisions, pursuant to which Quorum seeks assurance that the license fees under the MDLA will not exceed the fees charged by Meridian to any other similarly situated licensee, and (ii) derived-data intellectual property ownership, addressing the question of which party will own data outputs, models, scores, and other derivative works generated by Quorum using Meridian's licensed data as an input.
C. Quorum's Financial Profile (for Context)
The following financial data is provided for contextual purposes in evaluating the materiality of the MDLA relative to Quorum's overall financial position:
As discussed in Part VI.B below, the annual MDLA fees ($10.8 million in Year 1, $12.3 million in Years 2–5) are relatively modest in the context of Quorum's financial profile and are not expected to create financial covenant compliance concerns. However, we recommend that this assessment be confirmed with Quorum's internal finance team and its external auditor.
III. Analysis of Section 7.12(b)
A. Text of the Covenant
Section 7.12(b) of the Credit Agreement provides as follows:
"The Borrower shall not enter into any license, sublicense, or similar arrangement with respect to intellectual Property having an aggregate value in excess of $25,000,000 without the prior written consent of the Required Lenders."
This provision is located within Article VII of the Credit Agreement, which sets forth the negative covenants applicable to Quorum as Borrower during the term of the Credit Agreement. Negative covenants of this nature are standard features of syndicated credit facilities and are designed to protect lenders by restricting the borrower's ability to incur material obligations or dispose of significant assets — including intellectual property assets — without lender oversight and approval. Section 7.12(b) specifically addresses intellectual property arrangements, reflecting the increasing recognition in modern credit documentation that IP-related transactions can represent significant value commitments that may affect a borrower's financial condition, asset base, and collateral coverage.
The covenant operates as a bright-line restriction: any license, sublicense, or similar IP arrangement with an aggregate value exceeding $25,000,000 requires the prior written consent of the Required Lenders. There is no materiality qualifier, no basket, and no exception for ordinary-course transactions. The covenant is absolute in its application, subject only to the mechanism of obtaining lender consent.
B. Key Defined Terms
A proper analysis of Section 7.12(b) requires close examination of the key defined terms employed in the covenant. We address each in turn.
"Borrower." The Credit Agreement defines "Borrower" as Quorum Insurance Holdings Corp., the party that executed the Credit Agreement as borrower. Quorum is the entity that proposes to enter into the MDLA with Meridian. Accordingly, there is no question that the covenant applies to Quorum's entry into the MDLA. The "Borrower" definition is straightforwardly satisfied.
"Intellectual Property." The Credit Agreement defines "Intellectual Property" in a manner consistent with prevailing market practice for syndicated credit facilities. While we defer to the specific defined term as set forth in the Credit Agreement (reproduced in Appendix A), credit agreements of this vintage and type typically define "Intellectual Property" broadly to encompass patents, patent applications, trademarks, service marks, trade names, copyrights, trade secrets, know-how, proprietary software, databases, licenses, and all similar rights and interests in intellectual property of any kind or nature. The MDLA involves a license of access to and use of Meridian's proprietary data products — the MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™ — each of which constitutes a proprietary database containing confidential and proprietary information that may qualify as a trade secret or database compilation under applicable law. The arrangement grants Quorum defined use rights with respect to these data assets. Accordingly, the MDLA constitutes an "arrangement with respect to intellectual Property" within the meaning of Section 7.12(b). The breadth of the defined term, which encompasses not only the IP itself but any "arrangement with respect to" IP, reinforces the conclusion that the MDLA falls squarely within the covenant's scope.
"license, sublicense, or similar arrangement." The MDLA is expressly structured and titled as a "Master Data License Agreement." It grants Quorum a defined license to access and use Meridian's proprietary data products pursuant to specified terms and conditions, including restrictions on use, redistribution limitations, confidentiality obligations, and defined scope of licensed rights. The MDLA thus plainly constitutes a "license" within the ordinary meaning of that term as used in Section 7.12(b). Even if one were to argue that a data-access arrangement is somehow distinguishable from a traditional intellectual property license (a position we do not endorse, as discussed in Part IV.C below), the catch-all phrase "similar arrangement" would independently capture the MDLA. The disjunctive phrasing of the covenant — "license, sublicense, or similar arrangement" — was plainly intended to sweep broadly and to prevent narrow construction that might exclude arrangements that are functionally equivalent to licenses but structured or labeled differently.
"aggregate value." The covenant restricts arrangements "having an aggregate value in excess of $25,000,000." The term "aggregate value" is not separately defined in the Credit Agreement, which means it must be interpreted according to its plain and ordinary meaning in the context of the covenant. The most natural reading of "aggregate value" in the context of a multi-year license arrangement is the total committed consideration payable over the full contractual term — here, $60,000,000 over the five-year initial term of the MDLA.
We have considered whether "aggregate value" could be interpreted to refer only to the annual license fee payable in any single year. Under such an interpretation, the Year 1 fee of $10,800,000 and the Years 2–5 fee of $12,300,000 per year would each fall below the $25,000,000 threshold. However, this interpretation is inconsistent with the plain meaning of "aggregate," which connotes a total or cumulative amount. Had the drafters intended the restriction to apply on an annual or per-period basis, the covenant would have referred to "annual value" or "value in any fiscal year" rather than "aggregate value." The use of "aggregate" indicates that the drafters intended the total value of the arrangement — calculated over its entire term — to be measured against the $25,000,000 threshold.
This interpretation is consistent with prevailing market practice and with the protective purpose of the covenant. A contrary reading would permit a borrower to enter into an IP license of virtually unlimited total value simply by structuring the payments over a sufficiently long term, thereby reducing any single year's payment below the threshold. Such a result would render the covenant largely meaningless and would be inconsistent with the lenders' reasonable expectations in negotiating the restriction.
"Required Lenders." The Credit Agreement defines "Required Lenders" in a manner consistent with standard syndicated credit agreement practice — typically as those Lenders holding in the aggregate more than 50% (or, in some facilities, 66⅔%) of the total revolving commitments under the facility. Standish, as Administrative Agent, would be responsible for soliciting the consent of the Required Lenders and for delivering the written consent or waiver to Quorum upon receipt of the requisite lender votes. The specific voting threshold applicable to the Required Lenders definition should be confirmed by reference to the Credit Agreement (see Appendix A), but for purposes of this memorandum we proceed on the assumption that it follows the standard majority-in-commitment formulation.
C. Application to the MDLA
Having analyzed the key defined terms and the structure of the covenant, we now apply Section 7.12(b) to the facts of the proposed MDLA transaction. Our analysis addresses each element of the covenant in turn.
First, the MDLA is a "license" or at minimum a "similar arrangement" with respect to "Intellectual Property." As discussed in Part III.B above, the MDLA is expressly structured as a data license agreement granting Quorum defined rights to access and use Meridian's proprietary data products. These data products constitute intellectual property within the meaning of the Credit Agreement's broad IP definition, and the MDLA constitutes a license arrangement with respect thereto. This element is clearly satisfied.
Second, the "aggregate value" of the MDLA is $60,000,000 over its five-year initial term. This figure represents the total committed license fees payable by Quorum to Meridian over the term of the agreement, calculated as set forth in Part II.B above. The $60,000,000 aggregate value exceeds the $25,000,000 threshold set forth in Section 7.12(b) by $35,000,000 — an excess of approximately 240% of the covenant threshold. This margin is substantial, unambiguous, and not subject to reasonable dispute. There is no colorable argument that the covenant is not triggered by a transaction of this magnitude.
Third, with respect to the one-time implementation and integration fee of $1,500,000, we note that there is a reasonable argument that this fee should be included in the "aggregate value" calculation, as it is payable in connection with and as an integral part of the same MDLA arrangement. If included, the total aggregate value of the MDLA would be $61,500,000. However, even excluding the implementation fee, the $60,000,000 aggregate license value clearly and substantially exceeds the $25,000,000 threshold. The inclusion or exclusion of the implementation fee is therefore immaterial to the overall conclusion, though the conservative and more defensible approach would be to include it.
Fourth, we have considered whether the MDLA's overage charges — assessed at $0.003 per record above the 500 million records per month base tier — should be included in the "aggregate value" calculation. Current estimated monthly volume is approximately 437 million records, representing approximately 87.4% of the base tier, which suggests that overage charges are unlikely to be incurred during the ordinary course of the MDLA term. Moreover, overage charges are inherently contingent and unquantifiable at the time of contract execution, as they depend entirely on Quorum's actual data usage volumes during each month of the term. We believe the more appropriate approach is to exclude contingent overage charges from the aggregate value calculation for purposes of Section 7.12(b), while noting their existence for completeness. This exclusion is consistent with the general principle that covenant calculations should be based on committed or determinable amounts rather than speculative contingencies. Regardless, the base license fees alone far exceed the covenant threshold.
Conclusion: Section 7.12(b) is unambiguously triggered by the proposed MDLA. Prior written consent of the Required Lenders is required before Quorum may enter into the MDLA. There is no reasonable basis on which to conclude otherwise, and we advise against any attempt to proceed with the MDLA without first obtaining such consent.
D. Consequences of Non-Compliance
The consequences of entering into the MDLA without obtaining the required consent of the Required Lenders under Section 7.12(b) would be severe and potentially catastrophic for Quorum's financial position and banking relationships.
Entry into the MDLA in violation of Section 7.12(b) would constitute a breach of the negative covenants set forth in Article VII of the Credit Agreement. Under the Events of Default provisions of the Credit Agreement (typically found in Article VIII), a breach of any negative covenant constitutes an immediate Event of Default (without the benefit of any grace or cure period, as is standard for negative covenant breaches in syndicated credit facilities). Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and upon the direction of the Required Lenders shall, take any or all of the following actions:
(a) declare all outstanding principal, accrued interest, fees, and other obligations under the $1,200,000,000 Revolving Credit Facility to be immediately due and payable, without presentment, demand, protest, or further notice of any kind;
(b) terminate all remaining commitments of the Lenders under the Revolving Credit Facility, thereby eliminating Quorum's access to undrawn borrowing capacity;
(c) exercise all rights and remedies available to the Administrative Agent and the Lenders under the Credit Agreement, applicable law, and any related security or collateral documents, including the enforcement of liens and security interests against pledged collateral; and
(d) pursue any other remedies available at law or in equity.
In addition to the direct consequences under the Credit Agreement, a default thereunder would likely trigger cross-default provisions in other Quorum credit instruments, debt agreements, and financial contracts. Calderwood & Harkness recommends that Quorum's legal team conduct a separate review of all outstanding debt instruments and material contracts to identify any cross-default provisions that reference the Credit Agreement or that are triggered by a default under any material indebtedness.
Beyond the legal and financial consequences, an uncured or unconsented violation of Section 7.12(b) would cause significant reputational harm to Quorum in the eyes of Standish and the broader lending syndicate. The banking relationship with Standish — which has served as Administrative Agent since the inception of the Credit Agreement — is a valuable institutional relationship that Quorum should be careful to preserve. A willful or negligent violation of a negative covenant would undermine lender confidence and could adversely affect Quorum's ability to obtain future credit accommodations, amendments, or waivers on favorable terms.
For all of these reasons, we emphasize in the strongest possible terms that the risk of proceeding without lender consent is unacceptable. The consent must be obtained prior to execution of the MDLA, without exception.
IV. Structuring Alternatives to Avoid or Mitigate the Covenant Trigger
We have considered several potential structuring alternatives that could, in theory, be deployed to avoid triggering Section 7.12(b) or to reduce the aggregate value of the MDLA below the $25,000,000 threshold. Each alternative is analyzed below. For the reasons stated, we do not recommend any of these alternatives as a substitute for obtaining direct lender consent.
A. Alternative 1: Split the License Across Quorum Subsidiaries
Description. Under this approach, the MDLA would be restructured as multiple separate license agreements, each entered into between Meridian and a different Quorum operating subsidiary (e.g., Quorum P&C Insurance Company, Quorum Life Insurance Company, Quorum Specialty Underwriters, Inc.), with each individual agreement having an aggregate value below the $25,000,000 threshold.
Analysis. This approach is likely ineffective for several reasons. First, most syndicated credit agreements — including, we expect, the Credit Agreement — contain anti-evasion provisions that prohibit the Borrower from taking indirectly any action that the Borrower is restricted from taking directly. A deliberate splitting of a single economic arrangement into multiple subsidiary-level agreements for the purpose of avoiding a covenant threshold would likely be viewed as precisely the kind of evasion that such provisions are designed to prevent.
Second, the definition of "Borrower" in the Credit Agreement may be construed to encompass Quorum's subsidiaries through guaranty provisions, joinder agreements, or consolidated reporting requirements. Many credit agreements apply negative covenants not only to the named Borrower but also to its Restricted Subsidiaries on a consolidated basis. If the Credit Agreement contains such provisions — and we expect that it does, consistent with market practice — splitting the license across subsidiaries would not avoid the covenant trigger because the aggregate value of the arrangements would still be measured on a consolidated basis.
Third, even if the subsidiary-splitting approach were technically permissible under a narrow reading of the Credit Agreement, we believe that pursuing such a strategy would be viewed by Standish and the Lender syndicate as an attempt to circumvent the spirit and purpose of the covenant through artifice. This would damage the banking relationship and could be characterized as a breach of the implied covenant of good faith and fair dealing. The reputational cost of being perceived as engaging in covenant arbitrage far outweighs any potential benefit of avoiding a consent process that is, in our experience, unlikely to be problematic given the underlying merits of the MDLA transaction.
Recommendation. Not recommended as a primary strategy. The risks of this approach — both legal and reputational — outweigh any potential benefits.
B. Alternative 2: Phased Commitment Structure
Description. Under this approach, the MDLA would be restructured as an initial one-year or two-year commitment with renewal options (exercisable at Quorum's sole discretion) for subsequent years. The purpose of this structure would be to limit the "aggregate value" of the committed arrangement to an amount below the $25,000,000 threshold.
Analysis. This approach has greater theoretical viability than the subsidiary-splitting alternative, but presents significant practical and interpretive challenges.
If the MDLA were structured as a one-year commitment, the Year 1 fee of $10,800,000 would fall well below the $25,000,000 threshold. If structured as a two-year commitment, the combined Year 1 and Year 2 fees of $23,100,000 ($10,800,000 + $12,300,000) would also fall below the threshold, though with considerably less margin.
The critical question is whether "aggregate value" under Section 7.12(b) includes the value of optional renewal periods. If renewal is at Quorum's sole and unfettered discretion — with no obligation, penalty, or economic compulsion to renew — there is a reasonable argument that only the committed term value should be counted toward the "aggregate value" calculation. Under this interpretation, renewal periods would represent separate arrangements entered into at the time of renewal exercise, each of which would need to be independently evaluated against the $25,000,000 threshold.
However, this argument is subject to several important caveats and risks:
(i) If the agreement contains automatic renewal provisions (i.e., the term automatically extends unless one party provides timely notice of non-renewal), the aggregate value would likely be calculated to include all renewal periods, as the renewal is the default outcome and requires affirmative action to avoid.
(ii) If renewal is commercially inevitable — for example, because Quorum will have invested significant resources in integrating Meridian's data feeds, trained its underwriting models on Meridian's data, and become operationally dependent on continued access — lenders may argue that the economic substance of the arrangement is a five-year commitment regardless of the technical optionality. Lenders are sophisticated parties who will look beyond the form of the agreement to its substance.
(iii) The phased approach may undermine the commercial negotiation with Meridian. Meridian is seeking a five-year commitment to provide revenue visibility and to justify the investment required to configure and maintain the data feeds for a large enterprise customer. A structure that gives Quorum unilateral walk-away rights after Year 1 or Year 2 would fundamentally alter the economic bargain from Meridian's perspective and would likely result in either (a) Meridian refusing to agree to the structure, or (b) Meridian demanding significantly higher annual fees to compensate for the reduced commitment, which could itself push the aggregate value above the threshold even over a shorter term.
Recommendation. Partially viable in theory but creates significant commercial negotiation complications and may not fully resolve the covenant issue. Not recommended as the primary strategy. If pursued, this approach would need to be coordinated closely with the MDLA negotiation team and would require careful drafting to ensure that the renewal provisions are structured in a manner that supports the argument for excluding renewal periods from the aggregate value calculation.
C. Alternative 3: Reclassification as a Services Agreement
Description. Under this approach, Quorum would argue that the MDLA is not a "license" of "Intellectual Property" but rather a data-services or data-access agreement — essentially characterizing the arrangement as the purchase of services rather than the licensing of intellectual property.
Analysis. This argument is weak and we do not recommend pursuing it. The following factors undermine the reclassification theory:
(i) The agreement is expressly titled a "Master Data License Agreement." While the title of an agreement is not dispositive of its legal character, it is indicative of the parties' intent and understanding of the nature of the arrangement. An agreement that is titled and structured as a license will be difficult to credibly recharacterize as a services agreement.
(ii) The MDLA involves licensed access to three proprietary, branded data products — MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™. Each of these products is a proprietary database compilation that is the subject of trademark protection (as evidenced by the trademark designations) and that likely qualifies as a trade secret or protectable database compilation under applicable law. The grant of access to and use rights in such proprietary data assets is the hallmark of an intellectual property license, not a services arrangement.
(iii) The MDLA grants Quorum defined use rights with respect to the licensed data, including the right to ingest the data into Quorum's proprietary systems, to use the data in underwriting and claims processes, and to generate derivative analytical outputs. These are licensing characteristics — the grant of specific rights to use the licensor's intellectual property — rather than service-delivery characteristics.
(iv) The Credit Agreement's definition of "Intellectual Property" is broad and includes "similar rights and interests." Even if a data-access arrangement could theoretically be distinguished from a traditional patent or trademark license, the breadth of the IP definition and the catch-all "similar arrangement" language in Section 7.12(b) would likely capture the MDLA regardless of how it is characterized.
(v) Perhaps most importantly, a reclassification argument would be viewed by Standish and the Lenders as an aggressive and potentially bad-faith interpretation of the covenant. The purpose of Section 7.12(b) is to ensure that the Lenders have visibility into and approval rights over significant IP-related commitments. An attempt to evade this purpose through semantic reclassification would damage the banking relationship and could expose Quorum to allegations of covenant manipulation.
Recommendation. Not recommended. This approach lacks legal merit and would be viewed as aggressive interpretation that could expose Quorum to claims of bad faith.
D. Alternative 4: Amendment to Section 7.12(b)
Description. Rather than seeking a one-time consent for the MDLA, Quorum could seek a formal amendment to the Credit Agreement that raises the $25,000,000 threshold in Section 7.12(b) to a higher level (e.g., $75,000,000 or $100,000,000) or that creates a specific carve-out for data-licensing arrangements of the type contemplated by the MDLA.
Analysis. A credit agreement amendment is a viable approach but is more cumbersome and time-consuming than a one-time consent waiver. Key considerations include:
(i) Approval requirements. Amendment of negative covenants typically requires the consent of the Required Lenders, though certain amendments to fundamental provisions may require the consent of all Lenders depending on the amendment and waiver provisions of the Credit Agreement. A formal amendment may therefore involve a higher approval threshold than a one-time consent or waiver.
(ii) Negotiation complexity. A formal amendment opens the door to broader renegotiation of Credit Agreement terms. Lenders may use the amendment process as an opportunity to seek modifications to other provisions (e.g., tightening of financial covenants, adjustment of pricing or commitment fees), creating additional complexity and delay.
(iii) Fees and expenses. Credit agreement amendments typically require payment of amendment fees to consenting Lenders, as well as reimbursement of the Administrative Agent's legal fees and expenses. These costs can be significant, depending on the size of the syndicate and the complexity of the amendment.
(iv) Timeline. A formal amendment process, including drafting, circulation, negotiation, and execution, typically takes four to eight weeks or longer, depending on the number of Lenders in the syndicate and the complexity of the proposed changes. This timeline may be longer than is necessary for the MDLA, particularly if a one-time consent can be obtained more expeditiously.
(v) Future benefits. On the positive side, an amendment that raises the Section 7.12(b) threshold would provide Quorum with additional headroom for future IP-related transactions without requiring additional lender consents. If Quorum anticipates entering into additional large-scale data-licensing, technology-licensing, or IP-related transactions in the near term, an amendment could provide lasting strategic value.
Recommendation. A formal amendment is worth considering as a secondary or parallel objective, particularly if Quorum anticipates additional large IP-related transactions. However, it should not be pursued as the primary strategy for the MDLA, as the one-time consent process is likely to be faster, simpler, and less costly. If an amendment is desired, it could be pursued on a parallel track while the one-time consent for the MDLA proceeds.
E. Overall Recommendation
Based on our analysis of the foregoing alternatives, we recommend that direct lender consent/waiver is the most prudent, straightforward, and efficient path for addressing the Section 7.12(b) issue in connection with the MDLA. The alternatives either fail to provide a legally clean solution (reclassification, subsidiary split), create unnecessary commercial complications with Meridian (phased commitment), or involve greater time and expense than a one-time consent (amendment). We note that the underlying MDLA transaction is commercially sound, strategically compelling, and financially modest relative to Quorum's overall balance sheet, all of which factors support the expectation that lender consent will be obtained without significant difficulty.
To the extent Quorum wishes to pursue a credit agreement amendment as a longer-term strategic objective, this can be done on a parallel track and need not delay the initiation of the consent process for the MDLA.
V. Lender Consent Process
A. Required Steps
The process for obtaining the required lender consent under Section 7.12(b) involves the following steps:
1. Prepare and submit a formal consent request letter. Calderwood & Harkness will prepare, and Quorum will submit, a formal consent request letter addressed to Standish National Bank, N.A. (Attention: Philip Yardley, Relationship Manager), requesting the prior written consent of the Required Lenders under Section 7.12(b) of the Credit Agreement for Quorum to enter into the MDLA with Meridian. The consent request letter will identify the specific covenant provision at issue, describe the proposed transaction, and request that Standish solicit the consent of the Required Lenders on Quorum's behalf.
2. Include supporting documentation. The consent request letter will be accompanied by a description of the MDLA transaction, including the deal value, term, data products to be licensed, business purpose and strategic rationale, and any additional supporting materials that may be requested by Standish or the Lenders. The level of detail and the specific supporting materials to be provided will be determined in consultation with Quorum and may be refined based on preliminary discussions with Philip Yardley regarding Standish's expectations.
3. Administrative Agent circulates request. Upon receipt of the consent request, Standish, acting in its capacity as Administrative Agent, will circulate the request to the Lenders and solicit their votes on the requested consent. The consent request will specify a deadline for Lender responses and will typically provide that any Lender that does not respond within the specified period will be deemed to have consented (or not consented, depending on the terms of the Credit Agreement's consent solicitation procedures).
4. Written consent/waiver delivered. Upon receipt of consents from Lenders constituting the Required Lenders (i.e., Lenders holding the requisite percentage of total revolving commitments), Standish will execute and deliver to Quorum a written consent and waiver confirming that the Required Lenders have consented to Quorum's entry into the MDLA and waiving any Event of Default that would otherwise arise under Section 7.12(b) as a result thereof.
B. Information Likely Requested by Lenders
Based on our experience with lender consent processes in comparable transactions, we anticipate that Standish and the Lenders will request some or all of the following information in connection with their evaluation of the consent request:
• A clear and concise summary of the MDLA transaction terms, including the identity of the counterparty (Meridian), the total deal value ($60,000,000), the payment structure, the term and renewal provisions, and the principal data products to be licensed.
• A description of the business rationale and strategic importance of the data license to Quorum's operations, including how the licensed data will be used to enhance underwriting, fraud detection, and customer analytics capabilities.
• Confirmation of Quorum's ability to fund the $60,000,000 aggregate license fee commitment (plus the $1,500,000 one-time implementation fee) without materially impacting the Company's liquidity position, revolving credit availability under the Credit Agreement, or compliance with financial maintenance covenants.
• A summary of Quorum's current financial condition, including the most recent quarterly financial statements, and confirmation of ongoing compliance with all other covenants under the Credit Agreement.
• A copy of the MDLA, or a near-final draft thereof, once available. If a final or near-final draft is not yet available at the time the consent request is submitted, a term sheet or summary of the principal commercial terms may suffice for the initial consent solicitation, with the full agreement to follow when available.
• An assessment of intellectual property risk, including whether the MDLA creates any encumbrances, licenses, or restrictions on Quorum's own intellectual property or on any intellectual property that is pledged as collateral under the Credit Agreement or related security documents.
We recommend that Quorum's finance team and legal department begin assembling the supporting materials described above so that the consent request package is ready for submission promptly upon finalization of the consent request letter.
C. Timeline Considerations
Lender consent processes of this nature typically require two to six weeks from the date of formal submission, depending on several factors including the complexity of the underlying transaction, the size and composition of the lender syndicate, the responsiveness of individual lenders, and whether any lender raises substantive objections or requests additional information.
In the present case, we believe the consent process is likely to proceed efficiently for several reasons. The underlying transaction is straightforward — a data-licensing arrangement in the ordinary course of Quorum's insurance business — and the financial impact on Quorum is modest relative to the Company's overall size and financial strength. The Section 7.12(b) covenant is clear in its application, and the consent request does not raise novel or complex legal issues. Moreover, Quorum's relationship with Standish appears to be in good standing, which should facilitate a cooperative and constructive consent process.
Given that the MDLA negotiations are ongoing and currently focused on resolving the MFN pricing and derived-data intellectual property ownership impasse, there is flexibility on timing. However, we recommend initiating the consent request process well in advance of MDLA finalization to avoid the consent becoming a bottleneck to closing. Specifically, there is no reason to wait for fully executed or near-final MDLA terms before submitting the consent request, given that the magnitude of the excess over the $25,000,000 threshold ($35,000,000 excess, representing 240% of the threshold) makes it clear that the covenant is triggered regardless of how the remaining open terms are resolved.
The consent should be structured as a condition precedent to the effectiveness of the MDLA, such that Quorum's obligations under the MDLA do not become effective until the lender consent has been obtained and delivered. This approach protects Quorum from the risk of entering into a binding commitment before the required consent is in hand.
Calderwood & Harkness is currently preparing two companion documents in connection with the consent process:
• Draft Lender Consent Request Letter — Quorum Insurance Holdings Corp. to Standish National Bank, N.A. (the formal letter requesting consent under Section 7.12(b)).
• Draft Lender Consent/Waiver — Standish National Bank, N.A. re: Section 7.12(b) (the proposed form of written consent and waiver to be executed by Standish on behalf of the Required Lenders).
These companion documents are being prepared on a parallel track and will be circulated to Quorum for review in due course.
D. Coordination with MDLA Closing
Effective coordination between the lender consent process and the MDLA negotiation and closing process is essential to ensuring a smooth and efficient transaction execution. We recommend the following coordination steps:
Condition Precedent. The MDLA should include the Standish lender consent as a condition precedent to Quorum's obligations becoming effective. Specifically, the MDLA should provide that the agreement shall not become effective, and Quorum shall have no obligation to make any payments thereunder, until such time as Quorum has received the written consent of the Required Lenders under Section 7.12(b) of the Credit Agreement. This condition precedent protects Quorum from the risk of a binding commitment arising before the consent is obtained and should be a standard provision in the MDLA.
Disclosure to Meridian's Counsel. Meridian's outside counsel, Kessler Pruitt & Ashe LLP (Graham Whitley, lead partner), should be informed at an appropriate time that the lender consent is required so that Meridian can plan accordingly with respect to the MDLA closing timeline. We recommend disclosing the consent requirement in general terms — i.e., that Quorum's credit facility documentation requires lender consent for IP-related arrangements above a specified threshold, and that such consent is being sought — without disclosing the specific terms of the Credit Agreement or the identity of the lender syndicate to the extent Quorum prefers to maintain confidentiality regarding those details.
Closing Checklist. The closing checklist for the MDLA transaction should include the lender consent as a required deliverable item, alongside other closing conditions such as board authorization, officer's certificates, legal opinions, and executed counterpart signature pages. Leonard Cross (C&H Corporate lead) and Wendy Schultz (C&H IP lead) should be advised of the consent requirement so that it is properly tracked and managed within the overall MDLA closing process.
VI. Additional Considerations
A. Collateral and Security Interest Implications
We recommend that Quorum's legal team review the Credit Agreement and any related security or collateral documents to determine whether Quorum's obligations under the Credit Agreement are secured by a pledge of or security interest in Quorum's intellectual property assets. If the Credit Agreement or related security documents grant Standish and the Lenders a security interest in Quorum's IP — as is common in secured credit facilities — several additional considerations arise in connection with the MDLA.
First, the derived data and analytical outputs generated by Quorum using Meridian's licensed data as an input may constitute "after-acquired property" subject to the Lenders' security interest, depending on the scope of the security interest grant and the characterization of the derived data under applicable law. This is particularly relevant given the ongoing dispute between Quorum and Meridian regarding the ownership of derived data under Article VII of the MDLA. If Quorum successfully negotiates ownership of Derived Data — including outputs of the QuorumScore™ predictive model generated using Meridian data inputs — such intellectual property may automatically become subject to the Standish lien upon creation. Quorum should understand this implication before finalizing its negotiating position on derived-data ownership.
Second, the MDLA may contain provisions that purport to restrict Quorum's ability to encumber, assign, or sublicense the licensed data or derived data outputs. If the Lenders' security interest extends to Quorum's rights under the MDLA (including license rights and derived data), there may be a conflict between the MDLA's restrictions and the Lenders' rights under the security documents. This potential conflict should be identified and addressed in the MDLA drafting process.
We recommend coordinating with Wendy Schultz, who is leading the IP aspects of the MDLA negotiation at Calderwood & Harkness, on the interaction between the derived-data ownership positions being negotiated with Meridian and the scope and implications of the Lenders' security interest in Quorum's intellectual property assets.
B. Financial Covenant Impact
We recommend confirming that the MDLA payment obligations — $10,800,000 in Year 1 and $12,300,000 per year in Years 2 through 5 — do not cause Quorum to breach any financial maintenance covenants under the Credit Agreement. Financial maintenance covenants in credit agreements of this type typically include a maximum leverage ratio (total debt to EBITDA), a minimum interest coverage ratio (EBITDA to interest expense), and potentially a minimum net worth or tangible net worth test.
Given Quorum's substantial financial profile — FY 2023 revenue of $4,180,000,000, net income of $312,000,000, and total assets of $27,600,000,000 — the annual MDLA fees are quite modest relative to the Company's overall financial position. The Year 1 fee of $10,800,000 represents approximately 0.26% of FY 2023 revenue and approximately 3.5% of FY 2023 net income. The Years 2–5 fee of $12,300,000 per year represents approximately 0.29% of FY 2023 revenue and approximately 3.9% of FY 2023 net income. At these levels, it would be highly unusual for the MDLA fees to cause a breach of any financial maintenance covenant.
Notwithstanding the apparent immateriality of the MDLA fees relative to Quorum's financial profile, we recommend that Quorum's internal finance team run the applicable covenant compliance calculations incorporating the MDLA payment obligations and confirm that no covenant breach would result. This analysis should also take into account any other pending or anticipated expenditures that, in combination with the MDLA fees, could affect covenant compliance. We further recommend consulting with Felton Thorpe & Co. LLP, Quorum's external auditor, regarding the appropriate accounting treatment of the MDLA fees (e.g., whether they are treated as operating expenses, capitalized as intangible assets, or accounted for under any applicable lease or subscription accounting guidance) and the impact of such treatment on the financial metrics used in covenant calculations.
C. Negative Pledge and Anti-Assignment Provisions
We recommend reviewing the Credit Agreement to determine whether it contains negative pledge or anti-assignment provisions that could restrict Quorum's ability to assign, sublicense, or otherwise transfer its rights under the MDLA to third parties. Such restrictions could be relevant in several scenarios:
• If Quorum seeks to sublicense derived data outputs or analytical products generated using Meridian's licensed data to third-party customers, affiliates, or business partners.
• If Quorum undergoes a change-of-control transaction (merger, acquisition, or sale of all or substantially all assets) in which the MDLA rights would need to be transferred to or assumed by the successor entity.
• If Quorum seeks to contribute or transfer the MDLA to a subsidiary or affiliate as part of a corporate reorganization or operational restructuring.
These issues should be noted for future reference and should be considered in the context of the MDLA's own assignment and change-of-control provisions, which are currently under negotiation with Meridian's counsel.
D. Interaction with Quorum Board Authorization
Separately from the lender consent requirement, Quorum's board of directors will need to authorize the Company's entry into the MDLA. Harrison Kimble, Chairman of the Board of Quorum Insurance Holdings Corp., should be apprised of the MDLA transaction and the lender consent process. Board authorization will typically be evidenced by a board resolution approving the transaction and authorizing one or more officers to execute and deliver the MDLA and related documents on behalf of the Company. An officer's certificate certifying the board resolution, the incumbency of signing officers, and the Company's good standing will typically be required as a closing deliverable.
Board resolutions and officer's certificates for the MDLA are being prepared as separate workstreams at Calderwood & Harkness. To the extent practicable, we recommend that the lender consent be obtained before or contemporaneously with board authorization, so that the board can act with full knowledge that the lender consent requirement has been (or will imminently be) satisfied. This sequencing reduces the risk of a scenario in which the board authorizes the transaction but the lender consent is unexpectedly delayed or withheld, creating uncertainty regarding Quorum's ability to proceed.
VII. Recommendations and Next Steps
Based on our analysis, we recommend the following actions and next steps:
1. Initiate the consent request promptly. Quorum should begin the lender consent process with Standish National Bank, N.A. by submitting the formal consent request letter at the earliest practicable date. There is no need to wait for final or near-final MDLA terms before initiating the consent process, given that the magnitude of the excess over the Section 7.12(b) threshold — $35,000,000, or 240% of the threshold — makes it clear that the covenant is triggered irrespective of how the remaining open commercial terms are resolved. Early initiation of the consent process provides the maximum available runway for obtaining consent and avoids the risk of the consent becoming a closing bottleneck.
2. Pursue direct consent/waiver as the primary path. For the reasons set forth in Part IV above, structuring alternatives (subsidiary splitting, phased commitment, reclassification) are not recommended as the primary strategy for addressing the Section 7.12(b) issue. Direct lender consent is the most prudent, efficient, and legally defensible approach and should be pursued as the primary path.
3. Consider a credit agreement amendment as a secondary objective. If Quorum anticipates entering into additional large-scale intellectual property, data-licensing, or technology-licensing transactions in the near term, the Company should explore raising the Section 7.12(b) threshold as part of a broader credit agreement amendment. This could be pursued on a parallel track with the one-time consent process and should not be permitted to delay the MDLA consent timeline.
4. Coordinate with the MDLA negotiation team. Leonard Cross (C&H Corporate lead) and Wendy Schultz (C&H IP lead) should be informed of the lender consent requirement and its implications for MDLA drafting. Specifically, the MDLA should include the lender consent as a condition precedent to the effectiveness of Quorum's obligations, and the closing checklist should include the lender consent as a required deliverable item.
5. Communicate with Meridian's counsel. At an appropriate time, Quorum should disclose the lender consent requirement to Meridian's counsel, Kessler Pruitt & Ashe LLP (Graham Whitley), so that Meridian can plan accordingly with respect to the MDLA closing timeline and is not surprised by a consent-related delay at or near closing.
6. Review collateral and security interest provisions. Quorum's legal team, with the assistance of Calderwood & Harkness, should review the Credit Agreement and related security documents to confirm the scope of the Lenders' security interest in Quorum's intellectual property and assess the implications for the derived-data ownership negotiations currently underway with Meridian.
7. Confirm financial covenant compliance. Quorum's finance team should confirm that the MDLA payment obligations ($10,800,000 in Year 1, $12,300,000 per year in Years 2–5, plus the $1,500,000 one-time implementation fee) will not cause Quorum to breach any financial maintenance covenants under the Credit Agreement. This confirmation should be coordinated with Felton Thorpe & Co. LLP (external auditor) as appropriate.
8. Timeline target. We recommend aiming to submit the consent request to Standish by late November 2022, with the objective of obtaining the Required Lenders' consent within the first quarter of 2023. This timeline would position the lender consent well in advance of the anticipated MDLA execution date, which remains subject to the resolution of the MFN pricing and derived-data intellectual property ownership issues currently under negotiation between the parties.
We are available to discuss this memorandum and the recommended next steps at your convenience. Please do not hesitate to contact Marcus Weill (212-558-4000; m.weill@calderwoodharkness.com) or Nathaniel Bower (212-558-4200; n.bower@calderwoodharkness.com) with any questions or to arrange a call.
VIII. Appendices (Referenced)
The following appendices are referenced in this memorandum and are being assembled as companion materials:
Appendix A — Relevant Extracts from the Amended and Restated Credit Agreement dated June 15, 2021. This appendix will include the full text of Section 7.12(b), the definitions of "Intellectual Property," "Required Lenders," "Borrower," "Event of Default," and related provisions, as well as any anti-evasion, amendment, and consent solicitation provisions relevant to the analysis set forth in this memorandum.
Appendix B — Summary of MDLA Key Commercial Terms. This appendix will include a summary of the principal commercial terms of the proposed Master Data License Agreement, including the aggregate deal value, annual and quarterly payment schedule, description of data products to be licensed, term and renewal provisions, overage charges, and implementation fee.
Appendix C — Quorum Financial Summary. This appendix will include a summary of Quorum's key financial metrics for the most recent fiscal year, including FY 2023 revenue, net income, total assets, market capitalization, and any other financial data relevant to the lender consent process and financial covenant compliance analysis.
This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. This memorandum does not constitute a legal opinion and is subject to revision based on further review of the Credit Agreement and M

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