1025-00008 · Quorum Insurance Holdings · Engagement & Administration

billing-partner-status-report-q1-2023.docx DOCUMENT M&A / Corporate

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP 425 Park Avenue New York, New York 10022 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

April 14, 2023

C&H Matter No. 1025-00008

MEMORANDUM

TO: Gregory Stahl, Vice President, Legal Affairs, Quorum Insurance Holdings Corp.

CC: Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp.

FROM: Nathaniel Bower, Partner, Calderwood & Harkness LLP (Billing Partner)

RE: Quarterly Status Report — Q1 2023 (January 1 – March 31, 2023) — Data License Negotiation with Meridian Credit intelligence, Inc.

Matter No.: 1025-00008

I. Executive Summary

This memorandum provides a comprehensive summary of work performed by Calderwood & Harkness LLP ("C&H") during the first quarter of 2023 (January 1 through March 31, 2023) in connection with the ongoing negotiation of a Master Data License Agreement ("MDLA") between Quorum Insurance Holdings Corp. ("Quorum") and Meridian Credit intelligence, Inc. ("Meridian"). This report is submitted in accordance with the quarterly reporting obligations established in the engagement letter dated August 8, 2022.

The first quarter of 2023 represented a period of significant activity across multiple workstreams. Key milestones and developments during the quarter included:

• In-Person Negotiation Sessions. C&H prepared for, attended, and conducted follow-up work in connection with two in-person negotiation sessions with Meridian and its outside counsel, Kessler Pruitt & Ashe LLP ("KP&A"): the first held in New York on January 18, 2023, and the second held in Atlanta on March 9, 2023.

• MDLA Drafting. C&H completed preparation of the second draft redline of the MDLA (marking up Meridian's counter-redline received following the January session), including the development of Quorum's proposed Article VII (Derived-Data Rights) and a standalone Most Favored Nation ("MFN") Clause rider.

• Data Security and Privacy. The Data Security Addendum ("DSA") and related regulatory work advanced substantially, including finalization and delivery of the initial DSA draft, preparation of an Incident Response & Breach Notification Obligations memorandum, completion of a FCRA Permissible Purpose Certification draft schedule, and drafting of a Data Processing Agreement ("DPA") for CCPA/CPRA compliance.

• Service Level Agreement and Technical Schedules. C&H prepared the initial draft SLA schedule and Technical Schedule A (Data Delivery Specifications), and communicated technical schedule comments to counterparty counsel.

• Pinnacle Ridge Pricing Benchmark Study. C&H received and analyzed the pricing benchmark study delivered by Pinnacle Ridge Advisory LLC on February 14, 2023, which forms a key evidentiary basis for Quorum's MFN negotiating position.

• Lender Covenant Compliance. C&H continued its follow-up on the lender consent request to Standish National Bank, N.A. under the Amended and Restated Credit Agreement.

At the conclusion of the January 18 negotiation session, the parties formally identified MFN pricing protection and derived-data rights as the two principal open issues in the MDLA negotiation. These issues remained unresolved through the second negotiation session held on March 9, 2023, in Atlanta, and continue to represent the primary obstacles to reaching agreement on the MDLA.

From a budget perspective, cumulative professional fees through the end of Q1 2023 total $1,219,950.00, which remains within the $1,800,000 soft fee cap established for the negotiation and documentation phase of this engagement. However, the quarterly burn rate has accelerated meaningfully — Q1 2023 fees of $536,135.00 exceeded the Q4 2022 run rate by approximately $117,760 — driven by the complexity of the intellectual property, privacy and regulatory, and lender covenant workstreams running in parallel with the core MDLA negotiation. As discussed in the Revised Budget & Fee Projection Memorandum circulated in March 2023, the soft cap may require discussion with Quorum if the negotiation extends significantly beyond Q2 2023.

It bears noting that the overall pace of the MDLA negotiation has been slower than originally projected at the time of engagement opening on August 8, 2022. This is attributable principally to Meridian's sustained resistance to MFN pricing provisions and to the parties' divergent positions on derived-data commercialization rights. C&H continues to view resolution of these two issues as the critical path to closing the MDLA.

II. Summary of Work Performed — Q1 2023

A. MDLA Negotiation & Drafting

First In-Person Negotiation Session — January 18, 2023 (New York). C&H prepared for and attended the first in-person negotiation session, which was held at C&H's offices at 425 Park Avenue, New York, on January 18, 2023. The session ran approximately seven hours and addressed the full range of open issues in the MDLA. The C&H team attending the session consisted of Leonard Cross (Responsible Partner), Wendy Schultz (Lead Associate), Patricia Heng (Senior Counsel), and Omar Siddiqui (Working Associate). The Quorum delegation included Carolyn Whitford (General Counsel & EVP), Gregory Stahl (VP, Legal Affairs), Rajesh Anand (SVP, Data Strategy), and Thomas Ng (Director, Actuarial Analytics). Meridian was represented by its outside counsel Graham Whitley (Partner) and Nina Chastain (Senior Associate) of Kessler Pruitt & Ashe LLP.

The January 18 session was productive in confirming the overall architecture of the MDLA and in narrowing the scope of certain ancillary disputes. The parties reached partial alignment on several SLA-related terms, including the general framework for data-delivery obligations, and on certain mechanical provisions governing the term, renewal, and termination of the license. However, the session also confirmed that MFN pricing protection and derived-data rights remain the two principal open issues. Meridian's counsel made clear at the session that Meridian views any form of MFN clause as commercially unacceptable, and that Meridian's position on derived-data ownership and license-back is driven by guidance from its majority owner, Breckenridge Capital Partners, and its IPO advisors. C&H provided Quorum with a detailed summary of these positions in the post-session debrief memorandum.

Post-Session Debrief Memorandum — January 23, 2023. C&H prepared and circulated to the Quorum legal team a comprehensive post-session debrief memorandum, dated January 23, 2023, summarizing the positions taken by each party at the January 18 session, identifying areas of alignment, cataloging remaining open issues, and recommending next steps. The memorandum was approximately twenty pages in length and included a revised issues matrix tracking the status of each MDLA provision.

Second Draft Redline of the MDLA. Following the January 18 session, Meridian's counsel at KP&A delivered a counter-redline of the MDLA reflecting Meridian's positions as articulated at the session. C&H commenced preparation of the second draft redline of the MDLA (i.e., C&H's markup of Meridian's counter-redline) in late January 2023 and completed the draft in February 2023. The second draft redline addressed, among other matters, revisions to the license grant provisions, the scope of permitted uses, the term and renewal mechanics, the representations and warranties framework, the indemnification provisions, and the limitation of liability structure. The redline was circulated to the Quorum team for review and comment prior to transmission to KP&A.

Article VII (Derived-Data Rights) and MFN Clause Rider. In January 2023, Wendy Schultz and Omar Siddiqui, with input from Leonard Cross, drafted Quorum's proposed Article VII (Derived-Data Rights) for inclusion in the MDLA. Article VII sets forth Quorum's position that all Derived Data (as defined therein) constitutes the sole and exclusive intellectual property of Quorum, subject to limited informational rights in favor of Meridian, and that Quorum shall have unrestricted rights to commercialize Derived Data to third parties without payment of royalties or revenue sharing to Meridian. Concurrently, Wendy Schultz prepared a standalone MFN Clause rider, structured as a supplement to the pricing schedule of the MDLA, which would require Meridian to offer Quorum the most favorable pricing terms made available to any comparable licensee in the U.S. insurance market. Both drafts were incorporated into the second draft redline of the MDLA.

Second In-Person Negotiation Session — March 9, 2023 (Atlanta). C&H prepared for and attended the second in-person negotiation session, which was held at the offices of Kessler Pruitt & Ashe LLP in Atlanta on March 9, 2023. The session focused principally on the MFN and derived-data rights issues, with ancillary discussion of the Data Security Addendum and SLA. Meridian's team reiterated its categorical opposition to MFN pricing, and for the first time explicitly cited the position of Breckenridge Capital Partners as a key constraint on Meridian's ability to agree to any MFN provision. Meridian's counsel indicated that Breckenridge views the MFN as a potential margin risk that would complicate IPO due diligence and valuation. On derived-data rights, the parties exchanged views on the "sufficient transformation" standard and the scope of any license-back, but were unable to narrow the gap materially.

Post-Session Debrief Memorandum — March 13, 2023. C&H prepared and circulated a post-session debrief memorandum dated March 13, 2023, summarizing the March 9 session and updating the issues matrix. The memorandum recommended that Quorum consider potential fallback positions on MFN and escalation strategies, including the possibility of direct engagement at the C-suite level, if no meaningful progress is achieved at the working level in Q2 2023.

B. Data Security, Privacy & Regulatory

Data Security Addendum (DSA) — Initial Draft. David Cartwright (Partner, Data Privacy & Cybersecurity) and Lisa Johannsen (Associate, Data Privacy & Cybersecurity) finalized and delivered the initial draft of the Data Security Addendum in January 2023. The DSA is structured as a standalone addendum to the MDLA and addresses the following key areas:

• Requirements for Meridian to maintain SOC 2 Type II and ISO 27001 certifications with respect to the systems and infrastructure used to process, store, and transmit Licensed Data;

• A 48-hour breach notification obligation, requiring Meridian to notify Quorum within 48 hours of becoming aware of any Security Incident (as defined in the DSA) affecting Licensed Data or Derived Data;

• Minimum encryption standards, including AES-256 encryption at rest and TLS 1.2 or higher in transit;

• Audit rights, permitting Quorum (or its designated third-party auditor) to conduct annual security audits of Meridian's data-processing environment upon reasonable notice; and

• Data retention and destruction obligations upon termination or expiration of the MDLA.

Incident Response & Breach Notification Obligations Memorandum. In February 2023, David Cartwright prepared a detailed memorandum analyzing the incident response and breach notification obligations applicable to the MDLA transaction. The memorandum addressed, among other matters:

• State-by-state notification requirements across all fifty states and the District of Columbia, with particular focus on the states in which Quorum holds insurance licenses or underwrites policies;

• FCRA-specific breach notification obligations arising from the nature of the Licensed Data as consumer report information;

• The requirements of New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR Part 500, including the 72-hour notification obligation to the Superintendent and the annual certification requirement; and

• Recommendations for contractual provisions that would allocate breach notification responsibilities between Quorum and Meridian and establish cooperation obligations.

FCRA Permissible Purpose Certification. In February 2023, Lisa Johannsen prepared a draft schedule to the MDLA setting forth the FCRA Permissible Purpose Certification framework. The schedule requires Quorum to certify, at the time of execution and on an ongoing basis, that its use of the Licensed Data is for one or more permissible purposes under Section 604 of the Fair Credit Reporting Act, 15 U.S.C. § 1681b. The draft schedule was coordinated with Quorum's internal compliance team to ensure alignment with Quorum's existing FCRA compliance program.

Data Processing Agreement (DPA) — CCPA/CPRA Compliance. Lisa Johannsen commenced drafting the Data Processing Agreement for CCPA/CPRA compliance in February 2023 and completed the draft in March 2023. The DPA addresses the roles and responsibilities of Quorum and Meridian as "businesses" and "service providers" (or "contractors," as applicable) under the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, and the implementing regulations. The DPA includes provisions governing consumer rights requests, data minimization, purpose limitation, sub-processor management, and annual assessments.

DSA Redline Response. In March 2023, David Cartwright and Lisa Johannsen reviewed and responded to the comments submitted by KP&A on the initial draft DSA. The C&H team prepared a redline of the DSA incorporating Quorum's responses to Meridian's markup, with accompanying commentary explaining the rationale for accepting, rejecting, or proposing alternative language with respect to each of KP&A's comments. The redline was completed in March 2023 and transmitted to KP&A.

C. Service Level Agreement & Technical Schedules

Initial Draft SLA Schedule. In January 2023, Patricia Heng (Senior Counsel, Technology Transactions) prepared the initial draft SLA schedule for inclusion as a schedule to the MDLA. The SLA establishes the following key service-level commitments:

• Uptime: 99.9% monthly uptime for all data-delivery systems and API endpoints, measured on a calendar-month basis, excluding scheduled maintenance windows;

• Latency: Maximum latency standards for API responses, tiered by query complexity;

• Service Credits: A structured service credit mechanism providing escalating credits (ranging from 5% to 25% of monthly fees) based on the severity and duration of any failure to meet the uptime or latency commitments;

• Escalation Procedures: A defined escalation matrix with specified response times for Severity 1 through Severity 4 incidents, including executive-level escalation for persistent failures; and

• Reporting: Monthly performance reports to be delivered by Meridian within ten business days following the end of each calendar month.

Technical Schedule A — Data Delivery Specifications. In February 2023, Omar Siddiqui prepared Technical Schedule A (Data Delivery Specifications), with significant input from Priya Nair, Quorum's Director of Data Engineering. Technical Schedule A addresses the following matters:

• Data Formats: Specification of acceptable data formats, including CSV, JSON, and Parquet, with defined schema requirements;

• Refresh Frequencies: Daily batch refresh for standard data feeds and near-real-time streaming for specified high-priority data elements;

• Delivery Methods: SFTP for batch deliveries and REST API for on-demand and streaming access, with defined authentication and security protocols for each method;

• Data-Quality Acceptance Criteria: Defined thresholds for completeness, accuracy, timeliness, and consistency, together with a data-quality dispute resolution mechanism;

• Volume Tiers and Overage Pricing: A base tier of 500 million records per month, with an overage rate of $0.003 per record for volumes exceeding the base tier in any calendar month.

SLA Memorandum. In March 2023, Patricia Heng prepared a memorandum analyzing the adequacy of Meridian's uptime and latency commitments as set forth in Meridian's proposed SLA terms, benchmarking those commitments against industry standards for comparable data-license arrangements and identifying areas where Quorum should seek enhanced protections.

Technical Schedule Comments to KP&A. On March 22, 2023, Omar Siddiqui communicated C&H's and Quorum's comments on the technical schedule provisions to Derek Fontaine at KP&A via email, requesting a response prior to any further negotiation session.

D. IP & Derived-Data Analysis

ML Model Outputs Memorandum. In January 2023, Wendy Schultz and Omar Siddiqui completed a memorandum analyzing the ownership of machine-learning model outputs under copyright law and trade secret law. The memorandum addressed whether the outputs of Quorum's proprietary machine-learning models — including the QuorumScore™ predictive insurance-risk scoring model (for which Quorum has filed a trademark application with the United States Patent and Trademark Office, Application Serial No. 97/482,116) — constitute copyrightable "derivative works" under 17 U.S.C. § 101 when those outputs are generated using Licensed Data obtained from Meridian. The memorandum concluded that, under the prevailing weight of authority, outputs generated through sufficient computational transformation of input data are not "derivative works" of the input data for copyright purposes, but recommended that the MDLA include explicit contractual provisions clarifying the parties' respective ownership rights to mitigate the risk of future disputes.

Coordination with IP Counsel. C&H continued its coordination with Angela Firth at Caldwell & Strauss LLP (100 Pearl Street, Hartford, CT 06103), Quorum's regular outside intellectual property counsel, regarding the implications of the MDLA's derived-data provisions for Quorum's broader QuorumScore™ IP protection strategy. This coordination included sharing (with Quorum's authorization) relevant portions of the ML Model Outputs Memorandum and discussing the interaction between the MDLA's proposed derived-data definitions and Quorum's pending trademark application.

E. Lender Covenant Compliance

Standish National Bank Consent — Continued Follow-Up. Marcus Weill (Associate, Corporate/Commercial) continued his work on the lender consent request to Standish National Bank, N.A. ("Standish"), which serves as administrative agent under the Amended and Restated Credit Agreement dated June 15, 2021, among Quorum, certain of its subsidiaries, Standish, and the lenders party thereto. As previously reported, Section 7.12(b) of the Amended and Restated Credit Agreement requires Quorum to obtain the prior written consent of the Required Lenders before entering into any single contract or commitment with an aggregate value in excess of $25,000,000. The anticipated aggregate value of the MDLA over its initial term is approximately $60,000,000, exceeding the threshold by $35,000,000 and triggering the consent requirement.

Follow-Up Letter to Standish. In February 2023, Marcus Weill prepared and sent a follow-up letter to Philip Yardley, Standish's Relationship Manager for the Quorum account, inquiring about the status of the lender consent request originally submitted by C&H on Quorum's behalf in November 2022. The letter reiterated the key terms of the proposed MDLA transaction, confirmed that the consent request remained outstanding, and requested an update on the timeline for Standish's review.

Status as of Quarter-End. As of March 31, 2023, the lender consent from Standish remains outstanding. In response to the February follow-up letter, Philip Yardley indicated that Standish is reviewing the consent request with its internal credit committee and expects to provide a substantive response in due course. Marcus Weill will continue to follow up on this matter in Q2 2023.

F. Pinnacle Ridge Pricing Benchmark Study

Delivery and Review. Pinnacle Ridge Advisory LLC ("Pinnacle Ridge"), a specialized advisory firm retained by Quorum to provide an independent pricing benchmark analysis, delivered its completed pricing benchmark study on February 14, 2023. The study was prepared under the direction of Franklin Osei, Managing Director of Pinnacle Ridge, and analyzes the pricing terms of comparable credit-data licenses granted to insurance-industry licensees by Meridian and its principal competitors. The study encompasses license agreements entered into over the preceding five-year period and provides a detailed comparison of per-record pricing, volume tiers, annual escalation mechanisms, and ancillary fee structures.

Incorporation into Negotiation Strategy. C&H reviewed the Pinnacle Ridge study in detail during the latter half of February 2023. The study's conclusions — which indicate that Quorum's proposed pricing terms are consistent with or favorable to market benchmarks and that certain Meridian licensees in the insurance sector have obtained materially more favorable pricing — form a key evidentiary basis for Quorum's position that MFN protection is commercially justified and market-consistent. C&H incorporated the study's findings and data points into its negotiation strategy and preparation materials for the March 9, 2023 negotiation session in Atlanta. Specifically, C&H used selected data points from the Pinnacle Ridge study (on an anonymized basis, consistent with the study's confidentiality restrictions) in presenting Quorum's MFN rationale to Meridian's counsel at the March 9 session.

III. Hours Incurred — Q1 2023 (By Timekeeper)

The following table sets forth the professional hours incurred and fees generated by each C&H timekeeper assigned to this matter during Q1 2023 (January 1 through March 31, 2023):

Note: All hours are rounded to the nearest half-hour increment in accordance with C&H's standard timekeeping practices. Fees are subject to standard billing adjustments, including any courtesy or volume-based reductions, in accordance with the terms of the engagement letter dated August 8, 2022.

As reflected in the table above, the largest concentrations of timekeeper effort during Q1 2023 were attributable to Wendy Schultz (148.5 hours), who served as Lead Associate on the MDLA drafting, Article VII development, MFN Clause drafting, and IP/derived-data analysis workstreams, and Omar Siddiqui (122.0 hours), who supported Ms. Schultz on those workstreams and led the preparation of Technical Schedule A. The data privacy and cybersecurity workstream, staffed principally by David Cartwright (54.0 hours) and Lisa Johannsen (86.0 hours), accounted for a combined 140.0 hours, reflecting the complexity of the DSA, DPA, and regulatory analysis work undertaken during the quarter.

IV. Cumulative Fees & Budget Tracking

A. Cumulative Hours and Fees (Engagement Opening through March 31, 2023)

The following table summarizes the cumulative hours and fees incurred from the opening of this engagement on August 8, 2022, through March 31, 2023:

The data reflects a clear upward trajectory in quarterly hours and fees over the life of the engagement, with Q1 2023 representing the highest-activity quarter to date. This acceleration is consistent with the maturation of the negotiation from the initial diligence and first-draft phase (Q3 2022) through the iterative redlining and parallel workstream phase (Q4 2022 and Q1 2023).

B. Budget Position vs. Soft Cap

The engagement letter dated August 8, 2022, established a soft fee cap of $1,800,000 for the negotiation and documentation phase of the MDLA transaction. The current budget position relative to this soft cap is as follows:

• Soft fee cap for negotiation/documentation phase: $1,800,000.00

• Cumulative fees through Q1 2023: $1,219,950.00

• Remaining under soft cap: $580,050.00

• Percentage of soft cap remaining: approximately 32.2%

At the current quarterly burn rate of $536,135.00 (as incurred in Q1 2023), the remaining headroom under the soft cap would be substantially exhausted during Q2 2023 if the same level of activity were to continue. However, it should be noted that Q1 2023 represented a period of particularly high activity, driven by the preparation for and attendance at two in-person negotiation sessions, the concurrent preparation of multiple substantive drafting and analytical workstreams (including the second draft redline, the DSA, the DPA, the SLA, and the IP memoranda), and the review and integration of the Pinnacle Ridge pricing benchmark study. Future quarters may see lower burn rates depending on the cadence of negotiation sessions and the resolution (or narrowing) of open issues.

C&H circulated a Revised Budget & Fee Projection Memorandum in March 2023, which analyzed the budget trajectory in light of the MFN and derived-data impasse and projected that, if extended negotiations are required on these issues — as appears likely based on the March 9 session — the engagement may require fees in excess of the $1,800,000 soft cap. The memorandum recommended that C&H and Quorum discuss the potential need to increase or revise the soft cap if the matter extends significantly beyond Q2 2023. C&H remains committed to managing costs efficiently and will continue to staff the matter at the most cost-effective level consistent with the quality of representation required. Nathaniel Bower requests the opportunity to discuss the budget trajectory and soft cap implications with Gregory Stahl at the Quorum team's earliest convenience; this is discussed further in Section VIII below.

C. Disbursements. Disbursements incurred during Q1 2023 and cumulatively through the end of Q1 2023 are summarized below:

• Travel expenses (New York negotiation session, January 18, 2023; Atlanta negotiation session, March 9, 2023): estimated $18,200 for Q1 2023. Travel expenses include airfare, ground transportation, hotel accommodations, and meals for C&H attorneys attending both sessions, in accordance with C&H's standard travel and expense policies.

• Legal research and database charges (Westmark Data Systems, Sundial Solutions, and specialized database searches): $4,650 for Q1 2023.

• Total Q1 2023 disbursements: approximately $22,850.

• Cumulative disbursements (engagement opening through March 31, 2023): approximately $41,300.

In accordance with the terms of the engagement letter, all disbursements are outside the scope of the soft fee cap and are billed separately on a pass-through basis at cost.

V. Invoicing and Payment Status

Invoicing for this matter is conducted on a monthly basis, Net 30, in accordance with the terms established in the engagement letter dated August 8, 2022.

As of the date of this memorandum, all invoices through February 2023 have been received and paid in full by Quorum. C&H appreciates Quorum's consistent and timely attention to invoice processing.

The invoice for March 2023 is currently in preparation and is expected to be delivered to Quorum no later than April 20, 2023. The March 2023 invoice will reflect the professional fees and disbursements incurred during the month of March 2023, including, among other items, the work performed in connection with the March 9 negotiation session, the DSA redline, the DPA, the SLA memorandum, and the ongoing lender consent follow-up.

The designated billing contact for this matter remains:

Gregory Stahl Vice President, Legal Affairs Quorum Insurance Holdings Corp. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901

C&H will continue to direct all invoices and billing-related correspondence to Mr. Stahl unless otherwise instructed by Quorum.

VI. Key Open Issues and Anticipated Q2 2023 Activity

A. MFN Pricing

The MFN pricing clause remains the most contentious open issue in the MDLA negotiation. Meridian has maintained categorical opposition to any form of most favored nation pricing clause throughout the negotiation, and the March 9, 2023 session in Atlanta confirmed that this opposition is deeply entrenched and driven by considerations beyond Meridian's operating management.

Specifically, at the March 9 session, Meridian's counsel disclosed for the first time that Breckenridge Capital Partners — which holds an approximately 62.5% ownership interest in Meridian — has taken the position that any MFN clause in a material data-license agreement would represent a margin risk and could complicate due diligence in connection with Meridian's planned initial public offering. We understand from statements made at the session that Caleb Rourke and Elaine Drummond, who advise the Meridian board of directors on behalf of Breckenridge, have been directly involved in formulating Meridian's position on MFN. Additionally, Whitmore Zanthor & Co. — Meridian's investment banking advisor for the planned 2025–2026 IPO — has weighed in on this issue. Rachel Ng-Castillo, Managing Director at Whitmore Zanthor, has reportedly advised the Meridian board that MFN commitments in customer contracts could be perceived negatively by prospective investors and could adversely affect Meridian's valuation in an IPO context.

Notwithstanding this opposition, C&H continues to believe that MFN protection is commercially justified and supportable based on market data. The Pinnacle Ridge Advisory LLC pricing benchmark study delivered in February 2023 provides strong evidentiary support for the proposition that comparable insurance-industry licensees have obtained more favorable pricing from Meridian and its competitors.

C&H is developing potential fallback positions in the event that a traditional MFN clause proves unachievable, including a limited annual pricing audit right that would permit Quorum, through an independent third-party auditor, to verify on an annual basis that the pricing terms in the MDLA are no less favorable than those offered by Meridian to comparable licensees. This concept would provide Quorum with meaningful transparency and pricing protection while potentially addressing certain of Meridian's and Breckenridge's concerns regarding the breadth and rigidity of a traditional MFN.

For clarity, Quorum's proposed MFN scope covers all U.S.-domiciled insurance carriers, managing general agents (MGAs), and insurtech firms with annual premiums written of $500 million or greater. This scope was designed to capture the relevant competitive set while excluding small or non-comparable licensees.

B. Derived-Data Rights

The parties remain far apart on the derived-data rights provisions of the MDLA. The key areas of disagreement include:

• IP Ownership. Quorum's position is that all Derived Data — defined to include any data, scores, models, analytics, or other outputs generated by Quorum through the processing, analysis, or transformation of Licensed Data, whether alone or in combination with other data — is and shall remain the sole and exclusive intellectual property of Quorum. Meridian contends that it retains a residual ownership interest in any Derived Data that incorporates or is generated from Licensed Data.

• License-Back. Meridian has demanded a perpetual, royalty-free license-back to all Derived Data, including the right to use, reproduce, and distribute Derived Data for Meridian's own commercial purposes. Quorum's position is that any license-back, if granted at all, should be limited to internal analytical and benchmarking purposes and should not extend to commercial redistribution.

• "Sufficient Transformation" Standard. Meridian has proposed a "sufficient transformation" test to determine whether data generated by Quorum qualifies as Derived Data (and thus falls within Quorum's ownership) or remains Licensed Data (and thus falls within Meridian's ownership). Critically, Meridian insists that the determination of whether "sufficient transformation" has occurred should be within Meridian's sole discretion. Quorum views this as commercially and legally unacceptable, as it would give Meridian effective veto power over Quorum's IP ownership claims.

• Revenue Sharing for Third-Party Commercialization. Meridian has demanded a 15% revenue share on net revenues from Quorum's third-party commercialization of Derived Data. Given Quorum's projected revenue from QuorumScore™ — which the current business plan projects at $40–50 million in annual B2B licensing revenue by 2027 — a 15% revenue share would represent a significant and, in Quorum's view, commercially unjustified cost.

In Q2 2023, Wendy Schultz will prepare two analytical deliverables intended to strengthen Quorum's negotiating position on derived-data rights:

1. Critique of Meridian's "Sufficient Transformation" Standard. This memorandum will analyze the legal and practical deficiencies of a "sole discretion" approach to the sufficient transformation determination, including the lack of objective criteria, the potential for arbitrary application, and the inconsistency with market practice in comparable data-license transactions.

2. Market Survey of License-Back Provisions. This memorandum will survey license-back provisions in comparable data-license agreements across the financial services, insurance, and data-analytics sectors, with a focus on the scope, duration, and commercialization restrictions typically included in such provisions.

Additionally, C&H plans to prepare a QuorumScore™ IP Protection Strategy Memorandum in Q2 2023, to be coordinated with Angela Firth at Caldwell & Strauss LLP, analyzing the implications of the MDLA's derived-data provisions for Quorum's broader intellectual property portfolio and the pending USPTO trademark application (Serial No. 97/482,116).

C. Dispute Resolution

The dispute resolution provisions of the MDLA remain an open issue. The parties' respective positions are as follows:

• Quorum's Position: Exclusive jurisdiction in the United States District Court for the Southern District of New York or, for disputes not within federal subject-matter jurisdiction, the Commercial Division of the Supreme Court of the State of New York, New York County. Quorum's preference for litigation reflects its view that the complex IP, regulatory, and contract issues presented by the MDLA are best resolved through the courts, with the benefit of appellate review, and that New York's well-developed commercial law jurisprudence provides a favorable and predictable framework.

• Meridian's Position: Binding arbitration under the American Arbitration Association ("AAA") Commercial Arbitration Rules, with a three-arbitrator panel, seated in New York. Meridian's preference for arbitration appears to be driven by a desire for confidentiality (particularly given the planned IPO) and finality.

C&H will continue to negotiate this issue in Q2 2023 and will explore potential compromise structures, such as litigation with a confidentiality order or expedited arbitration with limited discovery.

D. Standish Lender Consent

As discussed in Section II.E above, the lender consent from Standish National Bank, N.A. under Section 7.12(b) of the Amended and Restated Credit Agreement remains outstanding as of quarter-end. Marcus Weill will continue to follow up with Philip Yardley at Standish on a regular basis during Q2 2023. Depending on the timeline for resolution of the MDLA's substantive terms, the lender consent may become a critical-path item, and C&H will keep the Quorum team apprised of any developments.

E. Anticipated Q2 2023 Workstreams

Based on the current status of the negotiation and the open issues identified above, C&H anticipates the following principal workstreams during Q2 2023 (April 1 through June 30, 2023):

1. Potential C-Suite Escalation on MFN. If no meaningful progress is achieved on the MFN issue at the working level in Q2 2023, C&H recommends that Quorum consider escalating the discussion to the C-suite level — specifically, a direct conversation between Quorum CEO Meg Tierney and Meridian CEO Vince Halstead. C&H can prepare briefing materials and talking points for such a discussion.

2. Completion of IP Specialist Memoranda. As described above, C&H will prepare the critique of Meridian's "sufficient transformation" standard, the market survey of license-back provisions, and the QuorumScore™ IP Protection Strategy Memorandum.

3. SLA Redline Negotiations. Meridian's counter-markup of the SLA schedule is anticipated in April 2023. Upon receipt, C&H will review, analyze, and prepare a response redline in coordination with the Quorum team, including Patricia Heng and Priya Nair.

4. Continued Standish Consent Process. Marcus Weill will continue follow-up with Standish and will escalate as appropriate if the consent timeline begins to conflict with the MDLA execution timeline.

5. Possible Third Negotiation Session. Depending on the progress of redline exchanges and the resolution of open issues, a third in-person negotiation session may be warranted during Q2 2023. C&H will coordinate with KP&A to identify potential dates and locations.

VII. Staffing Update

The current C&H team assigned to this matter remains as set forth in the engagement letter and matter opening memorandum, and consists of the following professionals:

No staffing changes are anticipated for Q2 2023. The current team composition provides the interdisciplinary coverage required for the overlapping IP, privacy, technology, and corporate workstreams involved in this transaction.

C&H's Stamford office (1 Landmark Square, Suite 1800, Stamford, CT 06901) continues to provide logistical support for coordination with Quorum's headquarters at 1200 Atlantic Street, Suite 3400, Stamford, CT 06901, including facilitating document exchanges, scheduling, and in-person meetings as needed.

VIII. Conclusion / Next Steps

C&H will continue to pursue resolution of the MFN pricing and derived-data rights impasses as the highest-priority workstreams in Q2 2023. These two issues represent the principal obstacles to finalizing the MDLA, and meaningful progress on one or both will be essential to maintaining a reasonable timeline for transaction completion. All other workstreams — including the DSA, DPA, SLA, technical schedules, and lender consent — are advancing on track and will continue in parallel.

Nathaniel Bower respectfully requests the opportunity to schedule a call with Gregory Stahl at the earliest mutually convenient time to discuss the budget trajectory and the potential implications for the $1,800,000 soft fee cap if the MDLA negotiation extends beyond Q2 2023. As outlined in Section IV.B above, the current burn rate, if sustained, would exhaust the remaining headroom under the soft cap during Q2 2023. While C&H remains confident that efficient staffing and matter management will continue to deliver value, it is prudent to address the budget framework proactively rather than reactively.

The next quarterly status report will cover Q2 2023 (April 1 through June 30, 2023) and will be delivered in July 2023.

We appreciate the continued confidence that Quorum has placed in Calderwood & Harkness LLP, and we remain committed to achieving a favorable outcome in this important transaction.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Nathaniel Bower Partner Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Direct: (212) 558-4127

Email: nbower@calderwoodharkness.com

Enclosures:

• Detailed Timekeeper Activity Summary (Q1 2023) — available upon request

Note: All work product referenced herein, including but not limited to memoranda, draft agreements, redlines, analyses, and correspondence, is subject to the attorney-client privilege and the work product doctrine. This memorandum and its contents are intended solely for the use of the addressee and copy recipient identified above and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

Timekeeper	Title / Practice Group	Hourly Rate	Q1 2023 Hours	Q1 2023 Fees
Leonard Cross	Partner, Tax (Responsible Partner)	$1,475/hr	42.5	$62,687.50
Nathaniel Bower	Partner, Bankruptcy & Restructuring (Billing Partner)	$1,425/hr	8.0	$11,400.00
Patricia Heng	Senior Counsel, Technology Transactions	$1,175/hr	67.5	$79,312.50
David Cartwright	Partner, Data Privacy & Cybersecurity	$1,350/hr	54.0	$72,900.00
Wendy Schultz	Associate, intellectual Property (Lead Associate)	$895/hr	148.5	$132,907.50
Omar Siddiqui	Associate, intellectual Property (Working Associate)	$725/hr	122.0	$88,450.00
Lisa Johannsen	Associate, Data Privacy & Cybersecurity	$750/hr	86.0	$64,500.00
Marcus Weill	Associate, Corporate/Commercial	$695/hr	34.5	$23,977.50
TOTAL Q1 2023	563.0	$536,135.00
Period	Total Hours	Total Fees
Q3 2022 (August 8 – September 30, 2022)	312.0	$265,440.00
Q4 2022 (October 1 – December 31, 2022)	487.5	$418,375.00
Q1 2023 (January 1 – March 31, 2023)	563.0	$536,135.00
Cumulative Total	1,362.5	$1,219,950.00
Timekeeper	Role	Practice Group
Leonard Cross	Responsible Partner	Tax
Nathaniel Bower	Billing Partner	Bankruptcy & Restructuring
Wendy Schultz	Lead Associate	Intellectual Property
Omar Siddiqui	Working Associate	Intellectual Property
Patricia Heng	Senior Counsel (Subject-Matter Advisor)	Technology Transactions
David Cartwright	Partner (Privacy Regulatory Overlay)	Data Privacy & Cybersecurity
Lisa Johannsen	Associate (Privacy)	Data Privacy & Cybersecurity
Marcus Weill	Associate (Corporate/Commercial)	Corporate/Commercial

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP 425 Park Avenue New York, New York 10022 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
April 14, 2023
C&H Matter No. 1025-00008
MEMORANDUM
TO: Gregory Stahl, Vice President, Legal Affairs, Quorum Insurance Holdings Corp.
CC: Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp.
FROM: Nathaniel Bower, Partner, Calderwood & Harkness LLP (Billing Partner)
RE: Quarterly Status Report — Q1 2023 (January 1 – March 31, 2023) — Data License Negotiation with Meridian Credit intelligence, Inc.
Matter No.: 1025-00008
I. Executive Summary
This memorandum provides a comprehensive summary of work performed by Calderwood & Harkness LLP ("C&H") during the first quarter of 2023 (January 1 through March 31, 2023) in connection with the ongoing negotiation of a Master Data License Agreement ("MDLA") between Quorum Insurance Holdings Corp. ("Quorum") and Meridian Credit intelligence, Inc. ("Meridian"). This report is submitted in accordance with the quarterly reporting obligations established in the engagement letter dated August 8, 2022.
The first quarter of 2023 represented a period of significant activity across multiple workstreams. Key milestones and developments during the quarter included:
• In-Person Negotiation Sessions. C&H prepared for, attended, and conducted follow-up work in connection with two in-person negotiation sessions with Meridian and its outside counsel, Kessler Pruitt & Ashe LLP ("KP&A"): the first held in New York on January 18, 2023, and the second held in Atlanta on March 9, 2023.
• MDLA Drafting. C&H completed preparation of the second draft redline of the MDLA (marking up Meridian's counter-redline received following the January session), including the development of Quorum's proposed Article VII (Derived-Data Rights) and a standalone Most Favored Nation ("MFN") Clause rider.
• Data Security and Privacy. The Data Security Addendum ("DSA") and related regulatory work advanced substantially, including finalization and delivery of the initial DSA draft, preparation of an Incident Response & Breach Notification Obligations memorandum, completion of a FCRA Permissible Purpose Certification draft schedule, and drafting of a Data Processing Agreement ("DPA") for CCPA/CPRA compliance.
• Service Level Agreement and Technical Schedules. C&H prepared the initial draft SLA schedule and Technical Schedule A (Data Delivery Specifications), and communicated technical schedule comments to counterparty counsel.
• Pinnacle Ridge Pricing Benchmark Study. C&H received and analyzed the pricing benchmark study delivered by Pinnacle Ridge Advisory LLC on February 14, 2023, which forms a key evidentiary basis for Quorum's MFN negotiating position.
• Lender Covenant Compliance. C&H continued its follow-up on the lender consent request to Standish National Bank, N.A. under the Amended and Restated Credit Agreement.
At the conclusion of the January 18 negotiation session, the parties formally identified MFN pricing protection and derived-data rights as the two principal open issues in the MDLA negotiation. These issues remained unresolved through the second negotiation session held on March 9, 2023, in Atlanta, and continue to represent the primary obstacles to reaching agreement on the MDLA.
From a budget perspective, cumulative professional fees through the end of Q1 2023 total $1,219,950.00, which remains within the $1,800,000 soft fee cap established for the negotiation and documentation phase of this engagement. However, the quarterly burn rate has accelerated meaningfully — Q1 2023 fees of $536,135.00 exceeded the Q4 2022 run rate by approximately $117,760 — driven by the complexity of the intellectual property, privacy and regulatory, and lender covenant workstreams running in parallel with the core MDLA negotiation. As discussed in the Revised Budget & Fee Projection Memorandum circulated in March 2023, the soft cap may require discussion with Quorum if the negotiation extends significantly beyond Q2 2023.
It bears noting that the overall pace of the MDLA negotiation has been slower than originally projected at the time of engagement opening on August 8, 2022. This is attributable principally to Meridian's sustained resistance to MFN pricing provisions and to the parties' divergent positions on derived-data commercialization rights. C&H continues to view resolution of these two issues as the critical path to closing the MDLA.
II. Summary of Work Performed — Q1 2023
A. MDLA Negotiation & Drafting
First In-Person Negotiation Session — January 18, 2023 (New York). C&H prepared for and attended the first in-person negotiation session, which was held at C&H's offices at 425 Park Avenue, New York, on January 18, 2023. The session ran approximately seven hours and addressed the full range of open issues in the MDLA. The C&H team attending the session consisted of Leonard Cross (Responsible Partner), Wendy Schultz (Lead Associate), Patricia Heng (Senior Counsel), and Omar Siddiqui (Working Associate). The Quorum delegation included Carolyn Whitford (General Counsel & EVP), Gregory Stahl (VP, Legal Affairs), Rajesh Anand (SVP, Data Strategy), and Thomas Ng (Director, Actuarial Analytics). Meridian was represented by its outside counsel Graham Whitley (Partner) and Nina Chastain (Senior Associate) of Kessler Pruitt & Ashe LLP.
The January 18 session was productive in confirming the overall architecture of the MDLA and in narrowing the scope of certain ancillary disputes. The parties reached partial alignment on several SLA-related terms, including the general framework for data-delivery obligations, and on certain mechanical provisions governing the term, renewal, and termination of the license. However, the session also confirmed that MFN pricing protection and derived-data rights remain the two principal open issues. Meridian's counsel made clear at the session that Meridian views any form of MFN clause as commercially unacceptable, and that Meridian's position on derived-data ownership and license-back is driven by guidance from its majority owner, Breckenridge Capital Partners, and its IPO advisors. C&H provided Quorum with a detailed summary of these positions in the post-session debrief memorandum.
Post-Session Debrief Memorandum — January 23, 2023. C&H prepared and circulated to the Quorum legal team a comprehensive post-session debrief memorandum, dated January 23, 2023, summarizing the positions taken by each party at the January 18 session, identifying areas of alignment, cataloging remaining open issues, and recommending next steps. The memorandum was approximately twenty pages in length and included a revised issues matrix tracking the status of each MDLA provision.
Second Draft Redline of the MDLA. Following the January 18 session, Meridian's counsel at KP&A delivered a counter-redline of the MDLA reflecting Meridian's positions as articulated at the session. C&H commenced preparation of the second draft redline of the MDLA (i.e., C&H's markup of Meridian's counter-redline) in late January 2023 and completed the draft in February 2023. The second draft redline addressed, among other matters, revisions to the license grant provisions, the scope of permitted uses, the term and renewal mechanics, the representations and warranties framework, the indemnification provisions, and the limitation of liability structure. The redline was circulated to the Quorum team for review and comment prior to transmission to KP&A.
Article VII (Derived-Data Rights) and MFN Clause Rider. In January 2023, Wendy Schultz and Omar Siddiqui, with input from Leonard Cross, drafted Quorum's proposed Article VII (Derived-Data Rights) for inclusion in the MDLA. Article VII sets forth Quorum's position that all Derived Data (as defined therein) constitutes the sole and exclusive intellectual property of Quorum, subject to limited informational rights in favor of Meridian, and that Quorum shall have unrestricted rights to commercialize Derived Data to third parties without payment of royalties or revenue sharing to Meridian. Concurrently, Wendy Schultz prepared a standalone MFN Clause rider, structured as a supplement to the pricing schedule of the MDLA, which would require Meridian to offer Quorum the most favorable pricing terms made available to any comparable licensee in the U.S. insurance market. Both drafts were incorporated into the second draft redline of the MDLA.
Second In-Person Negotiation Session — March 9, 2023 (Atlanta). C&H prepared for and attended the second in-person negotiation session, which was held at the offices of Kessler Pruitt & Ashe LLP in Atlanta on March 9, 2023. The session focused principally on the MFN and derived-data rights issues, with ancillary discussion of the Data Security Addendum and SLA. Meridian's team reiterated its categorical opposition to MFN pricing, and for the first time explicitly cited the position of Breckenridge Capital Partners as a key constraint on Meridian's ability to agree to any MFN provision. Meridian's counsel indicated that Breckenridge views the MFN as a potential margin risk that would complicate IPO due diligence and valuation. On derived-data rights, the parties exchanged views on the "sufficient transformation" standard and the scope of any license-back, but were unable to narrow the gap materially.
Post-Session Debrief Memorandum — March 13, 2023. C&H prepared and circulated a post-session debrief memorandum dated March 13, 2023, summarizing the March 9 session and updating the issues matrix. The memorandum recommended that Quorum consider potential fallback positions on MFN and escalation strategies, including the possibility of direct engagement at the C-suite level, if no meaningful progress is achieved at the working level in Q2 2023.
B. Data Security, Privacy & Regulatory
Data Security Addendum (DSA) — Initial Draft. David Cartwright (Partner, Data Privacy & Cybersecurity) and Lisa Johannsen (Associate, Data Privacy & Cybersecurity) finalized and delivered the initial draft of the Data Security Addendum in January 2023. The DSA is structured as a standalone addendum to the MDLA and addresses the following key areas:
• Requirements for Meridian to maintain SOC 2 Type II and ISO 27001 certifications with respect to the systems and infrastructure used to process, store, and transmit Licensed Data;
• A 48-hour breach notification obligation, requiring Meridian to notify Quorum within 48 hours of becoming aware of any Security Incident (as defined in the DSA) affecting Licensed Data or Derived Data;
• Minimum encryption standards, including AES-256 encryption at rest and TLS 1.2 or higher in transit;
• Audit rights, permitting Quorum (or its designated third-party auditor) to conduct annual security audits of Meridian's data-processing environment upon reasonable notice; and
• Data retention and destruction obligations upon termination or expiration of the MDLA.
Incident Response & Breach Notification Obligations Memorandum. In February 2023, David Cartwright prepared a detailed memorandum analyzing the incident response and breach notification obligations applicable to the MDLA transaction. The memorandum addressed, among other matters:
• State-by-state notification requirements across all fifty states and the District of Columbia, with particular focus on the states in which Quorum holds insurance licenses or underwrites policies;
• FCRA-specific breach notification obligations arising from the nature of the Licensed Data as consumer report information;
• The requirements of New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR Part 500, including the 72-hour notification obligation to the Superintendent and the annual certification requirement; and
• Recommendations for contractual provisions that would allocate breach notification responsibilities between Quorum and Meridian and establish cooperation obligations.
FCRA Permissible Purpose Certification. In February 2023, Lisa Johannsen prepared a draft schedule to the MDLA setting forth the FCRA Permissible Purpose Certification framework. The schedule requires Quorum to certify, at the time of execution and on an ongoing basis, that its use of the Licensed Data is for one or more permissible purposes under Section 604 of the Fair Credit Reporting Act, 15 U.S.C. § 1681b. The draft schedule was coordinated with Quorum's internal compliance team to ensure alignment with Quorum's existing FCRA compliance program.
Data Processing Agreement (DPA) — CCPA/CPRA Compliance. Lisa Johannsen commenced drafting the Data Processing Agreement for CCPA/CPRA compliance in February 2023 and completed the draft in March 2023. The DPA addresses the roles and responsibilities of Quorum and Meridian as "businesses" and "service providers" (or "contractors," as applicable) under the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, and the implementing regulations. The DPA includes provisions governing consumer rights requests, data minimization, purpose limitation, sub-processor management, and annual assessments.
DSA Redline Response. In March 2023, David Cartwright and Lisa Johannsen reviewed and responded to the comments submitted by KP&A on the initial draft DSA. The C&H team prepared a redline of the DSA incorporating Quorum's responses to Meridian's markup, with accompanying commentary explaining the rationale for accepting, rejecting, or proposing alternative language with respect to each of KP&A's comments. The redline was completed in March 2023 and transmitted to KP&A.
C. Service Level Agreement & Technical Schedules
Initial Draft SLA Schedule. In January 2023, Patricia Heng (Senior Counsel, Technology Transactions) prepared the initial draft SLA schedule for inclusion as a schedule to the MDLA. The SLA establishes the following key service-level commitments:
• Uptime: 99.9% monthly uptime for all data-delivery systems and API endpoints, measured on a calendar-month basis, excluding scheduled maintenance windows;
• Latency: Maximum latency standards for API responses, tiered by query complexity;
• Service Credits: A structured service credit mechanism providing escalating credits (ranging from 5% to 25% of monthly fees) based on the severity and duration of any failure to meet the uptime or latency commitments;
• Escalation Procedures: A defined escalation matrix with specified response times for Severity 1 through Severity 4 incidents, including executive-level escalation for persistent failures; and
• Reporting: Monthly performance reports to be delivered by Meridian within ten business days following the end of each calendar month.
Technical Schedule A — Data Delivery Specifications. In February 2023, Omar Siddiqui prepared Technical Schedule A (Data Delivery Specifications), with significant input from Priya Nair, Quorum's Director of Data Engineering. Technical Schedule A addresses the following matters:
• Data Formats: Specification of acceptable data formats, including CSV, JSON, and Parquet, with defined schema requirements;
• Refresh Frequencies: Daily batch refresh for standard data feeds and near-real-time streaming for specified high-priority data elements;
• Delivery Methods: SFTP for batch deliveries and REST API for on-demand and streaming access, with defined authentication and security protocols for each method;
• Data-Quality Acceptance Criteria: Defined thresholds for completeness, accuracy, timeliness, and consistency, together with a data-quality dispute resolution mechanism;
• Volume Tiers and Overage Pricing: A base tier of 500 million records per month, with an overage rate of $0.003 per record for volumes exceeding the base tier in any calendar month.
SLA Memorandum. In March 2023, Patricia Heng prepared a memorandum analyzing the adequacy of Meridian's uptime and latency commitments as set forth in Meridian's proposed SLA terms, benchmarking those commitments against industry standards for comparable data-license arrangements and identifying areas where Quorum should seek enhanced protections.
Technical Schedule Comments to KP&A. On March 22, 2023, Omar Siddiqui communicated C&H's and Quorum's comments on the technical schedule provisions to Derek Fontaine at KP&A via email, requesting a response prior to any further negotiation session.
D. IP & Derived-Data Analysis
ML Model Outputs Memorandum. In January 2023, Wendy Schultz and Omar Siddiqui completed a memorandum analyzing the ownership of machine-learning model outputs under copyright law and trade secret law. The memorandum addressed whether the outputs of Quorum's proprietary machine-learning models — including the QuorumScore™ predictive insurance-risk scoring model (for which Quorum has filed a trademark application with the United States Patent and Trademark Office, Application Serial No. 97/482,116) — constitute copyrightable "derivative works" under 17 U.S.C. § 101 when those outputs are generated using Licensed Data obtained from Meridian. The memorandum concluded that, under the prevailing weight of authority, outputs generated through sufficient computational transformation of input data are not "derivative works" of the input data for copyright purposes, but recommended that the MDLA include explicit contractual provisions clarifying the parties' respective ownership rights to mitigate the risk of future disputes.
Coordination with IP Counsel. C&H continued its coordination with Angela Firth at Caldwell & Strauss LLP (100 Pearl Street, Hartford, CT 06103), Quorum's regular outside intellectual property counsel, regarding the implications of the MDLA's derived-data provisions for Quorum's broader QuorumScore™ IP protection strategy. This coordination included sharing (with Quorum's authorization) relevant portions of the ML Model Outputs Memorandum and discussing the interaction between the MDLA's proposed derived-data definitions and Quorum's pending trademark application.
E. Lender Covenant Compliance
Standish National Bank Consent — Continued Follow-Up. Marcus Weill (Associate, Corporate/Commercial) continued his work on the lender consent request to Standish National Bank, N.A. ("Standish"), which serves as administrative agent under the Amended and Restated Credit Agreement dated June 15, 2021, among Quorum, certain of its subsidiaries, Standish, and the lenders party thereto. As previously reported, Section 7.12(b) of the Amended and Restated Credit Agreement requires Quorum to obtain the prior written consent of the Required Lenders before entering into any single contract or commitment with an aggregate value in excess of $25,000,000. The anticipated aggregate value of the MDLA over its initial term is approximately $60,000,000, exceeding the threshold by $35,000,000 and triggering the consent requirement.
Follow-Up Letter to Standish. In February 2023, Marcus Weill prepared and sent a follow-up letter to Philip Yardley, Standish's Relationship Manager for the Quorum account, inquiring about the status of the lender consent request originally submitted by C&H on Quorum's behalf in November 2022. The letter reiterated the key terms of the proposed MDLA transaction, confirmed that the consent request remained outstanding, and requested an update on the timeline for Standish's review.
Status as of Quarter-End. As of March 31, 2023, the lender consent from Standish remains outstanding. In response to the February follow-up letter, Philip Yardley indicated that Standish is reviewing the consent request with its internal credit committee and expects to provide a substantive response in due course. Marcus Weill will continue to follow up on this matter in Q2 2023.
F. Pinnacle Ridge Pricing Benchmark Study
Delivery and Review. Pinnacle Ridge Advisory LLC ("Pinnacle Ridge"), a specialized advisory firm retained by Quorum to provide an independent pricing benchmark analysis, delivered its completed pricing benchmark study on February 14, 2023. The study was prepared under the direction of Franklin Osei, Managing Director of Pinnacle Ridge, and analyzes the pricing terms of comparable credit-data licenses granted to insurance-industry licensees by Meridian and its principal competitors. The study encompasses license agreements entered into over the preceding five-year period and provides a detailed comparison of per-record pricing, volume tiers, annual escalation mechanisms, and ancillary fee structures.
Incorporation into Negotiation Strategy. C&H reviewed the Pinnacle Ridge study in detail during the latter half of February 2023. The study's conclusions — which indicate that Quorum's proposed pricing terms are consistent with or favorable to market benchmarks and that certain Meridian licensees in the insurance sector have obtained materially more favorable pricing — form a key evidentiary basis for Quorum's position that MFN protection is commercially justified and market-consistent. C&H incorporated the study's findings and data points into its negotiation strategy and preparation materials for the March 9, 2023 negotiation session in Atlanta. Specifically, C&H used selected data points from the Pinnacle Ridge study (on an anonymized basis, consistent with the study's confidentiality restrictions) in presenting Quorum's MFN rationale to Meridian's counsel at the March 9 session.
III. Hours Incurred — Q1 2023 (By Timekeeper)
The following table sets forth the professional hours incurred and fees generated by each C&H timekeeper assigned to this matter during Q1 2023 (January 1 through March 31, 2023):
Note: All hours are rounded to the nearest half-hour increment in accordance with C&H's standard timekeeping practices. Fees are subject to standard billing adjustments, including any courtesy or volume-based reductions, in accordance with the terms of the engagement letter dated August 8, 2022.
As reflected in the table above, the largest concentrations of timekeeper effort during Q1 2023 were attributable to Wendy Schultz (148.5 hours), who served as Lead Associate on the MDLA drafting, Article VII development, MFN Clause drafting, and IP/derived-data analysis workstreams, and Omar Siddiqui (122.0 hours), who supported Ms. Schultz on those workstreams and led the preparation of Technical Schedule A. The data privacy and cybersecurity workstream, staffed principally by David Cartwright (54.0 hours) and Lisa Johannsen (86.0 hours), accounted for a combined 140.0 hours, reflecting the complexity of the DSA, DPA, and regulatory analysis work undertaken during the quarter.
IV. Cumulative Fees & Budget Tracking
A. Cumulative Hours and Fees (Engagement Opening through March 31, 2023)
The following table summarizes the cumulative hours and fees incurred from the opening of this engagement on August 8, 2022, through March 31, 2023:
The data reflects a clear upward trajectory in quarterly hours and fees over the life of the engagement, with Q1 2023 representing the highest-activity quarter to date. This acceleration is consistent with the maturation of the negotiation from the initial diligence and first-draft phase (Q3 2022) through the iterative redlining and parallel workstream phase (Q4 2022 and Q1 2023).
B. Budget Position vs. Soft Cap
The engagement letter dated August 8, 2022, established a soft fee cap of $1,800,000 for the negotiation and documentation phase of the MDLA transaction. The current budget position relative to this soft cap is as follows:
• Soft fee cap for negotiation/documentation phase: $1,800,000.00
• Cumulative fees through Q1 2023: $1,219,950.00
• Remaining under soft cap: $580,050.00
• Percentage of soft cap remaining: approximately 32.2%
At the current quarterly burn rate of $536,135.00 (as incurred in Q1 2023), the remaining headroom under the soft cap would be substantially exhausted during Q2 2023 if the same level of activity were to continue. However, it should be noted that Q1 2023 represented a period of particularly high activity, driven by the preparation for and attendance at two in-person negotiation sessions, the concurrent preparation of multiple substantive drafting and analytical workstreams (including the second draft redline, the DSA, the DPA, the SLA, and the IP memoranda), and the review and integration of the Pinnacle Ridge pricing benchmark study. Future quarters may see lower burn rates depending on the cadence of negotiation sessions and the resolution (or narrowing) of open issues.
C&H circulated a Revised Budget & Fee Projection Memorandum in March 2023, which analyzed the budget trajectory in light of the MFN and derived-data impasse and projected that, if extended negotiations are required on these issues — as appears likely based on the March 9 session — the engagement may require fees in excess of the $1,800,000 soft cap. The memorandum recommended that C&H and Quorum discuss the potential need to increase or revise the soft cap if the matter extends significantly beyond Q2 2023. C&H remains committed to managing costs efficiently and will continue to staff the matter at the most cost-effective level consistent with the quality of representation required. Nathaniel Bower requests the opportunity to discuss the budget trajectory and soft cap implications with Gregory Stahl at the Quorum team's earliest convenience; this is discussed further in Section VIII below.
C. Disbursements. Disbursements incurred during Q1 2023 and cumulatively through the end of Q1 2023 are summarized below:
• Travel expenses (New York negotiation session, January 18, 2023; Atlanta negotiation session, March 9, 2023): estimated $18,200 for Q1 2023. Travel expenses include airfare, ground transportation, hotel accommodations, and meals for C&H attorneys attending both sessions, in accordance with C&H's standard travel and expense policies.
• Legal research and database charges (Westmark Data Systems, Sundial Solutions, and specialized database searches): $4,650 for Q1 2023.
• Total Q1 2023 disbursements: approximately $22,850.
• Cumulative disbursements (engagement opening through March 31, 2023): approximately $41,300.
In accordance with the terms of the engagement letter, all disbursements are outside the scope of the soft fee cap and are billed separately on a pass-through basis at cost.
V. Invoicing and Payment Status
Invoicing for this matter is conducted on a monthly basis, Net 30, in accordance with the terms established in the engagement letter dated August 8, 2022.
As of the date of this memorandum, all invoices through February 2023 have been received and paid in full by Quorum. C&H appreciates Quorum's consistent and timely attention to invoice processing.
The invoice for March 2023 is currently in preparation and is expected to be delivered to Quorum no later than April 20, 2023. The March 2023 invoice will reflect the professional fees and disbursements incurred during the month of March 2023, including, among other items, the work performed in connection with the March 9 negotiation session, the DSA redline, the DPA, the SLA memorandum, and the ongoing lender consent follow-up.
The designated billing contact for this matter remains:
Gregory Stahl Vice President, Legal Affairs Quorum Insurance Holdings Corp. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901
C&H will continue to direct all invoices and billing-related correspondence to Mr. Stahl unless otherwise instructed by Quorum.
VI. Key Open Issues and Anticipated Q2 2023 Activity
A. MFN Pricing
The MFN pricing clause remains the most contentious open issue in the MDLA negotiation. Meridian has maintained categorical opposition to any form of most favored nation pricing clause throughout the negotiation, and the March 9, 2023 session in Atlanta confirmed that this opposition is deeply entrenched and driven by considerations beyond Meridian's operating management.
Specifically, at the March 9 session, Meridian's counsel disclosed for the first time that Breckenridge Capital Partners — which holds an approximately 62.5% ownership interest in Meridian — has taken the position that any MFN clause in a material data-license agreement would represent a margin risk and could complicate due diligence in connection with Meridian's planned initial public offering. We understand from statements made at the session that Caleb Rourke and Elaine Drummond, who advise the Meridian board of directors on behalf of Breckenridge, have been directly involved in formulating Meridian's position on MFN. Additionally, Whitmore Zanthor & Co. — Meridian's investment banking advisor for the planned 2025–2026 IPO — has weighed in on this issue. Rachel Ng-Castillo, Managing Director at Whitmore Zanthor, has reportedly advised the Meridian board that MFN commitments in customer contracts could be perceived negatively by prospective investors and could adversely affect Meridian's valuation in an IPO context.
Notwithstanding this opposition, C&H continues to believe that MFN protection is commercially justified and supportable based on market data. The Pinnacle Ridge Advisory LLC pricing benchmark study delivered in February 2023 provides strong evidentiary support for the proposition that comparable insurance-industry licensees have obtained more favorable pricing from Meridian and its competitors.
C&H is developing potential fallback positions in the event that a traditional MFN clause proves unachievable, including a limited annual pricing audit right that would permit Quorum, through an independent third-party auditor, to verify on an annual basis that the pricing terms in the MDLA are no less favorable than those offered by Meridian to comparable licensees. This concept would provide Quorum with meaningful transparency and pricing protection while potentially addressing certain of Meridian's and Breckenridge's concerns regarding the breadth and rigidity of a traditional MFN.
For clarity, Quorum's proposed MFN scope covers all U.S.-domiciled insurance carriers, managing general agents (MGAs), and insurtech firms with annual premiums written of $500 million or greater. This scope was designed to capture the relevant competitive set while excluding small or non-comparable licensees.
B. Derived-Data Rights
The parties remain far apart on the derived-data rights provisions of the MDLA. The key areas of disagreement include:
• IP Ownership. Quorum's position is that all Derived Data — defined to include any data, scores, models, analytics, or other outputs generated by Quorum through the processing, analysis, or transformation of Licensed Data, whether alone or in combination with other data — is and shall remain the sole and exclusive intellectual property of Quorum. Meridian contends that it retains a residual ownership interest in any Derived Data that incorporates or is generated from Licensed Data.
• License-Back. Meridian has demanded a perpetual, royalty-free license-back to all Derived Data, including the right to use, reproduce, and distribute Derived Data for Meridian's own commercial purposes. Quorum's position is that any license-back, if granted at all, should be limited to internal analytical and benchmarking purposes and should not extend to commercial redistribution.
• "Sufficient Transformation" Standard. Meridian has proposed a "sufficient transformation" test to determine whether data generated by Quorum qualifies as Derived Data (and thus falls within Quorum's ownership) or remains Licensed Data (and thus falls within Meridian's ownership). Critically, Meridian insists that the determination of whether "sufficient transformation" has occurred should be within Meridian's sole discretion. Quorum views this as commercially and legally unacceptable, as it would give Meridian effective veto power over Quorum's IP ownership claims.
• Revenue Sharing for Third-Party Commercialization. Meridian has demanded a 15% revenue share on net revenues from Quorum's third-party commercialization of Derived Data. Given Quorum's projected revenue from QuorumScore™ — which the current business plan projects at $40–50 million in annual B2B licensing revenue by 2027 — a 15% revenue share would represent a significant and, in Quorum's view, commercially unjustified cost.
In Q2 2023, Wendy Schultz will prepare two analytical deliverables intended to strengthen Quorum's negotiating position on derived-data rights:
1. Critique of Meridian's "Sufficient Transformation" Standard. This memorandum will analyze the legal and practical deficiencies of a "sole discretion" approach to the sufficient transformation determination, including the lack of objective criteria, the potential for arbitrary application, and the inconsistency with market practice in comparable data-license transactions.
2. Market Survey of License-Back Provisions. This memorandum will survey license-back provisions in comparable data-license agreements across the financial services, insurance, and data-analytics sectors, with a focus on the scope, duration, and commercialization restrictions typically included in such provisions.
Additionally, C&H plans to prepare a QuorumScore™ IP Protection Strategy Memorandum in Q2 2023, to be coordinated with Angela Firth at Caldwell & Strauss LLP, analyzing the implications of the MDLA's derived-data provisions for Quorum's broader intellectual property portfolio and the pending USPTO trademark application (Serial No. 97/482,116).
C. Dispute Resolution
The dispute resolution provisions of the MDLA remain an open issue. The parties' respective positions are as follows:
• Quorum's Position: Exclusive jurisdiction in the United States District Court for the Southern District of New York or, for disputes not within federal subject-matter jurisdiction, the Commercial Division of the Supreme Court of the State of New York, New York County. Quorum's preference for litigation reflects its view that the complex IP, regulatory, and contract issues presented by the MDLA are best resolved through the courts, with the benefit of appellate review, and that New York's well-developed commercial law jurisprudence provides a favorable and predictable framework.
• Meridian's Position: Binding arbitration under the American Arbitration Association ("AAA") Commercial Arbitration Rules, with a three-arbitrator panel, seated in New York. Meridian's preference for arbitration appears to be driven by a desire for confidentiality (particularly given the planned IPO) and finality.
C&H will continue to negotiate this issue in Q2 2023 and will explore potential compromise structures, such as litigation with a confidentiality order or expedited arbitration with limited discovery.
D. Standish Lender Consent
As discussed in Section II.E above, the lender consent from Standish National Bank, N.A. under Section 7.12(b) of the Amended and Restated Credit Agreement remains outstanding as of quarter-end. Marcus Weill will continue to follow up with Philip Yardley at Standish on a regular basis during Q2 2023. Depending on the timeline for resolution of the MDLA's substantive terms, the lender consent may become a critical-path item, and C&H will keep the Quorum team apprised of any developments.
E. Anticipated Q2 2023 Workstreams
Based on the current status of the negotiation and the open issues identified above, C&H anticipates the following principal workstreams during Q2 2023 (April 1 through June 30, 2023):
1. Potential C-Suite Escalation on MFN. If no meaningful progress is achieved on the MFN issue at the working level in Q2 2023, C&H recommends that Quorum consider escalating the discussion to the C-suite level — specifically, a direct conversation between Quorum CEO Meg Tierney and Meridian CEO Vince Halstead. C&H can prepare briefing materials and talking points for such a discussion.
2. Completion of IP Specialist Memoranda. As described above, C&H will prepare the critique of Meridian's "sufficient transformation" standard, the market survey of license-back provisions, and the QuorumScore™ IP Protection Strategy Memorandum.
3. SLA Redline Negotiations. Meridian's counter-markup of the SLA schedule is anticipated in April 2023. Upon receipt, C&H will review, analyze, and prepare a response redline in coordination with the Quorum team, including Patricia Heng and Priya Nair.
4. Continued Standish Consent Process. Marcus Weill will continue follow-up with Standish and will escalate as appropriate if the consent timeline begins to conflict with the MDLA execution timeline.
5. Possible Third Negotiation Session. Depending on the progress of redline exchanges and the resolution of open issues, a third in-person negotiation session may be warranted during Q2 2023. C&H will coordinate with KP&A to identify potential dates and locations.
VII. Staffing Update
The current C&H team assigned to this matter remains as set forth in the engagement letter and matter opening memorandum, and consists of the following professionals:
No staffing changes are anticipated for Q2 2023. The current team composition provides the interdisciplinary coverage required for the overlapping IP, privacy, technology, and corporate workstreams involved in this transaction.
C&H's Stamford office (1 Landmark Square, Suite 1800, Stamford, CT 06901) continues to provide logistical support for coordination with Quorum's headquarters at 1200 Atlantic Street, Suite 3400, Stamford, CT 06901, including facilitating document exchanges, scheduling, and in-person meetings as needed.
VIII. Conclusion / Next Steps
C&H will continue to pursue resolution of the MFN pricing and derived-data rights impasses as the highest-priority workstreams in Q2 2023. These two issues represent the principal obstacles to finalizing the MDLA, and meaningful progress on one or both will be essential to maintaining a reasonable timeline for transaction completion. All other workstreams — including the DSA, DPA, SLA, technical schedules, and lender consent — are advancing on track and will continue in parallel.
Nathaniel Bower respectfully requests the opportunity to schedule a call with Gregory Stahl at the earliest mutually convenient time to discuss the budget trajectory and the potential implications for the $1,800,000 soft fee cap if the MDLA negotiation extends beyond Q2 2023. As outlined in Section IV.B above, the current burn rate, if sustained, would exhaust the remaining headroom under the soft cap during Q2 2023. While C&H remains confident that efficient staffing and matter management will continue to deliver value, it is prudent to address the budget framework proactively rather than reactively.
The next quarterly status report will cover Q2 2023 (April 1 through June 30, 2023) and will be delivered in July 2023.
We appreciate the continued confidence that Quorum has placed in Calderwood & Harkness LLP, and we remain committed to achieving a favorable outcome in this important transaction.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Nathaniel Bower Partner Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Direct: (212) 558-4127
Email: nbower@calderwoodharkness.com
Enclosures:
• Detailed Timekeeper Activity Summary (Q1 2023) — available upon request
Note: All work product referenced herein, including but not limited to memoranda, draft agreements, redlines, analyses, and correspondence, is subject to the attorney-client privilege and the work product doctrine. This memorandum and its contents are intended solely for the use of the addressee and copy recipient identified above and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
Timekeeper | Title / Practice Group | Hourly Rate | Q1 2023 Hours | Q1 2023 Fees
Leonard Cross | Partner, Tax (Responsible Partner) | $1,475/hr | 42.5 | $62,687.50
Nathaniel Bower | Partner, Bankruptcy & Restructuring (Billing Partner) | $1,425/hr | 8.0 | $11,400.00
Patricia Heng | Senior Counsel, Technology Transactions | $1,175/hr | 67.5 | $79,312.50
David Cartwright | Partner, Data Privacy & Cybersecurity | $1,350/hr | 54.0 | $72,900.00
Wendy Schultz | Associate, intellectual Property (Lead Associate) | $895/hr | 148.5 | $132,907.50
Omar Siddiqui | Associate, intellectual Property (Working Associate) | $725/hr | 122.0 | $88,450.00
Lisa Johannsen | Associate, Data Privacy & Cybersecurity | $750/hr | 86.0 | $64,500.00
Marcus Weill | Associate, Corporate/Commercial | $695/hr | 34.5 | $23,977.50
TOTAL Q1 2023 | 563.0 | $536,135.00
Period | Total Hours | Total Fees
Q3 2022 (August 8 – September 30, 2022) | 312.0 | $265,440.00
Q4 2022 (October 1 – December 31, 2022) | 487.5 | $418,375.00
Q1 2023 (January 1 – March 31, 2023) | 563.0 | $536,135.00
Cumulative Total | 1,362.5 | $1,219,950.00
Timekeeper | Role | Practice Group
Leonard Cross | Responsible Partner | Tax
Nathaniel Bower | Billing Partner | Bankruptcy & Restructuring
Wendy Schultz | Lead Associate | Intellectual Property
Omar Siddiqui | Working Associate | Intellectual Property
Patricia Heng | Senior Counsel (Subject-Matter Advisor) | Technology Transactions
David Cartwright | Partner (Privacy Regulatory Overlay) | Data Privacy & Cybersecurity
Lisa Johannsen | Associate (Privacy) | Data Privacy & Cybersecurity
Marcus Weill | Associate (Corporate/Commercial) | Corporate/Commercial

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

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