1025-00008 · Quorum Insurance Holdings · Engagement & Administration

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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

FROM: Nathaniel Bower, Partner (Billing Partner)

TO: Leonard Cross, Partner (Responsible Partner)

CC: Wendy Schultz, Lead Associate; Patricia Heng, Senior Counsel

DATE: March 20, 2023

RE: Revised Budget & Fee Projection — C&H Matter No. 1025-00008 (Quorum Insurance Holdings Corp. / Meridian Credit intelligence, Inc. Data License)

CLIENT: Quorum Insurance Holdings Corp.

CLIENT BILLING CONTACT: Gregory Stahl, VP, Legal Affairs

I. Purpose and Executive Summary

The purpose of this memorandum is to revise the initial staffing budget set forth in the August 10, 2022 Staffing & Budget Memorandum in light of the extended negotiations on the proposed five-year, $60,000,000 enterprise data-licensing arrangement between our client, Quorum Insurance Holdings Corp. ("Quorum"), and Meridian Credit intelligence, Inc. ("Meridian"). As discussed in greater detail below, the matter has evolved considerably beyond its originally anticipated scope and timeline, and this memorandum provides an updated assessment of projected fees, identifies the principal cost drivers, and recommends a framework for approaching fee discussions with the client.

When this engagement was opened in August 2022, the original budget assumed a negotiation-and-documentation timeline of approximately four to five months — spanning from August 2022 through December 2022 or, at the outside, January 2023 — with total legal fees estimated to fall within the $1,800,000 soft cap that was agreed upon with Quorum's legal department at the outset of the representation. That estimate was predicated on assumptions about the pace and complexity of negotiations that, in hindsight, proved overly optimistic given the positions ultimately taken by Meridian and its financial sponsors.

The matter has now extended approximately seven months beyond the original estimated closing date, and there is no certainty as to when closing will occur. The prolonged timeline is principally attributable to two substantive impasses that have consumed a disproportionate share of legal resources. First, Quorum's demand for a most favored nation ("MFN") pricing clause — applicable to all U.S.-domiciled insurance carriers, managing general agents, and insurtech firms with annual premiums written of $500 million or more — has been categorically refused by Meridian. This refusal appears driven not by the merits of the MFN provision itself but by the strategic priorities of Meridian's majority private equity sponsor, Breckenridge Capital Partners Fund IV, L.P., and its investment bank, Whitmore Zanthor & Co., both of which view any MFN commitment as an impediment to Meridian's planned 2025–2026 initial public offering. Second, the parties remain deeply divided over Quorum's rights to create, own, and commercially exploit derived data — including blended risk scores, propensity models, and enriched datasets — built upon Meridian's licensed data. This issue implicates core intellectual property rights central to Quorum's QuorumScore™ product line and its projected $40–50 million B2B licensing revenue stream by 2027.

As of the end of February 2023, cumulative fees (including accrued but unbilled time) have reached approximately $1,180,000, representing approximately 65.6% of the $1,800,000 soft cap. While this figure is not, in isolation, alarming — it is roughly consistent with the proportion of work that would have been completed at this stage under the original timeline — the critical concern is that substantial work remains. The MDLA is not yet in execution-ready form, and the two principal open issues show no sign of imminent resolution. Accordingly, the remaining soft cap headroom of approximately $620,000 is unlikely to be sufficient to carry the matter through closing under any but the most optimistic scenario.

This memorandum proceeds as follows: Section II provides a recap of the original budget parameters and assumptions. Section III details actual fee burn by period and by timekeeper through February 2023. Section IV identifies and analyzes the key drivers of the extended timeline and increased costs. Section V presents revised fee projections under three scenarios (optimistic, base case, and pessimistic). Section VI outlines four options for structuring fee discussions with Quorum. Section VII sets forth the team's recommendations. Section VIII identifies immediate next steps.

II. Original Budget Recap

A. Engagement Parameters

The engagement letter between Calderwood & Harkness LLP and Quorum Insurance Holdings Corp. was executed on August 8, 2022, and the matter was opened on the same date under C&H Matter No. 1025-00008. The representation encompasses all legal work associated with the negotiation, drafting, and closing of the proposed five-year enterprise data-licensing arrangement with Meridian Credit intelligence, Inc., including all ancillary agreements, regulatory compliance analysis, and third-party consent processes.

The agreed fee structure is hourly billing, subject to a soft cap of $1,800,000 for the negotiation and documentation phase of the engagement. The soft cap was discussed and confirmed in a call between Nathaniel Bower and Gregory Stahl on August 5, 2022, and referenced in the engagement letter. It was understood by both parties that the soft cap represented a target estimate rather than a hard ceiling, and that fees could exceed the cap if the scope or complexity of the engagement materially expanded beyond the parties' initial expectations. That said, the engagement letter contemplated that Calderwood & Harkness would notify the client promptly if it appeared that fees were likely to exceed the soft cap, and would discuss any such overages with the client before they were incurred to the extent practicable.

Invoicing is conducted on a monthly basis, with payment terms of Net 30 days from the date of each invoice. Nathaniel Bower serves as the billing partner for the engagement, and Gregory Stahl, Vice President of Legal Affairs at Quorum, serves as the client's designated billing contact. Invoices are transmitted electronically to Mr. Stahl and to Quorum's accounts payable department, with copies retained in the matter file. Through February 2023, all invoices have been paid in a timely manner, and there are no outstanding receivables of concern.

B. Original Hourly Rate Schedule

The following hourly rate schedule was established in the engagement letter and has been in effect since the matter was opened:

These rates reflect the standard 2022 billing rates for each timekeeper. No rate increases have been applied mid-engagement, and the 2023 standard rate increases that took effect firm-wide on January 1, 2023 have not been applied to this matter. For purposes of the revised projections in Section V, we continue to use the above rate schedule unless otherwise noted. Should the matter extend into 2024, the question of whether to apply updated rates will need to be addressed with the client at the appropriate time.

C. Original Timeline and Budget Assumptions

The original Staffing & Budget Memorandum of August 10, 2022 assumed a negotiation and documentation timeline of approximately five months, running from August 2022 through December 2022 or, at the outside, January 2023. This timeline was based on a number of key assumptions, each of which is identified below for comparison against actual experience:

1. Negotiation Complexity. The original budget assumed that the MFN pricing provision and the derived-data rights provisions would be resolved within the normal course of Master Data License Agreement ("MDLA") negotiation. While these issues were recognized as potentially contentious, neither was expected to escalate into a protracted, standalone workstream requiring specialized analysis, dedicated drafting resources, and iterative negotiation rounds separate from the broader MDLA negotiation.

2. Drafting Rounds. The budget assumed a single round of MDLA drafting and counter-drafting — that is, Calderwood & Harkness would prepare an initial comprehensive redline of Meridian's form MDLA, Kessler Pruitt & Ashe LLP ("KP&A") would return a counter-redline on behalf of Meridian, and the parties would negotiate the remaining open points to resolution, with at most one additional round of focused markup on contested provisions. In practice, the matter has already gone through more than two full rounds of drafting and counter-drafting, with the MFN and derived-data provisions having been separately iterated multiple times.

3. Negotiation Sessions. The original budget allocated resources for one to two in-person negotiation sessions. As of the date of this memorandum, one session has been conducted (January 18, 2023, in New York), a second session is scheduled (March 9, 2023, in Atlanta), and additional sessions are likely required depending on the trajectory of negotiations.

4. Ancillary Workstreams. The original budget included allocations for the following ancillary workstreams, all of which were anticipated at engagement outset: negotiation and execution of a mutual non-disclosure agreement ("NDA"); preparation of regulatory compliance memoranda addressing the Fair Credit Reporting Act ("FCRA"), the Gramm-Leach-Bliley Act ("GLBA"), the California Consumer Privacy Act / California Privacy Rights Act ("CCPA/CPRA"), and 23 NYCRR Part 500 (New York Department of Financial Services Cybersecurity Regulation); analysis of the Standish National Bank covenant implications and preparation of a lender consent request; drafting of a Data Security Addendum ("DSA"); drafting of a Service Level Agreement ("SLA") and related technical schedules; preparation of an FCRA certification schedule; and preparation of standard closing deliverables (board resolutions, officer's certificates, closing checklist, and related documentation).

5. Total Budget Range. Based on the foregoing assumptions, the original total budget estimate was $1,500,000 to $1,700,000, well within the $1,800,000 soft cap. The soft cap itself was set at a level that provided approximately $100,000 to $300,000 of cushion above the upper end of the working estimate.

As discussed in Section IV, several of these assumptions have proven materially inaccurate, necessitating the revised projections set forth in this memorandum.

III. Actual Fee Burn — August 2022 Through February 2023

A. Summary of Fees Incurred by Period

The following is a narrative summary of work performed and fees incurred during each billing period from engagement opening through the end of February 2023. Detailed time entries are available in the billing system and have been reviewed for accuracy; the figures presented here are approximations based on that review.

August – October 2022 (Engagement Opening, NDA, Term Sheets): Approximately $340,000

This initial phase encompassed the administrative steps of engagement opening and conflicts clearance, followed by substantive work on the NDA and the parties' respective term sheets. The mutual NDA (NDA-QIH-MCI-2022-001) was negotiated with KP&A and executed on August 15, 2022 — a rapid turnaround that reflected the parties' eagerness to begin exchanging confidential information and move forward with substantive discussions. Following execution of the NDA, Meridian delivered its initial term sheet on September 12, 2022, which the team analyzed in detail over the following two weeks. The Quorum counter-term sheet was prepared between September 28 and September 30, 2022, incorporating input from all members of the deal team. An annotated comparison of the two term sheets, together with a comprehensive issues matrix identifying areas of alignment and divergence, was prepared between October 3 and October 5, 2022. During this period, the team also prepared and transmitted an initial introduction letter and negotiation priorities letter to Graham Whitley at KP&A, establishing the framework for the principal-to-principal and counsel-to-counsel negotiation tracks.

Fee expenditure during this period was generally consistent with the original budget, with no significant deviations from the anticipated scope of work. The term sheet analysis consumed somewhat more time than anticipated due to the complexity of Meridian's proposed pricing structure and the number of non-standard provisions in Meridian's initial proposal, but these overages were minor and were offset by efficiencies achieved in the NDA negotiation, which concluded more quickly than budgeted.

November – December 2022 (MDLA Drafting Phase): Approximately $445,000

This period represented the core drafting phase and was, on a per-month basis, the most resource-intensive period of the engagement. KP&A delivered Meridian's form MDLA on November 4, 2022. The team undertook a comprehensive analysis of the form agreement, which included a detailed review by Patricia Heng (technology transactions), David Cartwright (data privacy and cybersecurity), Wendy Schultz and Omar Siddiqui (Intellectual property), and Marcus Weill (corporate/commercial), with coordination and oversight by Leonard Cross and Nathaniel Bower. The analysis identified a significant number of provisions requiring revision or supplementation, particularly in the areas of data use restrictions, derived-data ownership, MFN pricing, indemnification, and limitation of liability.

Quorum's comprehensive redline of the MDLA was transmitted to KP&A on December 2, 2022. The redline was accompanied by a cover letter explaining the rationale for Quorum's principal revisions and identifying the provisions that Quorum viewed as most critical. An internal negotiation strategy memorandum was prepared and circulated on December 15, 2022, setting forth the team's recommended approach for the upcoming negotiation sessions, including identification of priority issues, acceptable fallback positions, and walk-away points.

During this same period, the team prepared multiple regulatory and subject-matter memoranda, including: (i) a memorandum analyzing the FCRA and GLBA framework applicable to the proposed data-licensing arrangement, with particular attention to the permissible purpose requirements under the FCRA and the information-sharing provisions of the GLBA; (ii) a memorandum addressing derived-data intellectual property ownership under copyright and trade secret law; (iii) a memorandum analyzing MFN market practice and enforceability in the context of data-licensing agreements; (iv) a memorandum addressing antitrust considerations related to MFN provisions in data markets; and (v) a memorandum analyzing the covenant implications of the proposed transaction under Quorum's Amended and Restated Credit Agreement with Standish National Bank, dated June 15, 2021 (the "Standish Credit Agreement"). In connection with the Standish analysis, the team prepared a draft lender consent request letter addressed to Philip Yardley at Standish National Bank, as well as a structuring alternatives memorandum analyzing potential approaches to structuring the transaction in a manner that might avoid or mitigate the need for lender consent.

Initial drafts of the Data Security Addendum, Service Level Agreement, and FCRA certification schedule were also prepared during this period. These ancillary documents proceeded generally on schedule, though the team's capacity to devote sustained attention to them was constrained by the intensity of the MDLA drafting process.

The higher-than-anticipated fee burn during November and December was driven primarily by two factors. First, the derived-data intellectual property ownership analysis proved substantially more complex than originally anticipated, requiring extensive legal research into the intersection of copyright law, trade secret law, and contractual allocation of rights in machine learning model outputs. Second, the need to prepare multiple regulatory and subject-matter memoranda in parallel with the MDLA redline created overlapping workstreams that could not be efficiently sequenced. Each of these memoranda was necessary to inform the team's positions on specific MDLA provisions, and delaying their preparation would have delayed the MDLA redline itself.

January – February 2023 (First Negotiation Session and Follow-up): Approximately $395,000

The third billing period was dominated by the first in-person negotiation session and the extensive preparation and follow-up work associated with it. Preparation for the January 18, 2023 session in New York included preparation of a detailed pre-session memorandum, updated issues lists, talking points for each open provision, and role-play exercises for anticipated Meridian negotiation positions. The session itself was attended by Leonard Cross, Patricia Heng, Wendy Schultz, and Omar Siddiqui, and lasted approximately nine hours. Meridian's delegation included Graham Whitley and two associates from KP&A, together with Meridian's General Counsel, Anabel Reyes, and VP of Data Partnerships, Derek Chen.

Following the session, a comprehensive post-session debrief memorandum was prepared and circulated on January 23, 2023, summarizing the areas of progress, the areas of continued disagreement, and the team's assessment of Meridian's negotiation posture. The January 18 session confirmed what had been suspected but not definitively established: the MFN clause and the derived-data rights provisions are the two principal open issues, and they are the issues on which Meridian's positions are most firmly entrenched. Both issues will require additional specialized analysis and creative drafting not contemplated in the original budget.

Substantive work during January and February included preparation of the revised MDLA second draft (Calderwood & Harkness's markup of Meridian's counter-redline, which KP&A had returned on January 9, 2023), drafting of a standalone MFN rider as a potential alternative to embedding the MFN provision in the body of the MDLA, preparation of the initial Quorum proposal for Article VII (Derived Data), and preparation of a detailed legal analysis memorandum addressing the copyright and trade secret status of machine learning model outputs. The team also prepared a counter-analysis of Meridian's proposed SLA terms, drafted data delivery specifications in Technical Schedule A (with input from Priya Nair, Quorum's VP of Data Engineering), and prepared a Data Processing Agreement addressing CCPA/CPRA compliance obligations. A follow-up letter to Standish National Bank regarding the status of the lender consent process was also transmitted during this period.

On February 14, 2023, Pinnacle Ridge Advisory LLC, Quorum's pricing consultant (Franklin Osei, Managing Director), delivered its pricing benchmark study analyzing Meridian's proposed rates against comparable data-licensing transactions in the insurance and financial services sectors. The study required additional legal review to assess the implications of the benchmarking data for the MFN negotiation and to evaluate potential use of the benchmarking data in the negotiation process.

B. Fees by Timekeeper (Through February 2023)

The following table summarizes approximate hours and fees by timekeeper from engagement opening through the end of February 2023:

The figures presented above are rounded for ease of reference and reflect time recorded through the end of February 2023. Actual invoiced amounts through February 2023 total approximately $1,031,000. However, there is an additional approximately $149,000 of accrued but unbilled time attributable to late February work that had not yet been reviewed and processed for invoicing as of the preparation of this memorandum. When this accrued time is included, the effective total fees incurred through February 2023 are approximately $1,180,000.

Several observations regarding the timekeeper-level data are noteworthy. The staffing profile reflects the team's deliberate effort to leverage work to the associate level to the greatest extent practicable: Wendy Schultz and Omar Siddiqui together account for approximately 570 of the 1,110 total hours (approximately 51%), and they bill at rates of $895/hr and $725/hr, respectively — well below the partner rates of $1,350 to $1,475/hr. Lisa Johannsen and Marcus Weill together account for an additional approximately 250 hours (approximately 23%) at rates of $750/hr and $695/hr. Thus, approximately 74% of total hours have been billed at associate-level rates, which is consistent with the staffing philosophy communicated to the client at the outset of the engagement.

Partner and senior counsel involvement has been focused on strategy, oversight, and client communications. Leonard Cross's 85 hours are attributable primarily to strategy sessions, client calls, and review of key deliverables. Nathaniel Bower's 30 hours reflect his role as billing partner, including invoice review, billing communications with the client, and coordination on engagement-level matters. Patricia Heng's 110 hours reflect her role as the subject-matter lead on technology transactions, including review and markup of the MDLA, guidance on the derived-data issues, and participation in the January 18 session. David Cartwright's 65 hours reflect his work on data privacy and cybersecurity matters, including the DSA, DPA, and regulatory memoranda.

C. Budget Utilization

The current budget utilization metrics are as follows:

• Cumulative fees incurred (through February 2023, including accruals): Approximately $1,180,000

• Soft cap: $1,800,000

• Soft cap consumed: Approximately 65.6%

• Remaining soft cap headroom: Approximately $620,000

While a utilization rate of 65.6% might appear to leave adequate room to complete the matter within the soft cap, the concern is that this figure must be evaluated in the context of where the matter stands substantively, not merely temporally. Under the original budget assumptions, approximately 80% of the total budget was expected to be consumed by the time the MDLA reached execution-ready stage, with the remaining 20% allocated to final negotiation of ancillary documents, lender consent, and closing deliverables. By that measure, we have consumed approximately 65.6% of the budget but have not yet reached execution-ready stage — indeed, we are not close, given the two principal open issues. The remaining work required to resolve the MFN and derived-data impasses, finalize the MDLA, complete the ancillary documents, obtain lender consent, and execute closing deliverables will, under all three scenarios analyzed in Section V, consume a substantial majority of the remaining soft cap headroom and, in the base and pessimistic cases, exceed it.

IV. Key Drivers of Extended Timeline and Increased Costs

This section identifies the four principal factors that have driven the matter beyond its originally estimated timeline and budget. Understanding these drivers is essential both for preparing accurate revised projections and for framing the fee discussion with the client, as each driver reflects circumstances that were not reasonably foreseeable at the outset of the engagement and that are attributable to the counterparty's conduct, the complexity of the underlying subject matter, or both — rather than to any inefficiency in the Calderwood & Harkness team's work.

A. MFN Impasse

Quorum's request for a most favored nation pricing clause has been a feature of the negotiation from the term sheet stage, and Meridian's resistance to such a clause was anticipated. What was not anticipated was the categorical nature of Meridian's refusal and the extent to which that refusal is driven by considerations extrinsic to the data-licensing relationship itself.

Quorum's proposed MFN clause would apply to all U.S.-domiciled insurance carriers, managing general agents ("MGAs"), and insurtech firms with annual premiums written equal to or exceeding $500 million. As drafted, the clause would require Meridian to offer Quorum pricing terms no less favorable than those offered to any comparably situated licensee, with a retroactive adjustment mechanism and annual audit rights. The Quorum position is that an MFN is commercially reasonable given the scale of the proposed licensing arrangement ($60 million over five years) and that the absence of an MFN creates an unacceptable risk that Quorum's competitors could obtain access to the same data on more favorable terms, undermining the competitive advantage that Quorum is paying a premium to secure.

Meridian has categorically refused any MFN clause in any form. Based on the team's analysis and the intelligence gathered through negotiations, this refusal is driven primarily by two external stakeholders. First, Breckenridge Capital Partners Fund IV, L.P. ("Breckenridge"), which holds a 62.5% equity interest in Meridian and whose representatives Caleb Rourke and Elaine Drummond sit on Meridian's board, has instructed Meridian's management that no MFN commitments are to be made in any data-licensing agreement. The concern is that MFN commitments would constrain Meridian's pricing flexibility, depress revenue growth metrics, and create disclosure complications in connection with Meridian's planned 2025–2026 IPO. Second, Whitmore Zanthor & Co., Meridian's investment bank (lead contact: Rachel Ng-Castillo), has reportedly advised Breckenridge and Meridian that MFN provisions in material customer contracts would be viewed negatively by prospective IPO investors and underwriters.

The practical consequence of this impasse is that the MFN issue, which was originally expected to be resolved as part of the normal give-and-take of MDLA negotiation, has instead become a standalone workstream requiring: (i) extensive market survey research on the prevalence and enforceability of MFN clauses in data-licensing agreements; (ii) detailed antitrust analysis in light of recent DOJ and FTC scrutiny of MFN provisions in data markets and adjacent industries; (iii) development of fallback positions, including a pricing audit right concept that would provide Quorum with visibility into Meridian's pricing practices without imposing a formal MFN obligation; and (iv) drafting of multiple alternative formulations, including a standalone MFN rider, a modified MFN with carve-outs, and a benchmarking-based adjustment mechanism. Each of these workstreams was not originally scoped, and collectively they have consumed significant attorney time — particularly from Wendy Schultz, Omar Siddiqui, and Patricia Heng.

B. Derived-Data Rights Dispute

The dispute over Quorum's rights to create, own, and commercially exploit derived data built upon Meridian's licensed data is the most complex and most commercially significant of the open issues. It is also the issue on which the gap between the parties' positions is widest and on which a compromise framework is most difficult to construct.

The core question is whether Quorum will have the unrestricted right to create and commercially exploit "derived data" — defined broadly to include blended risk scores, propensity models, enriched datasets, and other analytical outputs generated through Quorum's application of machine learning algorithms and proprietary methodologies to Meridian's raw and processed data feeds. This question directly implicates Quorum's QuorumScore™ product (USPTO application Serial No. 97/482,116), which is central to Quorum's B2B licensing strategy and which Quorum projects will generate $40–50 million in annual revenue by 2027.

The derived-data issue has required substantially more legal research and memorandum drafting than originally anticipated. Specific areas of additional work include:

(a) Analysis of whether Quorum's machine learning model outputs — including the QuorumScore™ — constitute "derivative works" under the Copyright Act, which determines whether Meridian's copyright in its underlying data extends to Quorum's analytical outputs. This analysis required engagement with a rapidly evolving area of law in which there is limited binding precedent, particularly with respect to the copyrightability of algorithmically generated outputs and the scope of the derivative work right in the context of data analytics.

(b) Analysis and response to Meridian's proposed license-back arrangement, under which Quorum would grant Meridian a perpetual, royalty-free license to use Quorum's derived data for Meridian's own commercial purposes, and Meridian's proposed 15% revenue share on any third-party commercialization by Quorum of derived data products. The Quorum team views both of these proposals as commercially unacceptable and inconsistent with market practice for enterprise data-licensing arrangements of this nature.

(c) Analysis and response to Meridian's proposed "sufficient transformation" standard, under which Quorum's derived data would be deemed to fall outside the scope of Meridian's license restrictions only if it had been "sufficiently transformed" such that Meridian's underlying data could not be reverse-engineered or extracted from the derived product — with "sufficient transformation" to be determined in Meridian's sole discretion. This standard is objectively unworkable, as it would give Meridian an effective veto over Quorum's entire derived-data business and would create unacceptable commercial uncertainty for Quorum and its downstream licensees.

(d) Protection of QuorumScore™ and Quorum's projected B2B licensing revenue stream. The team has worked closely with Quorum's in-house IP counsel and with Angela Firth at Caldwell & Strauss LLP, which represents Quorum on its broader IP portfolio, to ensure that the MDLA's derived-data provisions do not inadvertently compromise Quorum's existing IP rights or create encumbrances that would undermine the value of QuorumScore™ or related products. This coordination with outside IP counsel was not contemplated in the original scope and has required additional time, particularly from Wendy Schultz and Patricia Heng.

The team has developed a comprehensive Article VII compromise framework and a Draft Derived Data Commercialization Protocol, both of which have gone through multiple iterations in response to internal feedback from Quorum's business team and evolving negotiation dynamics. This iterative development process, while necessary, has consumed substantial resources beyond what was originally budgeted for the derived-data provisions.

C. Parallel Regulatory and Ancillary Workstreams

The ancillary workstreams identified in the original budget — Data Security Addendum, Data Processing Agreement (CCPA/CPRA), FCRA certification, and Service Level Agreement — have generally proceeded on their expected timelines. However, the intensification of the MFN and derived-data workstreams during November 2022 through February 2023 created resource pressure that affected the team's ability to advance these ancillary deliverables as efficiently as planned. In several instances, work on ancillary documents had to be paused while the team redirected its attention to the primary negotiation issues, resulting in context-switching inefficiencies and some duplication of effort when work was resumed.

In addition, the Standish National Bank covenant analysis and lender consent process has proven more time-intensive than originally budgeted. The $60,000,000 aggregate value of the proposed licensing arrangement exceeds the $25,000,000 threshold set forth in Section 7.12(b) of the Amended and Restated Credit Agreement (dated June 15, 2021) by $35,000,000, or approximately 240% of the threshold. This substantial exceedance required a more detailed structuring alternatives analysis than originally anticipated, as the team explored potential approaches — including phased payment structures, termination-for-convenience provisions, and separate contracting through a Quorum subsidiary — that might reduce the effective commitment below the threshold or otherwise mitigate the need for lender consent. Ultimately, the team concluded that lender consent is required under any commercially viable structuring approach, and a consent request letter was prepared and transmitted to Philip Yardley at Standish National Bank. The consent process is ongoing and has required multiple follow-up communications, with the outcome still pending as of the date of this memorandum.

D. Multiple Negotiation Sessions

The original budget allocated resources for one to two in-person negotiation sessions, with the assumption that any remaining open points could be resolved through counsel-to-counsel telephone discussions and email exchanges. In practice, the matter has already required one in-person session (January 18, 2023, in New York), and a second session has been scheduled for March 9, 2023, in Atlanta. Based on the current trajectory of negotiations, additional in-person sessions are likely required — particularly if the MFN and derived-data issues need to be escalated to the C-suite level for resolution.

Each in-person negotiation session carries a significant preparation and follow-up burden. Pre-session preparation typically includes preparation of a detailed pre-session memorandum (summarizing the status of each open issue, the parties' respective positions, and recommended negotiation strategies), preparation of updated issues lists and negotiation matrices, preparation of talking points for each open provision, internal strategy sessions with the deal team, and pre-session communications with the client's business team to confirm negotiation authority and priorities. Post-session follow-up typically includes preparation of a comprehensive debrief memorandum, revision of open issues lists to reflect the session's outcomes, preparation of revised drafts or counterproposals as appropriate, and strategic communications with the client regarding next steps. The combined preparation and follow-up for a single session typically consumes 80 to 120 hours of attorney time across the team, depending on the number and complexity of the issues under discussion.

The second session in Atlanta, scheduled for March 9, 2023, is expected to be particularly resource-intensive, as it is anticipated to address both the MFN and derived-data issues directly, and the team will need to present the revised Article VII compromise framework and the pricing audit right concept as alternatives to the current impasse.

V. Revised Fee Projections

A. Scenario Analysis

Based on the current status of the engagement and the factors identified in Section IV, the team has developed three scenarios for the remaining work and associated fees. Each scenario is described below with its underlying assumptions, scope of remaining work, and estimated fee range.

Scenario 1: Resolution and Closing by June 2023 (Optimistic)

This scenario assumes that the MFN and derived-data impasses are substantially resolved at or shortly after the March 9, 2023 negotiation session in Atlanta. Resolution could take the form of agreement on the pricing audit right concept (in lieu of a formal MFN) and adoption of the Article VII compromise framework (or a mutually acceptable variant) for derived-data rights. Under this scenario, the parties would move promptly to finalize the MDLA and execute closing deliverables, with closing occurring by the end of June 2023.

Remaining work under Scenario 1 would include:

• Final negotiation and drafting of the MDLA, incorporating agreed resolutions on MFN and derived-data issues as well as any remaining open commercial and legal terms.

• Finalization of the Data Security Addendum, Data Processing Agreement, Service Level Agreement, and Technical Schedules (including Technical Schedule A, data delivery specifications).

• Completion of the Standish National Bank lender consent process, including preparation of any supplemental information requested by Standish and review and negotiation of any conditions imposed by Standish as a condition to consent.

• Preparation of board resolutions, officer's certificates, and other corporate authorization documents required for execution.

• Preparation and management of the closing checklist, coordination of closing deliverables, and execution of the MDLA and all ancillary agreements.

Estimated remaining fees under Scenario 1: $550,000–$650,000.

Total projected fees under Scenario 1: $1,730,000–$1,830,000, representing a total that is approximately at or slightly above the $1,800,000 soft cap. This scenario would result in a modest overrun of the soft cap in the upper range (approximately $30,000, or 1.7%) and would be within the soft cap at the lower end of the range.

Scenario 2: Extended Negotiations Through Q3 2023 (Base Case)

This scenario, which the team considers the most likely based on current negotiation dynamics, assumes that the MFN and derived-data impasses are not resolved at the March 9 session and that negotiations continue through the second quarter of 2023, with resolution and closing occurring in the third quarter of 2023 (July–September 2023). Under this scenario, the continued impasse may require escalation of key issues to the C-suite level — specifically, to Quorum CEO Meg Tierney and Meridian CEO Vince Halstead — and iterative development of additional compromise proposals.

Remaining work under Scenario 2 would include all items identified under Scenario 1, plus:

• Additional rounds of negotiation on the MFN and derived-data provisions, potentially including one or more additional in-person sessions, multiple rounds of counsel-to-counsel negotiation, and development of revised proposals and fallback positions.

• Preparation of strategy memoranda and escalation-level communications for C-suite principals on both sides.

• Potential restructuring of deal terms, including modifications to the pricing structure, term length, or scope of the licensed data to facilitate compromise on the principal open issues.

• Extended monitoring and management of the Standish lender consent process, which may be complicated by the delay in closing.

• Additional regulatory analysis if the restructured deal terms implicate different or additional regulatory requirements.

Estimated remaining fees under Scenario 2: $800,000–$1,000,000.

Total projected fees under Scenario 2: $1,980,000–$2,180,000, exceeding the $1,800,000 soft cap by $180,000 to $380,000, representing an overage of approximately 10% to 21%.

Scenario 3: Protracted Negotiations or Impasse Through Year-End 2023 (Pessimistic)

This scenario assumes that negotiations stall materially — either because the parties are unable to bridge the gap on the MFN and/or derived-data issues, or because external factors (such as developments in Meridian's IPO planning or changes in Quorum's strategic priorities) create delays or interruptions. Under this scenario, the matter either resolves very late in 2023, enters a dormant period during which the engagement remains open and subject to periodic activity, or ultimately requires Quorum to consider alternative data providers.

Remaining work under Scenario 3 would include all items identified under Scenarios 1 and 2, plus:

• Extended monitoring of the engagement during periods of reduced activity, including periodic status updates to the client, maintenance of the deal file, and readiness to resume active negotiations on short notice.

• Preparation of additional strategy memoranda analyzing Quorum's options in the event of a protracted impasse, including analysis of alternative data providers and the implications of abandoning the Meridian arrangement.

• Potential alternative-provider analysis, including preliminary review of data-licensing terms available from competing providers and assessment of the switching costs and strategic implications.

• Matter maintenance activities, including periodic billing, time entry review, and engagement-level administration.

Estimated remaining fees under Scenario 3: $1,100,000–$1,400,000.

Total projected fees under Scenario 3: $2,280,000–$2,580,000, exceeding the $1,800,000 soft cap by $480,000 to $780,000, representing an overage of approximately 27% to 43%.

B. Projected Hours by Timekeeper (Remaining Work — Base Case)

The following table sets forth estimated remaining hours and fees by timekeeper under Scenario 2 (Base Case), which the team considers the most likely outcome:

These estimates assume that the current staffing model remains in place, with the associate team (Schultz, Siddiqui, Johannsen, and Weill) continuing to handle the bulk of the drafting and research work. The ranges reflect uncertainty regarding the number of additional negotiation sessions required, the complexity of the compromise proposals that will need to be developed, and the duration of the Standish consent process.

The midpoint of the Base Case fee range — approximately $727,000 in remaining fees, or approximately $1,907,000 in cumulative fees — is approximately 6% above the $1,800,000 soft cap, which the team considers a reasonable working estimate for budgeting and client-discussion purposes.

VI. Options for Fee Discussions with Quorum

As set forth below, the team has identified four options for structuring the fee discussion with Quorum. Each option is described with its key features, advantages, and risks.

A. Option 1: Maintain Current Soft Cap; Absorb Moderate Overages

Under this option, Calderwood & Harkness would not proactively approach the client to reset the soft cap. Instead, the firm would continue to perform work under the existing engagement terms and would absorb fee overages of up to approximately 10% above the $1,800,000 soft cap — i.e., the firm would write off fees in excess of approximately $1,980,000 as a client-relationship investment. This approach recognizes the size and importance of Quorum as a firm client — Quorum Insurance Holdings Corp. (Nasdaq: QIHC) reported FY 2023 revenue of $4.18 billion and engages Calderwood & Harkness across multiple practice areas — and treats the soft cap as what it was always presented to be: a target estimate, not a hard ceiling.

Advantages: This approach preserves goodwill with the client and avoids a potentially uncomfortable budget conversation at a time when the client's primary focus is on resolving the substantive negotiation issues. It also avoids creating any perception that Calderwood & Harkness is prioritizing its own fee interests over the client's deal objectives.

Risks: If Scenario 3 materializes, the overage absorbed by Calderwood & Harkness could reach $480,000 to $780,000, which would represent a significant write-off that is difficult to justify from a practice-group profitability standpoint. Even under the Base Case (Scenario 2), the write-off could reach $180,000 to $380,000, depending on the actual trajectory of the remaining work. Additionally, failing to communicate proactively about the budget creates a risk that the client will be surprised by the final fee totals, which could damage the relationship more than a transparent budget conversation would.

B. Option 2: Reset the Soft Cap with Client

Under this option, Nathaniel Bower (or, if preferred, Leonard Cross) would approach Gregory Stahl and/or Quorum General Counsel Carolyn Whitford to discuss resetting the soft cap to a range of $2,200,000 to $2,400,000. The conversation would be framed around the unforeseen complexity and duration of the MFN and derived-data negotiations, which have transformed what was originally expected to be a straightforward (if large-scale) data-licensing transaction into a multi-front negotiation with significant legal complexity and strategic stakes.

The team recommends framing this discussion as a phased approach: the current $1,800,000 soft cap was set to cover work through the original anticipated closing timeline; the revised cap would cover the additional work necessitated by the extended negotiation and the complexity of the unresolved issues. This framing avoids any implication that the original budget was poorly estimated and instead positions the revised cap as a natural response to changed circumstances.

Advantages: This approach is transparent and direct; it aligns the client's fee expectations with the reality of the engagement's scope and timeline. It preserves Calderwood & Harkness's ability to bill fully for the work performed, which is important both for practice-group economics and for maintaining appropriate incentives for the team to devote the time and attention that the matter requires. It also provides an opportunity to demonstrate the firm's professionalism and client-communication practices.

Risks: The client may push back, either on the reset itself or on the proposed range. Gregory Stahl may need to seek internal approvals to accept a revised cap, which could introduce delays and additional scrutiny. The client may also request concessions in connection with the reset — for example, a blended rate discount, a volume write-off, or a cap on the hours of specific timekeepers. Any such concessions would need to be carefully evaluated for their impact on the firm's effective realization on the matter.

C. Option 3: Hybrid — Phase-Based Billing with Adjusted Cap

Under this option, the team would propose restructuring the engagement into two distinct billing phases, each with its own budget:

Phase 1 (Completed): Engagement Through MDLA Second Draft. This phase encompasses all work performed from engagement opening through the transmission of the second MDLA draft, including the first negotiation session and all regulatory and subject-matter memoranda. Fees incurred during Phase 1 total approximately $1,180,000, billed against the original $1,800,000 soft cap.

Phase 2 (Remaining): Negotiation Resolution Through Closing. This phase encompasses all remaining work necessary to resolve the open negotiation issues, finalize the MDLA and all ancillary documents, complete the Standish lender consent process, and execute closing deliverables. The team would propose a new soft cap of $750,000 to $900,000 for Phase 2 work.

Under this structure, the total effective soft cap for the engagement would be $1,950,000 to $2,100,000, calculated as the sum of Phase 1 fees incurred ($1,180,000) plus the Phase 2 cap ($750,000 to $900,000). This range falls between the Scenario 1 and Scenario 2 projections and would provide adequate budget under the Base Case at the upper end of the Phase 2 cap range.

Advantages: This structure gives the client clear visibility into the remaining costs and provides a natural checkpoint for budget discussions. The phase-based framing makes the fee conversation easier to manage, as it avoids asking the client to accept a single large number and instead focuses the discussion on the incremental cost of completing the matter. It also provides a framework for ongoing budget monitoring, as Phase 2 fees can be tracked against the Phase 2 cap independently of Phase 1.

Risks: The client may seek to limit the Phase 2 cap more aggressively — for example, proposing a cap of $600,000 to $700,000 — which would leave inadequate budget for the Base Case scenario. The team would need to be prepared to explain the drivers of the Phase 2 cost estimate and to defend the proposed range.

D. Option 4: Alternative Fee Arrangement

If the client indicates a strong preference for greater fee predictability, the team could propose an alternative fee arrangement for the remaining work. Several structures are possible:

• Partial Fixed Fee: A flat fee for defined deliverables (e.g., closing deliverables, corporate authorizations, Standish consent) with continued hourly billing for the ongoing negotiation of contested provisions.

• Success Fee Component: A reduced hourly rate for ongoing work, with a success fee payable upon closing that is tied to the favorable resolution of the MFN and derived-data issues. This structure would align the firm's compensation incentives with the client's deal objectives.

• Blended Rate with Threshold: Continued hourly billing at a reduced blended rate (e.g., a 10% discount to standard rates) that would apply after cumulative fees exceed a defined threshold (e.g., $1,800,000), providing the client with effective rate relief on the overage amounts while still compensating the firm for its time.

Given the significant uncertainty in both the timing and outcome of the remaining negotiations, a pure fixed fee for the entirety of the remaining work is inadvisable, as it would expose Calderwood & Harkness to meaningful downside risk in the event of a protracted timeline. However, a hybrid arrangement — such as hourly billing with a reduced rate after a certain threshold, or a partial fixed fee for defined deliverables — may be workable and could be attractive to the client.

Note: Any alternative fee arrangement would require approval from the firm's pricing committee and should be discussed with the billing partner and practice group leaders before being proposed to the client.

VII. Recommendations

Based on the analysis set forth in this memorandum, the team recommends the following actions:

1. Immediate Action. Nathaniel Bower should schedule a call with Gregory Stahl, Quorum VP of Legal Affairs, in late March 2023 to discuss the revised budget outlook. This call should take place before cumulative fees approach or exceed the $1,800,000 soft cap. Based on the current rate of fee accrual — approximately $150,000 to $180,000 per month — cumulative fees are likely to reach the soft cap in late April or early May 2023 if the current pace of work continues. Initiating the budget conversation before that point is essential to preserving client trust and avoiding any suggestion that the firm failed to communicate proactively about foreseeable cost overruns.

2. Recommended Approach. The team recommends presenting Option 3 (Hybrid Phase-Based Billing with Adjusted Cap) as the primary proposal for the fee discussion with Quorum. The phase-based structure is the most intuitive framework for the client, as it provides a clear delineation between work already performed and work remaining, and it focuses the fee conversation on the incremental cost of completing the matter rather than requiring the client to accept a single revised aggregate number. Option 2 (Reset the Soft Cap) should be held in reserve as a fallback if the client prefers a simpler structure or if the phase-based approach proves difficult to implement from a billing-system standpoint.

3. Talking Points for Client Discussion. The following key messages should be communicated during the budget discussion with Quorum:

• The extended timeline and increased costs are driven by Meridian's negotiation positions — specifically, Meridian's categorical refusal of the MFN clause and the depth of the derived-data rights dispute — not by any inefficiency in the Calderwood & Harkness team's work. The MFN impasse is attributable to Breckenridge Capital Partners' and Whitmore Zanthor's concerns regarding Meridian's IPO positioning, and the derived-data dispute reflects fundamental disagreements about the allocation of IP rights that were not foreseeable at the outset of the engagement.

• The $60,000,000 deal value, combined with the critical importance of QuorumScore™ to Quorum's long-term B2B licensing strategy (projected $40–50 million in annual revenue by 2027), justifies the investment in rigorous negotiation and documentation. The provisions at issue — MFN pricing and derived-data rights — are among the most consequential terms in the entire agreement, and their resolution will have significant commercial implications for Quorum over the five-year term of the license and beyond.

• The Standish National Bank covenant process adds an unavoidable ancillary workstream. The $60,000,000 license value exceeds the $25,000,000 threshold in Section 7.12(b) of the Amended and Restated Credit Agreement by $35,000,000, and lender consent is required under any commercially viable structuring approach. This workstream was anticipated in the original budget but has consumed more time than expected due to the complexity of the structuring alternatives analysis.

• Calderwood & Harkness remains committed to cost efficiency and has maintained a staffing model in which the substantial majority of hours (approximately 74%) are billed at associate rates of $695 to $895 per hour, rather than at the partner rates of $1,350 to $1,475 per hour. This commitment to appropriate leverage will continue through the remainder of the engagement.

4. Staffing Adjustments Going Forward. To optimize cost efficiency for the remaining work, the team recommends the following staffing adjustments:

• Wendy Schultz and Omar Siddiqui will continue as the primary drafters and day-to-day negotiators, maintaining continuity and efficiency on the core MDLA negotiation. Their deep familiarity with the transaction and the negotiation history will minimize ramp-up time and reduce the risk of inconsistency in the drafting and negotiation approach.

• Leonard Cross's involvement will be focused on escalation-level communications (including any direct engagement with Quorum CEO Meg Tierney or Meridian CEO Vince Halstead) and high-level strategy sessions. He will not be deployed for routine document review or drafting tasks.

• Patricia Heng will be deployed selectively for subject-matter guidance on the derived-data provisions and technology transactions issues, rather than on a continuous basis. Her involvement in document markup and negotiation sessions will be limited to instances where her specific expertise is required.

• Marcus Weill will take primary responsibility for all Standish-related work (including the ongoing lender consent process and any supplemental submissions to Standish) and all corporate deliverables (board resolutions, officer's certificates, closing checklist), thereby freeing up bandwidth within the IP team to focus on the core negotiation issues.

• David Cartwright and Lisa Johannsen will be deployed as needed for data privacy, cybersecurity, and regulatory matters but will not maintain continuous involvement in the day-to-day negotiation.

These staffing adjustments are expected to maintain the current leverage ratio (approximately 74% associate hours) or improve it modestly, while ensuring that partner and senior counsel time is directed to its highest-value uses.

VIII. Next Steps

The following immediate next steps are identified:

1. Leonard Cross to review and approve this memorandum and provide any comments or direction regarding the recommended approach to fee discussions with Quorum.

2. Nathaniel Bower to coordinate with Gregory Stahl at Quorum to schedule a budget discussion call in late March 2023 or, at the latest, the first week of April 2023. The call should be scheduled after the March 9 Atlanta session, so that the team can provide the client with an update on the status of negotiations as part of the budget discussion.

3. Wendy Schultz to prepare a concise summary of estimated remaining work suitable for sharing with the client in connection with the budget discussion call. This summary should describe the remaining workstreams at a high level, identify the key variables that affect the cost estimate, and present the Phase-Based Billing proposal in a client-friendly format.

4. The full deal team to prepare for the March 9, 2023 negotiation session in Atlanta (the second in-person session). The outcome of this session will be a significant indicator of whether Scenario 1 (Optimistic) or Scenario 2/3 (Base Case/Pessimistic) is the more likely trajectory. Pre-session preparation should include: updated issues matrices for MFN and derived-data provisions; presentation of the pricing audit right concept and the Article VII compromise framework; and talking points for escalation scenarios.

5. Ongoing monthly invoicing to continue on the current schedule. The next invoice, covering work performed during February 2023, is to be finalized and transmitted by mid-March 2023. All time entries should be reviewed for accuracy and billing judgment applied as appropriate.

Distribution Note: This memorandum is for internal Calderwood & Harkness LLP use only. It is privileged and confidential attorney work product and is not to be shared with the client, opposing counsel, or any third party. A separate, client-facing budget discussion summary will be prepared if the team decides to proceed with fee discussions in accordance with the recommendations set forth above.

Timekeeper	Role	Hourly Rate
Leonard Cross	Responsible Partner (Tax)	$1,475/hr
Nathaniel Bower	Billing Partner (Bankruptcy & Restructuring)	$1,425/hr
Patricia Heng	Senior Counsel (Technology Transactions)	$1,175/hr
David Cartwright	Partner (Data Privacy & Cybersecurity)	$1,350/hr
Wendy Schultz	Lead Associate (Intellectual Property)	$895/hr
Omar Siddiqui	Working Associate (Intellectual Property)	$725/hr
Lisa Johannsen	Associate (Data Privacy & Cybersecurity)	$750/hr
Marcus Weill	Associate (Corporate/Commercial)	$695/hr
Timekeeper	Approx. Hours	Approx. Fees
Leonard Cross	~85 hrs	~$125,375
Nathaniel Bower	~30 hrs	~$42,750
Patricia Heng	~110 hrs	~$129,250
David Cartwright	~65 hrs	~$87,750
Wendy Schultz	~310 hrs	~$277,450
Omar Siddiqui	~260 hrs	~$188,500
Lisa Johannsen	~120 hrs	~$90,000
Marcus Weill	~130 hrs	~$90,350
Total	~1,110 hrs	~$1,031,425
Timekeeper	Est. Remaining Hours	Est. Remaining Fees
Leonard Cross	60–80 hrs	$88,500–$118,000
Nathaniel Bower	15–25 hrs	$21,375–$35,625
Patricia Heng	70–90 hrs	$82,250–$105,750
David Cartwright	30–40 hrs	$40,500–$54,000
Wendy Schultz	200–260 hrs	$179,000–$232,700

Omar Siddiqui	180–230 hrs	$130,500–$166,750
Lisa Johannsen	40–60 hrs	$30,000–$45,000
Marcus Weill	80–100 hrs	$55,600–$69,500
Total	~675–885 hrs	~$627,725–$827,325

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
FROM: Nathaniel Bower, Partner (Billing Partner)
TO: Leonard Cross, Partner (Responsible Partner)
CC: Wendy Schultz, Lead Associate; Patricia Heng, Senior Counsel
DATE: March 20, 2023
RE: Revised Budget & Fee Projection — C&H Matter No. 1025-00008 (Quorum Insurance Holdings Corp. / Meridian Credit intelligence, Inc. Data License)
CLIENT: Quorum Insurance Holdings Corp.
CLIENT BILLING CONTACT: Gregory Stahl, VP, Legal Affairs
I. Purpose and Executive Summary
The purpose of this memorandum is to revise the initial staffing budget set forth in the August 10, 2022 Staffing & Budget Memorandum in light of the extended negotiations on the proposed five-year, $60,000,000 enterprise data-licensing arrangement between our client, Quorum Insurance Holdings Corp. ("Quorum"), and Meridian Credit intelligence, Inc. ("Meridian"). As discussed in greater detail below, the matter has evolved considerably beyond its originally anticipated scope and timeline, and this memorandum provides an updated assessment of projected fees, identifies the principal cost drivers, and recommends a framework for approaching fee discussions with the client.
When this engagement was opened in August 2022, the original budget assumed a negotiation-and-documentation timeline of approximately four to five months — spanning from August 2022 through December 2022 or, at the outside, January 2023 — with total legal fees estimated to fall within the $1,800,000 soft cap that was agreed upon with Quorum's legal department at the outset of the representation. That estimate was predicated on assumptions about the pace and complexity of negotiations that, in hindsight, proved overly optimistic given the positions ultimately taken by Meridian and its financial sponsors.
The matter has now extended approximately seven months beyond the original estimated closing date, and there is no certainty as to when closing will occur. The prolonged timeline is principally attributable to two substantive impasses that have consumed a disproportionate share of legal resources. First, Quorum's demand for a most favored nation ("MFN") pricing clause — applicable to all U.S.-domiciled insurance carriers, managing general agents, and insurtech firms with annual premiums written of $500 million or more — has been categorically refused by Meridian. This refusal appears driven not by the merits of the MFN provision itself but by the strategic priorities of Meridian's majority private equity sponsor, Breckenridge Capital Partners Fund IV, L.P., and its investment bank, Whitmore Zanthor & Co., both of which view any MFN commitment as an impediment to Meridian's planned 2025–2026 initial public offering. Second, the parties remain deeply divided over Quorum's rights to create, own, and commercially exploit derived data — including blended risk scores, propensity models, and enriched datasets — built upon Meridian's licensed data. This issue implicates core intellectual property rights central to Quorum's QuorumScore™ product line and its projected $40–50 million B2B licensing revenue stream by 2027.
As of the end of February 2023, cumulative fees (including accrued but unbilled time) have reached approximately $1,180,000, representing approximately 65.6% of the $1,800,000 soft cap. While this figure is not, in isolation, alarming — it is roughly consistent with the proportion of work that would have been completed at this stage under the original timeline — the critical concern is that substantial work remains. The MDLA is not yet in execution-ready form, and the two principal open issues show no sign of imminent resolution. Accordingly, the remaining soft cap headroom of approximately $620,000 is unlikely to be sufficient to carry the matter through closing under any but the most optimistic scenario.
This memorandum proceeds as follows: Section II provides a recap of the original budget parameters and assumptions. Section III details actual fee burn by period and by timekeeper through February 2023. Section IV identifies and analyzes the key drivers of the extended timeline and increased costs. Section V presents revised fee projections under three scenarios (optimistic, base case, and pessimistic). Section VI outlines four options for structuring fee discussions with Quorum. Section VII sets forth the team's recommendations. Section VIII identifies immediate next steps.
II. Original Budget Recap
A. Engagement Parameters
The engagement letter between Calderwood & Harkness LLP and Quorum Insurance Holdings Corp. was executed on August 8, 2022, and the matter was opened on the same date under C&H Matter No. 1025-00008. The representation encompasses all legal work associated with the negotiation, drafting, and closing of the proposed five-year enterprise data-licensing arrangement with Meridian Credit intelligence, Inc., including all ancillary agreements, regulatory compliance analysis, and third-party consent processes.
The agreed fee structure is hourly billing, subject to a soft cap of $1,800,000 for the negotiation and documentation phase of the engagement. The soft cap was discussed and confirmed in a call between Nathaniel Bower and Gregory Stahl on August 5, 2022, and referenced in the engagement letter. It was understood by both parties that the soft cap represented a target estimate rather than a hard ceiling, and that fees could exceed the cap if the scope or complexity of the engagement materially expanded beyond the parties' initial expectations. That said, the engagement letter contemplated that Calderwood & Harkness would notify the client promptly if it appeared that fees were likely to exceed the soft cap, and would discuss any such overages with the client before they were incurred to the extent practicable.
Invoicing is conducted on a monthly basis, with payment terms of Net 30 days from the date of each invoice. Nathaniel Bower serves as the billing partner for the engagement, and Gregory Stahl, Vice President of Legal Affairs at Quorum, serves as the client's designated billing contact. Invoices are transmitted electronically to Mr. Stahl and to Quorum's accounts payable department, with copies retained in the matter file. Through February 2023, all invoices have been paid in a timely manner, and there are no outstanding receivables of concern.
B. Original Hourly Rate Schedule
The following hourly rate schedule was established in the engagement letter and has been in effect since the matter was opened:
These rates reflect the standard 2022 billing rates for each timekeeper. No rate increases have been applied mid-engagement, and the 2023 standard rate increases that took effect firm-wide on January 1, 2023 have not been applied to this matter. For purposes of the revised projections in Section V, we continue to use the above rate schedule unless otherwise noted. Should the matter extend into 2024, the question of whether to apply updated rates will need to be addressed with the client at the appropriate time.
C. Original Timeline and Budget Assumptions
The original Staffing & Budget Memorandum of August 10, 2022 assumed a negotiation and documentation timeline of approximately five months, running from August 2022 through December 2022 or, at the outside, January 2023. This timeline was based on a number of key assumptions, each of which is identified below for comparison against actual experience:
1. Negotiation Complexity. The original budget assumed that the MFN pricing provision and the derived-data rights provisions would be resolved within the normal course of Master Data License Agreement ("MDLA") negotiation. While these issues were recognized as potentially contentious, neither was expected to escalate into a protracted, standalone workstream requiring specialized analysis, dedicated drafting resources, and iterative negotiation rounds separate from the broader MDLA negotiation.
2. Drafting Rounds. The budget assumed a single round of MDLA drafting and counter-drafting — that is, Calderwood & Harkness would prepare an initial comprehensive redline of Meridian's form MDLA, Kessler Pruitt & Ashe LLP ("KP&A") would return a counter-redline on behalf of Meridian, and the parties would negotiate the remaining open points to resolution, with at most one additional round of focused markup on contested provisions. In practice, the matter has already gone through more than two full rounds of drafting and counter-drafting, with the MFN and derived-data provisions having been separately iterated multiple times.
3. Negotiation Sessions. The original budget allocated resources for one to two in-person negotiation sessions. As of the date of this memorandum, one session has been conducted (January 18, 2023, in New York), a second session is scheduled (March 9, 2023, in Atlanta), and additional sessions are likely required depending on the trajectory of negotiations.
4. Ancillary Workstreams. The original budget included allocations for the following ancillary workstreams, all of which were anticipated at engagement outset: negotiation and execution of a mutual non-disclosure agreement ("NDA"); preparation of regulatory compliance memoranda addressing the Fair Credit Reporting Act ("FCRA"), the Gramm-Leach-Bliley Act ("GLBA"), the California Consumer Privacy Act / California Privacy Rights Act ("CCPA/CPRA"), and 23 NYCRR Part 500 (New York Department of Financial Services Cybersecurity Regulation); analysis of the Standish National Bank covenant implications and preparation of a lender consent request; drafting of a Data Security Addendum ("DSA"); drafting of a Service Level Agreement ("SLA") and related technical schedules; preparation of an FCRA certification schedule; and preparation of standard closing deliverables (board resolutions, officer's certificates, closing checklist, and related documentation).
5. Total Budget Range. Based on the foregoing assumptions, the original total budget estimate was $1,500,000 to $1,700,000, well within the $1,800,000 soft cap. The soft cap itself was set at a level that provided approximately $100,000 to $300,000 of cushion above the upper end of the working estimate.
As discussed in Section IV, several of these assumptions have proven materially inaccurate, necessitating the revised projections set forth in this memorandum.
III. Actual Fee Burn — August 2022 Through February 2023
A. Summary of Fees Incurred by Period
The following is a narrative summary of work performed and fees incurred during each billing period from engagement opening through the end of February 2023. Detailed time entries are available in the billing system and have been reviewed for accuracy; the figures presented here are approximations based on that review.
August – October 2022 (Engagement Opening, NDA, Term Sheets): Approximately $340,000
This initial phase encompassed the administrative steps of engagement opening and conflicts clearance, followed by substantive work on the NDA and the parties' respective term sheets. The mutual NDA (NDA-QIH-MCI-2022-001) was negotiated with KP&A and executed on August 15, 2022 — a rapid turnaround that reflected the parties' eagerness to begin exchanging confidential information and move forward with substantive discussions. Following execution of the NDA, Meridian delivered its initial term sheet on September 12, 2022, which the team analyzed in detail over the following two weeks. The Quorum counter-term sheet was prepared between September 28 and September 30, 2022, incorporating input from all members of the deal team. An annotated comparison of the two term sheets, together with a comprehensive issues matrix identifying areas of alignment and divergence, was prepared between October 3 and October 5, 2022. During this period, the team also prepared and transmitted an initial introduction letter and negotiation priorities letter to Graham Whitley at KP&A, establishing the framework for the principal-to-principal and counsel-to-counsel negotiation tracks.
Fee expenditure during this period was generally consistent with the original budget, with no significant deviations from the anticipated scope of work. The term sheet analysis consumed somewhat more time than anticipated due to the complexity of Meridian's proposed pricing structure and the number of non-standard provisions in Meridian's initial proposal, but these overages were minor and were offset by efficiencies achieved in the NDA negotiation, which concluded more quickly than budgeted.
November – December 2022 (MDLA Drafting Phase): Approximately $445,000
This period represented the core drafting phase and was, on a per-month basis, the most resource-intensive period of the engagement. KP&A delivered Meridian's form MDLA on November 4, 2022. The team undertook a comprehensive analysis of the form agreement, which included a detailed review by Patricia Heng (technology transactions), David Cartwright (data privacy and cybersecurity), Wendy Schultz and Omar Siddiqui (Intellectual property), and Marcus Weill (corporate/commercial), with coordination and oversight by Leonard Cross and Nathaniel Bower. The analysis identified a significant number of provisions requiring revision or supplementation, particularly in the areas of data use restrictions, derived-data ownership, MFN pricing, indemnification, and limitation of liability.
Quorum's comprehensive redline of the MDLA was transmitted to KP&A on December 2, 2022. The redline was accompanied by a cover letter explaining the rationale for Quorum's principal revisions and identifying the provisions that Quorum viewed as most critical. An internal negotiation strategy memorandum was prepared and circulated on December 15, 2022, setting forth the team's recommended approach for the upcoming negotiation sessions, including identification of priority issues, acceptable fallback positions, and walk-away points.
During this same period, the team prepared multiple regulatory and subject-matter memoranda, including: (i) a memorandum analyzing the FCRA and GLBA framework applicable to the proposed data-licensing arrangement, with particular attention to the permissible purpose requirements under the FCRA and the information-sharing provisions of the GLBA; (ii) a memorandum addressing derived-data intellectual property ownership under copyright and trade secret law; (iii) a memorandum analyzing MFN market practice and enforceability in the context of data-licensing agreements; (iv) a memorandum addressing antitrust considerations related to MFN provisions in data markets; and (v) a memorandum analyzing the covenant implications of the proposed transaction under Quorum's Amended and Restated Credit Agreement with Standish National Bank, dated June 15, 2021 (the "Standish Credit Agreement"). In connection with the Standish analysis, the team prepared a draft lender consent request letter addressed to Philip Yardley at Standish National Bank, as well as a structuring alternatives memorandum analyzing potential approaches to structuring the transaction in a manner that might avoid or mitigate the need for lender consent.
Initial drafts of the Data Security Addendum, Service Level Agreement, and FCRA certification schedule were also prepared during this period. These ancillary documents proceeded generally on schedule, though the team's capacity to devote sustained attention to them was constrained by the intensity of the MDLA drafting process.
The higher-than-anticipated fee burn during November and December was driven primarily by two factors. First, the derived-data intellectual property ownership analysis proved substantially more complex than originally anticipated, requiring extensive legal research into the intersection of copyright law, trade secret law, and contractual allocation of rights in machine learning model outputs. Second, the need to prepare multiple regulatory and subject-matter memoranda in parallel with the MDLA redline created overlapping workstreams that could not be efficiently sequenced. Each of these memoranda was necessary to inform the team's positions on specific MDLA provisions, and delaying their preparation would have delayed the MDLA redline itself.
January – February 2023 (First Negotiation Session and Follow-up): Approximately $395,000
The third billing period was dominated by the first in-person negotiation session and the extensive preparation and follow-up work associated with it. Preparation for the January 18, 2023 session in New York included preparation of a detailed pre-session memorandum, updated issues lists, talking points for each open provision, and role-play exercises for anticipated Meridian negotiation positions. The session itself was attended by Leonard Cross, Patricia Heng, Wendy Schultz, and Omar Siddiqui, and lasted approximately nine hours. Meridian's delegation included Graham Whitley and two associates from KP&A, together with Meridian's General Counsel, Anabel Reyes, and VP of Data Partnerships, Derek Chen.
Following the session, a comprehensive post-session debrief memorandum was prepared and circulated on January 23, 2023, summarizing the areas of progress, the areas of continued disagreement, and the team's assessment of Meridian's negotiation posture. The January 18 session confirmed what had been suspected but not definitively established: the MFN clause and the derived-data rights provisions are the two principal open issues, and they are the issues on which Meridian's positions are most firmly entrenched. Both issues will require additional specialized analysis and creative drafting not contemplated in the original budget.
Substantive work during January and February included preparation of the revised MDLA second draft (Calderwood & Harkness's markup of Meridian's counter-redline, which KP&A had returned on January 9, 2023), drafting of a standalone MFN rider as a potential alternative to embedding the MFN provision in the body of the MDLA, preparation of the initial Quorum proposal for Article VII (Derived Data), and preparation of a detailed legal analysis memorandum addressing the copyright and trade secret status of machine learning model outputs. The team also prepared a counter-analysis of Meridian's proposed SLA terms, drafted data delivery specifications in Technical Schedule A (with input from Priya Nair, Quorum's VP of Data Engineering), and prepared a Data Processing Agreement addressing CCPA/CPRA compliance obligations. A follow-up letter to Standish National Bank regarding the status of the lender consent process was also transmitted during this period.
On February 14, 2023, Pinnacle Ridge Advisory LLC, Quorum's pricing consultant (Franklin Osei, Managing Director), delivered its pricing benchmark study analyzing Meridian's proposed rates against comparable data-licensing transactions in the insurance and financial services sectors. The study required additional legal review to assess the implications of the benchmarking data for the MFN negotiation and to evaluate potential use of the benchmarking data in the negotiation process.
B. Fees by Timekeeper (Through February 2023)
The following table summarizes approximate hours and fees by timekeeper from engagement opening through the end of February 2023:
The figures presented above are rounded for ease of reference and reflect time recorded through the end of February 2023. Actual invoiced amounts through February 2023 total approximately $1,031,000. However, there is an additional approximately $149,000 of accrued but unbilled time attributable to late February work that had not yet been reviewed and processed for invoicing as of the preparation of this memorandum. When this accrued time is included, the effective total fees incurred through February 2023 are approximately $1,180,000.
Several observations regarding the timekeeper-level data are noteworthy. The staffing profile reflects the team's deliberate effort to leverage work to the associate level to the greatest extent practicable: Wendy Schultz and Omar Siddiqui together account for approximately 570 of the 1,110 total hours (approximately 51%), and they bill at rates of $895/hr and $725/hr, respectively — well below the partner rates of $1,350 to $1,475/hr. Lisa Johannsen and Marcus Weill together account for an additional approximately 250 hours (approximately 23%) at rates of $750/hr and $695/hr. Thus, approximately 74% of total hours have been billed at associate-level rates, which is consistent with the staffing philosophy communicated to the client at the outset of the engagement.
Partner and senior counsel involvement has been focused on strategy, oversight, and client communications. Leonard Cross's 85 hours are attributable primarily to strategy sessions, client calls, and review of key deliverables. Nathaniel Bower's 30 hours reflect his role as billing partner, including invoice review, billing communications with the client, and coordination on engagement-level matters. Patricia Heng's 110 hours reflect her role as the subject-matter lead on technology transactions, including review and markup of the MDLA, guidance on the derived-data issues, and participation in the January 18 session. David Cartwright's 65 hours reflect his work on data privacy and cybersecurity matters, including the DSA, DPA, and regulatory memoranda.
C. Budget Utilization
The current budget utilization metrics are as follows:
• Cumulative fees incurred (through February 2023, including accruals): Approximately $1,180,000
• Soft cap: $1,800,000
• Soft cap consumed: Approximately 65.6%
• Remaining soft cap headroom: Approximately $620,000
While a utilization rate of 65.6% might appear to leave adequate room to complete the matter within the soft cap, the concern is that this figure must be evaluated in the context of where the matter stands substantively, not merely temporally. Under the original budget assumptions, approximately 80% of the total budget was expected to be consumed by the time the MDLA reached execution-ready stage, with the remaining 20% allocated to final negotiation of ancillary documents, lender consent, and closing deliverables. By that measure, we have consumed approximately 65.6% of the budget but have not yet reached execution-ready stage — indeed, we are not close, given the two principal open issues. The remaining work required to resolve the MFN and derived-data impasses, finalize the MDLA, complete the ancillary documents, obtain lender consent, and execute closing deliverables will, under all three scenarios analyzed in Section V, consume a substantial majority of the remaining soft cap headroom and, in the base and pessimistic cases, exceed it.
IV. Key Drivers of Extended Timeline and Increased Costs
This section identifies the four principal factors that have driven the matter beyond its originally estimated timeline and budget. Understanding these drivers is essential both for preparing accurate revised projections and for framing the fee discussion with the client, as each driver reflects circumstances that were not reasonably foreseeable at the outset of the engagement and that are attributable to the counterparty's conduct, the complexity of the underlying subject matter, or both — rather than to any inefficiency in the Calderwood & Harkness team's work.
A. MFN Impasse
Quorum's request for a most favored nation pricing clause has been a feature of the negotiation from the term sheet stage, and Meridian's resistance to such a clause was anticipated. What was not anticipated was the categorical nature of Meridian's refusal and the extent to which that refusal is driven by considerations extrinsic to the data-licensing relationship itself.
Quorum's proposed MFN clause would apply to all U.S.-domiciled insurance carriers, managing general agents ("MGAs"), and insurtech firms with annual premiums written equal to or exceeding $500 million. As drafted, the clause would require Meridian to offer Quorum pricing terms no less favorable than those offered to any comparably situated licensee, with a retroactive adjustment mechanism and annual audit rights. The Quorum position is that an MFN is commercially reasonable given the scale of the proposed licensing arrangement ($60 million over five years) and that the absence of an MFN creates an unacceptable risk that Quorum's competitors could obtain access to the same data on more favorable terms, undermining the competitive advantage that Quorum is paying a premium to secure.
Meridian has categorically refused any MFN clause in any form. Based on the team's analysis and the intelligence gathered through negotiations, this refusal is driven primarily by two external stakeholders. First, Breckenridge Capital Partners Fund IV, L.P. ("Breckenridge"), which holds a 62.5% equity interest in Meridian and whose representatives Caleb Rourke and Elaine Drummond sit on Meridian's board, has instructed Meridian's management that no MFN commitments are to be made in any data-licensing agreement. The concern is that MFN commitments would constrain Meridian's pricing flexibility, depress revenue growth metrics, and create disclosure complications in connection with Meridian's planned 2025–2026 IPO. Second, Whitmore Zanthor & Co., Meridian's investment bank (lead contact: Rachel Ng-Castillo), has reportedly advised Breckenridge and Meridian that MFN provisions in material customer contracts would be viewed negatively by prospective IPO investors and underwriters.
The practical consequence of this impasse is that the MFN issue, which was originally expected to be resolved as part of the normal give-and-take of MDLA negotiation, has instead become a standalone workstream requiring: (i) extensive market survey research on the prevalence and enforceability of MFN clauses in data-licensing agreements; (ii) detailed antitrust analysis in light of recent DOJ and FTC scrutiny of MFN provisions in data markets and adjacent industries; (iii) development of fallback positions, including a pricing audit right concept that would provide Quorum with visibility into Meridian's pricing practices without imposing a formal MFN obligation; and (iv) drafting of multiple alternative formulations, including a standalone MFN rider, a modified MFN with carve-outs, and a benchmarking-based adjustment mechanism. Each of these workstreams was not originally scoped, and collectively they have consumed significant attorney time — particularly from Wendy Schultz, Omar Siddiqui, and Patricia Heng.
B. Derived-Data Rights Dispute
The dispute over Quorum's rights to create, own, and commercially exploit derived data built upon Meridian's licensed data is the most complex and most commercially significant of the open issues. It is also the issue on which the gap between the parties' positions is widest and on which a compromise framework is most difficult to construct.
The core question is whether Quorum will have the unrestricted right to create and commercially exploit "derived data" — defined broadly to include blended risk scores, propensity models, enriched datasets, and other analytical outputs generated through Quorum's application of machine learning algorithms and proprietary methodologies to Meridian's raw and processed data feeds. This question directly implicates Quorum's QuorumScore™ product (USPTO application Serial No. 97/482,116), which is central to Quorum's B2B licensing strategy and which Quorum projects will generate $40–50 million in annual revenue by 2027.
The derived-data issue has required substantially more legal research and memorandum drafting than originally anticipated. Specific areas of additional work include:
(a) Analysis of whether Quorum's machine learning model outputs — including the QuorumScore™ — constitute "derivative works" under the Copyright Act, which determines whether Meridian's copyright in its underlying data extends to Quorum's analytical outputs. This analysis required engagement with a rapidly evolving area of law in which there is limited binding precedent, particularly with respect to the copyrightability of algorithmically generated outputs and the scope of the derivative work right in the context of data analytics.
(b) Analysis and response to Meridian's proposed license-back arrangement, under which Quorum would grant Meridian a perpetual, royalty-free license to use Quorum's derived data for Meridian's own commercial purposes, and Meridian's proposed 15% revenue share on any third-party commercialization by Quorum of derived data products. The Quorum team views both of these proposals as commercially unacceptable and inconsistent with market practice for enterprise data-licensing arrangements of this nature.
(c) Analysis and response to Meridian's proposed "sufficient transformation" standard, under which Quorum's derived data would be deemed to fall outside the scope of Meridian's license restrictions only if it had been "sufficiently transformed" such that Meridian's underlying data could not be reverse-engineered or extracted from the derived product — with "sufficient transformation" to be determined in Meridian's sole discretion. This standard is objectively unworkable, as it would give Meridian an effective veto over Quorum's entire derived-data business and would create unacceptable commercial uncertainty for Quorum and its downstream licensees.
(d) Protection of QuorumScore™ and Quorum's projected B2B licensing revenue stream. The team has worked closely with Quorum's in-house IP counsel and with Angela Firth at Caldwell & Strauss LLP, which represents Quorum on its broader IP portfolio, to ensure that the MDLA's derived-data provisions do not inadvertently compromise Quorum's existing IP rights or create encumbrances that would undermine the value of QuorumScore™ or related products. This coordination with outside IP counsel was not contemplated in the original scope and has required additional time, particularly from Wendy Schultz and Patricia Heng.
The team has developed a comprehensive Article VII compromise framework and a Draft Derived Data Commercialization Protocol, both of which have gone through multiple iterations in response to internal feedback from Quorum's business team and evolving negotiation dynamics. This iterative development process, while necessary, has consumed substantial resources beyond what was originally budgeted for the derived-data provisions.
C. Parallel Regulatory and Ancillary Workstreams
The ancillary workstreams identified in the original budget — Data Security Addendum, Data Processing Agreement (CCPA/CPRA), FCRA certification, and Service Level Agreement — have generally proceeded on their expected timelines. However, the intensification of the MFN and derived-data workstreams during November 2022 through February 2023 created resource pressure that affected the team's ability to advance these ancillary deliverables as efficiently as planned. In several instances, work on ancillary documents had to be paused while the team redirected its attention to the primary negotiation issues, resulting in context-switching inefficiencies and some duplication of effort when work was resumed.
In addition, the Standish National Bank covenant analysis and lender consent process has proven more time-intensive than originally budgeted. The $60,000,000 aggregate value of the proposed licensing arrangement exceeds the $25,000,000 threshold set forth in Section 7.12(b) of the Amended and Restated Credit Agreement (dated June 15, 2021) by $35,000,000, or approximately 240% of the threshold. This substantial exceedance required a more detailed structuring alternatives analysis than originally anticipated, as the team explored potential approaches — including phased payment structures, termination-for-convenience provisions, and separate contracting through a Quorum subsidiary — that might reduce the effective commitment below the threshold or otherwise mitigate the need for lender consent. Ultimately, the team concluded that lender consent is required under any commercially viable structuring approach, and a consent request letter was prepared and transmitted to Philip Yardley at Standish National Bank. The consent process is ongoing and has required multiple follow-up communications, with the outcome still pending as of the date of this memorandum.
D. Multiple Negotiation Sessions
The original budget allocated resources for one to two in-person negotiation sessions, with the assumption that any remaining open points could be resolved through counsel-to-counsel telephone discussions and email exchanges. In practice, the matter has already required one in-person session (January 18, 2023, in New York), and a second session has been scheduled for March 9, 2023, in Atlanta. Based on the current trajectory of negotiations, additional in-person sessions are likely required — particularly if the MFN and derived-data issues need to be escalated to the C-suite level for resolution.
Each in-person negotiation session carries a significant preparation and follow-up burden. Pre-session preparation typically includes preparation of a detailed pre-session memorandum (summarizing the status of each open issue, the parties' respective positions, and recommended negotiation strategies), preparation of updated issues lists and negotiation matrices, preparation of talking points for each open provision, internal strategy sessions with the deal team, and pre-session communications with the client's business team to confirm negotiation authority and priorities. Post-session follow-up typically includes preparation of a comprehensive debrief memorandum, revision of open issues lists to reflect the session's outcomes, preparation of revised drafts or counterproposals as appropriate, and strategic communications with the client regarding next steps. The combined preparation and follow-up for a single session typically consumes 80 to 120 hours of attorney time across the team, depending on the number and complexity of the issues under discussion.
The second session in Atlanta, scheduled for March 9, 2023, is expected to be particularly resource-intensive, as it is anticipated to address both the MFN and derived-data issues directly, and the team will need to present the revised Article VII compromise framework and the pricing audit right concept as alternatives to the current impasse.
V. Revised Fee Projections
A. Scenario Analysis
Based on the current status of the engagement and the factors identified in Section IV, the team has developed three scenarios for the remaining work and associated fees. Each scenario is described below with its underlying assumptions, scope of remaining work, and estimated fee range.
Scenario 1: Resolution and Closing by June 2023 (Optimistic)
This scenario assumes that the MFN and derived-data impasses are substantially resolved at or shortly after the March 9, 2023 negotiation session in Atlanta. Resolution could take the form of agreement on the pricing audit right concept (in lieu of a formal MFN) and adoption of the Article VII compromise framework (or a mutually acceptable variant) for derived-data rights. Under this scenario, the parties would move promptly to finalize the MDLA and execute closing deliverables, with closing occurring by the end of June 2023.
Remaining work under Scenario 1 would include:
• Final negotiation and drafting of the MDLA, incorporating agreed resolutions on MFN and derived-data issues as well as any remaining open commercial and legal terms.
• Finalization of the Data Security Addendum, Data Processing Agreement, Service Level Agreement, and Technical Schedules (including Technical Schedule A, data delivery specifications).
• Completion of the Standish National Bank lender consent process, including preparation of any supplemental information requested by Standish and review and negotiation of any conditions imposed by Standish as a condition to consent.
• Preparation of board resolutions, officer's certificates, and other corporate authorization documents required for execution.
• Preparation and management of the closing checklist, coordination of closing deliverables, and execution of the MDLA and all ancillary agreements.
Estimated remaining fees under Scenario 1: $550,000–$650,000.
Total projected fees under Scenario 1: $1,730,000–$1,830,000, representing a total that is approximately at or slightly above the $1,800,000 soft cap. This scenario would result in a modest overrun of the soft cap in the upper range (approximately $30,000, or 1.7%) and would be within the soft cap at the lower end of the range.
Scenario 2: Extended Negotiations Through Q3 2023 (Base Case)
This scenario, which the team considers the most likely based on current negotiation dynamics, assumes that the MFN and derived-data impasses are not resolved at the March 9 session and that negotiations continue through the second quarter of 2023, with resolution and closing occurring in the third quarter of 2023 (July–September 2023). Under this scenario, the continued impasse may require escalation of key issues to the C-suite level — specifically, to Quorum CEO Meg Tierney and Meridian CEO Vince Halstead — and iterative development of additional compromise proposals.
Remaining work under Scenario 2 would include all items identified under Scenario 1, plus:
• Additional rounds of negotiation on the MFN and derived-data provisions, potentially including one or more additional in-person sessions, multiple rounds of counsel-to-counsel negotiation, and development of revised proposals and fallback positions.
• Preparation of strategy memoranda and escalation-level communications for C-suite principals on both sides.
• Potential restructuring of deal terms, including modifications to the pricing structure, term length, or scope of the licensed data to facilitate compromise on the principal open issues.
• Extended monitoring and management of the Standish lender consent process, which may be complicated by the delay in closing.
• Additional regulatory analysis if the restructured deal terms implicate different or additional regulatory requirements.
Estimated remaining fees under Scenario 2: $800,000–$1,000,000.
Total projected fees under Scenario 2: $1,980,000–$2,180,000, exceeding the $1,800,000 soft cap by $180,000 to $380,000, representing an overage of approximately 10% to 21%.
Scenario 3: Protracted Negotiations or Impasse Through Year-End 2023 (Pessimistic)
This scenario assumes that negotiations stall materially — either because the parties are unable to bridge the gap on the MFN and/or derived-data issues, or because external factors (such as developments in Meridian's IPO planning or changes in Quorum's strategic priorities) create delays or interruptions. Under this scenario, the matter either resolves very late in 2023, enters a dormant period during which the engagement remains open and subject to periodic activity, or ultimately requires Quorum to consider alternative data providers.
Remaining work under Scenario 3 would include all items identified under Scenarios 1 and 2, plus:
• Extended monitoring of the engagement during periods of reduced activity, including periodic status updates to the client, maintenance of the deal file, and readiness to resume active negotiations on short notice.
• Preparation of additional strategy memoranda analyzing Quorum's options in the event of a protracted impasse, including analysis of alternative data providers and the implications of abandoning the Meridian arrangement.
• Potential alternative-provider analysis, including preliminary review of data-licensing terms available from competing providers and assessment of the switching costs and strategic implications.
• Matter maintenance activities, including periodic billing, time entry review, and engagement-level administration.
Estimated remaining fees under Scenario 3: $1,100,000–$1,400,000.
Total projected fees under Scenario 3: $2,280,000–$2,580,000, exceeding the $1,800,000 soft cap by $480,000 to $780,000, representing an overage of approximately 27% to 43%.
B. Projected Hours by Timekeeper (Remaining Work — Base Case)
The following table sets forth estimated remaining hours and fees by timekeeper under Scenario 2 (Base Case), which the team considers the most likely outcome:
These estimates assume that the current staffing model remains in place, with the associate team (Schultz, Siddiqui, Johannsen, and Weill) continuing to handle the bulk of the drafting and research work. The ranges reflect uncertainty regarding the number of additional negotiation sessions required, the complexity of the compromise proposals that will need to be developed, and the duration of the Standish consent process.
The midpoint of the Base Case fee range — approximately $727,000 in remaining fees, or approximately $1,907,000 in cumulative fees — is approximately 6% above the $1,800,000 soft cap, which the team considers a reasonable working estimate for budgeting and client-discussion purposes.
VI. Options for Fee Discussions with Quorum
As set forth below, the team has identified four options for structuring the fee discussion with Quorum. Each option is described with its key features, advantages, and risks.
A. Option 1: Maintain Current Soft Cap; Absorb Moderate Overages
Under this option, Calderwood & Harkness would not proactively approach the client to reset the soft cap. Instead, the firm would continue to perform work under the existing engagement terms and would absorb fee overages of up to approximately 10% above the $1,800,000 soft cap — i.e., the firm would write off fees in excess of approximately $1,980,000 as a client-relationship investment. This approach recognizes the size and importance of Quorum as a firm client — Quorum Insurance Holdings Corp. (Nasdaq: QIHC) reported FY 2023 revenue of $4.18 billion and engages Calderwood & Harkness across multiple practice areas — and treats the soft cap as what it was always presented to be: a target estimate, not a hard ceiling.
Advantages: This approach preserves goodwill with the client and avoids a potentially uncomfortable budget conversation at a time when the client's primary focus is on resolving the substantive negotiation issues. It also avoids creating any perception that Calderwood & Harkness is prioritizing its own fee interests over the client's deal objectives.
Risks: If Scenario 3 materializes, the overage absorbed by Calderwood & Harkness could reach $480,000 to $780,000, which would represent a significant write-off that is difficult to justify from a practice-group profitability standpoint. Even under the Base Case (Scenario 2), the write-off could reach $180,000 to $380,000, depending on the actual trajectory of the remaining work. Additionally, failing to communicate proactively about the budget creates a risk that the client will be surprised by the final fee totals, which could damage the relationship more than a transparent budget conversation would.
B. Option 2: Reset the Soft Cap with Client
Under this option, Nathaniel Bower (or, if preferred, Leonard Cross) would approach Gregory Stahl and/or Quorum General Counsel Carolyn Whitford to discuss resetting the soft cap to a range of $2,200,000 to $2,400,000. The conversation would be framed around the unforeseen complexity and duration of the MFN and derived-data negotiations, which have transformed what was originally expected to be a straightforward (if large-scale) data-licensing transaction into a multi-front negotiation with significant legal complexity and strategic stakes.
The team recommends framing this discussion as a phased approach: the current $1,800,000 soft cap was set to cover work through the original anticipated closing timeline; the revised cap would cover the additional work necessitated by the extended negotiation and the complexity of the unresolved issues. This framing avoids any implication that the original budget was poorly estimated and instead positions the revised cap as a natural response to changed circumstances.
Advantages: This approach is transparent and direct; it aligns the client's fee expectations with the reality of the engagement's scope and timeline. It preserves Calderwood & Harkness's ability to bill fully for the work performed, which is important both for practice-group economics and for maintaining appropriate incentives for the team to devote the time and attention that the matter requires. It also provides an opportunity to demonstrate the firm's professionalism and client-communication practices.
Risks: The client may push back, either on the reset itself or on the proposed range. Gregory Stahl may need to seek internal approvals to accept a revised cap, which could introduce delays and additional scrutiny. The client may also request concessions in connection with the reset — for example, a blended rate discount, a volume write-off, or a cap on the hours of specific timekeepers. Any such concessions would need to be carefully evaluated for their impact on the firm's effective realization on the matter.
C. Option 3: Hybrid — Phase-Based Billing with Adjusted Cap
Under this option, the team would propose restructuring the engagement into two distinct billing phases, each with its own budget:
Phase 1 (Completed): Engagement Through MDLA Second Draft. This phase encompasses all work performed from engagement opening through the transmission of the second MDLA draft, including the first negotiation session and all regulatory and subject-matter memoranda. Fees incurred during Phase 1 total approximately $1,180,000, billed against the original $1,800,000 soft cap.
Phase 2 (Remaining): Negotiation Resolution Through Closing. This phase encompasses all remaining work necessary to resolve the open negotiation issues, finalize the MDLA and all ancillary documents, complete the Standish lender consent process, and execute closing deliverables. The team would propose a new soft cap of $750,000 to $900,000 for Phase 2 work.
Under this structure, the total effective soft cap for the engagement would be $1,950,000 to $2,100,000, calculated as the sum of Phase 1 fees incurred ($1,180,000) plus the Phase 2 cap ($750,000 to $900,000). This range falls between the Scenario 1 and Scenario 2 projections and would provide adequate budget under the Base Case at the upper end of the Phase 2 cap range.
Advantages: This structure gives the client clear visibility into the remaining costs and provides a natural checkpoint for budget discussions. The phase-based framing makes the fee conversation easier to manage, as it avoids asking the client to accept a single large number and instead focuses the discussion on the incremental cost of completing the matter. It also provides a framework for ongoing budget monitoring, as Phase 2 fees can be tracked against the Phase 2 cap independently of Phase 1.
Risks: The client may seek to limit the Phase 2 cap more aggressively — for example, proposing a cap of $600,000 to $700,000 — which would leave inadequate budget for the Base Case scenario. The team would need to be prepared to explain the drivers of the Phase 2 cost estimate and to defend the proposed range.
D. Option 4: Alternative Fee Arrangement
If the client indicates a strong preference for greater fee predictability, the team could propose an alternative fee arrangement for the remaining work. Several structures are possible:
• Partial Fixed Fee: A flat fee for defined deliverables (e.g., closing deliverables, corporate authorizations, Standish consent) with continued hourly billing for the ongoing negotiation of contested provisions.
• Success Fee Component: A reduced hourly rate for ongoing work, with a success fee payable upon closing that is tied to the favorable resolution of the MFN and derived-data issues. This structure would align the firm's compensation incentives with the client's deal objectives.
• Blended Rate with Threshold: Continued hourly billing at a reduced blended rate (e.g., a 10% discount to standard rates) that would apply after cumulative fees exceed a defined threshold (e.g., $1,800,000), providing the client with effective rate relief on the overage amounts while still compensating the firm for its time.
Given the significant uncertainty in both the timing and outcome of the remaining negotiations, a pure fixed fee for the entirety of the remaining work is inadvisable, as it would expose Calderwood & Harkness to meaningful downside risk in the event of a protracted timeline. However, a hybrid arrangement — such as hourly billing with a reduced rate after a certain threshold, or a partial fixed fee for defined deliverables — may be workable and could be attractive to the client.
Note: Any alternative fee arrangement would require approval from the firm's pricing committee and should be discussed with the billing partner and practice group leaders before being proposed to the client.
VII. Recommendations
Based on the analysis set forth in this memorandum, the team recommends the following actions:
1. Immediate Action. Nathaniel Bower should schedule a call with Gregory Stahl, Quorum VP of Legal Affairs, in late March 2023 to discuss the revised budget outlook. This call should take place before cumulative fees approach or exceed the $1,800,000 soft cap. Based on the current rate of fee accrual — approximately $150,000 to $180,000 per month — cumulative fees are likely to reach the soft cap in late April or early May 2023 if the current pace of work continues. Initiating the budget conversation before that point is essential to preserving client trust and avoiding any suggestion that the firm failed to communicate proactively about foreseeable cost overruns.
2. Recommended Approach. The team recommends presenting Option 3 (Hybrid Phase-Based Billing with Adjusted Cap) as the primary proposal for the fee discussion with Quorum. The phase-based structure is the most intuitive framework for the client, as it provides a clear delineation between work already performed and work remaining, and it focuses the fee conversation on the incremental cost of completing the matter rather than requiring the client to accept a single revised aggregate number. Option 2 (Reset the Soft Cap) should be held in reserve as a fallback if the client prefers a simpler structure or if the phase-based approach proves difficult to implement from a billing-system standpoint.
3. Talking Points for Client Discussion. The following key messages should be communicated during the budget discussion with Quorum:
• The extended timeline and increased costs are driven by Meridian's negotiation positions — specifically, Meridian's categorical refusal of the MFN clause and the depth of the derived-data rights dispute — not by any inefficiency in the Calderwood & Harkness team's work. The MFN impasse is attributable to Breckenridge Capital Partners' and Whitmore Zanthor's concerns regarding Meridian's IPO positioning, and the derived-data dispute reflects fundamental disagreements about the allocation of IP rights that were not foreseeable at the outset of the engagement.
• The $60,000,000 deal value, combined with the critical importance of QuorumScore™ to Quorum's long-term B2B licensing strategy (projected $40–50 million in annual revenue by 2027), justifies the investment in rigorous negotiation and documentation. The provisions at issue — MFN pricing and derived-data rights — are among the most consequential terms in the entire agreement, and their resolution will have significant commercial implications for Quorum over the five-year term of the license and beyond.
• The Standish National Bank covenant process adds an unavoidable ancillary workstream. The $60,000,000 license value exceeds the $25,000,000 threshold in Section 7.12(b) of the Amended and Restated Credit Agreement by $35,000,000, and lender consent is required under any commercially viable structuring approach. This workstream was anticipated in the original budget but has consumed more time than expected due to the complexity of the structuring alternatives analysis.
• Calderwood & Harkness remains committed to cost efficiency and has maintained a staffing model in which the substantial majority of hours (approximately 74%) are billed at associate rates of $695 to $895 per hour, rather than at the partner rates of $1,350 to $1,475 per hour. This commitment to appropriate leverage will continue through the remainder of the engagement.
4. Staffing Adjustments Going Forward. To optimize cost efficiency for the remaining work, the team recommends the following staffing adjustments:
• Wendy Schultz and Omar Siddiqui will continue as the primary drafters and day-to-day negotiators, maintaining continuity and efficiency on the core MDLA negotiation. Their deep familiarity with the transaction and the negotiation history will minimize ramp-up time and reduce the risk of inconsistency in the drafting and negotiation approach.
• Leonard Cross's involvement will be focused on escalation-level communications (including any direct engagement with Quorum CEO Meg Tierney or Meridian CEO Vince Halstead) and high-level strategy sessions. He will not be deployed for routine document review or drafting tasks.
• Patricia Heng will be deployed selectively for subject-matter guidance on the derived-data provisions and technology transactions issues, rather than on a continuous basis. Her involvement in document markup and negotiation sessions will be limited to instances where her specific expertise is required.
• Marcus Weill will take primary responsibility for all Standish-related work (including the ongoing lender consent process and any supplemental submissions to Standish) and all corporate deliverables (board resolutions, officer's certificates, closing checklist), thereby freeing up bandwidth within the IP team to focus on the core negotiation issues.
• David Cartwright and Lisa Johannsen will be deployed as needed for data privacy, cybersecurity, and regulatory matters but will not maintain continuous involvement in the day-to-day negotiation.
These staffing adjustments are expected to maintain the current leverage ratio (approximately 74% associate hours) or improve it modestly, while ensuring that partner and senior counsel time is directed to its highest-value uses.
VIII. Next Steps
The following immediate next steps are identified:
1. Leonard Cross to review and approve this memorandum and provide any comments or direction regarding the recommended approach to fee discussions with Quorum.
2. Nathaniel Bower to coordinate with Gregory Stahl at Quorum to schedule a budget discussion call in late March 2023 or, at the latest, the first week of April 2023. The call should be scheduled after the March 9 Atlanta session, so that the team can provide the client with an update on the status of negotiations as part of the budget discussion.
3. Wendy Schultz to prepare a concise summary of estimated remaining work suitable for sharing with the client in connection with the budget discussion call. This summary should describe the remaining workstreams at a high level, identify the key variables that affect the cost estimate, and present the Phase-Based Billing proposal in a client-friendly format.
4. The full deal team to prepare for the March 9, 2023 negotiation session in Atlanta (the second in-person session). The outcome of this session will be a significant indicator of whether Scenario 1 (Optimistic) or Scenario 2/3 (Base Case/Pessimistic) is the more likely trajectory. Pre-session preparation should include: updated issues matrices for MFN and derived-data provisions; presentation of the pricing audit right concept and the Article VII compromise framework; and talking points for escalation scenarios.
5. Ongoing monthly invoicing to continue on the current schedule. The next invoice, covering work performed during February 2023, is to be finalized and transmitted by mid-March 2023. All time entries should be reviewed for accuracy and billing judgment applied as appropriate.
Distribution Note: This memorandum is for internal Calderwood & Harkness LLP use only. It is privileged and confidential attorney work product and is not to be shared with the client, opposing counsel, or any third party. A separate, client-facing budget discussion summary will be prepared if the team decides to proceed with fee discussions in accordance with the recommendations set forth above.
Timekeeper | Role | Hourly Rate
Leonard Cross | Responsible Partner (Tax) | $1,475/hr
Nathaniel Bower | Billing Partner (Bankruptcy & Restructuring) | $1,425/hr
Patricia Heng | Senior Counsel (Technology Transactions) | $1,175/hr
David Cartwright | Partner (Data Privacy & Cybersecurity) | $1,350/hr
Wendy Schultz | Lead Associate (Intellectual Property) | $895/hr
Omar Siddiqui | Working Associate (Intellectual Property) | $725/hr
Lisa Johannsen | Associate (Data Privacy & Cybersecurity) | $750/hr
Marcus Weill | Associate (Corporate/Commercial) | $695/hr
Timekeeper | Approx. Hours | Approx. Fees
Leonard Cross | ~85 hrs | ~$125,375
Nathaniel Bower | ~30 hrs | ~$42,750
Patricia Heng | ~110 hrs | ~$129,250
David Cartwright | ~65 hrs | ~$87,750
Wendy Schultz | ~310 hrs | ~$277,450
Omar Siddiqui | ~260 hrs | ~$188,500
Lisa Johannsen | ~120 hrs | ~$90,000
Marcus Weill | ~130 hrs | ~$90,350
Total | ~1,110 hrs | ~$1,031,425
Timekeeper | Est. Remaining Hours | Est. Remaining Fees
Leonard Cross | 60–80 hrs | $88,500–$118,000
Nathaniel Bower | 15–25 hrs | $21,375–$35,625
Patricia Heng | 70–90 hrs | $82,250–$105,750
David Cartwright | 30–40 hrs | $40,500–$54,000
Wendy Schultz | 200–260 hrs | $179,000–$232,700
Omar Siddiqui | 180–230 hrs | $130,500–$166,750
Lisa Johannsen | 40–60 hrs | $30,000–$45,000
Marcus Weill | 80–100 hrs | $55,600–$69,500
Total | ~675–885 hrs | ~$627,725–$827,325

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Dates

Amounts