MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Leonard Cross, Responsible Partner Nathaniel Bower, Billing Partner
FROM: Wendy Schultz, Lead Associate, intellectual Property Practice Group
DATE: August 10, 2022
RE: Staffing Plan, Hourly Rate Schedule & Budget Estimate — Quorum Insurance Holdings Corp. / Meridian Credit intelligence, Inc. Data-Licensing Transaction
MATTER NO.: C&H Matter No. 1025-00008
CLIENT: Quorum Insurance Holdings Corp.
CLIENT CONTACT: Gregory Stahl, Vice President, Legal Affairs; Carolyn Whitford, General Counsel & Executive Vice President
BILLING CONTACT: Gregory Stahl (invoicing monthly, Net 30)
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I. PURPOSE AND SCOPE
The purpose of this memorandum is to establish the staffing plan, hourly rate schedule, initial budget estimate, and projected timeline for Calderwood & Harkness LLP's ("C&H" or the "Firm") representation of Quorum Insurance Holdings Corp. ("Quorum" or the "Client") in connection with the negotiation and documentation of a five-year enterprise data-licensing arrangement with Meridian Credit intelligence, Inc. ("Meridian"). This memorandum is intended for internal use by the responsible partner, billing partner, and the C&H engagement team, and will serve as the baseline reference document for budget tracking, staffing allocation, and client reporting throughout the engagement.
The transaction at issue involves a total deal value of approximately $60,000,000 over the five-year initial term, structured as follows: $10,800,000 in Year 1 and $12,300,000 per year in each of Years 2 through 5, plus a one-time implementation and integration fee of $1,500,000 payable to Meridian upon execution. This is a strategically significant transaction for Quorum, representing one of the largest data-licensing commitments in its history and a core component of the Client's enterprise data strategy for the next half-decade.
The engagement letter between Calderwood & Harkness LLP and Quorum Insurance Holdings Corp. was executed on August 8, 2022. The agreed fee structure is hourly, subject to a soft cap of $1,800,000 for the negotiation and documentation phase. The soft cap is not a hard ceiling but reflects the Firm's good-faith estimate of the total legal fees required to complete the engagement under normal circumstances, and both parties have acknowledged that certain contingencies may cause fees to approach or modestly exceed that amount.
The scope of work to be performed by Calderwood & Harkness LLP under this engagement encompasses the following:
(a) Review and negotiation of the mutual Non-Disclosure Agreement ("NDA") between Quorum and Meridian;
(b) Analysis and counter-drafting of the initial term sheet proposed by Meridian;
(c) Negotiation and drafting of the Master Data License Agreement ("MDLA") and all ancillary schedules, including the Data Security Addendum ("DSA"), Data Processing Agreement ("DPA"), Service Level Agreement ("SLA"), Technical Schedule A, and FCRA Permissible Purpose Certification;
(d) intellectual property and derived-data analysis, including ownership, commercialization rights, and protection strategies for Quorum's proprietary predictive underwriting model (QuorumScore™);
(e) Regulatory compliance advice under applicable federal and state law, including the Fair Credit Reporting Act ("FCRA"), the Gramm-Leach-Bliley Act ("GLBA"), the California Consumer Privacy Act as amended by the California Privacy Rights Act ("CCPA/CPRA"), the New York Department of Financial Services Cybersecurity Regulation (23 NYCRR 500), and relevant state insurance data-security regulations;
(f) Lender covenant analysis and consent process under the Amended and Restated Credit Agreement dated June 15, 2021, among Quorum, the Lenders party thereto, and Standish National Bank, N.A. as Administrative Agent (the "Standish Credit Agreement"), specifically with respect to Section 7.12(b) thereof;
(g) Preparation of corporate authorization documents, including a board resolution, officer's certificate, and secretary's certificate; and
(h) Closing coordination, including preparation of closing checklists, conditions precedent trackers, signature page templates, and bring-down certificates.
The governing law for the MDLA is expected to be New York (without regard to conflicts-of-law principles), consistent with the engagement letter and the Client's preference.
II. TRANSACTION OVERVIEW
A. The Client
Quorum Insurance Holdings Corp. ("Quorum") is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol QIHC. The company is headquartered at 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901. Quorum is a multi-line insurance carrier and insurance-technology platform operator with operations spanning property and casualty, life, and specialty insurance lines. For its most recently completed fiscal year (FY 2023), Quorum reported revenue of approximately $4.18 billion and maintains a market capitalization of approximately $8.9 billion. Quorum's senior leadership relevant to this engagement includes Meg Tierney (Chief Executive Officer), Carolyn Whitford (General Counsel and Executive Vice President), Gregory Stahl (Vice President, Legal Affairs), Rajesh Anand (Chief Data Officer), Thomas Ng (Vice President, Procurement), Diane Lowell (Senior Vice President, Underwriting Analytics), Priya Nair (Director, Data Engineering), and Claudia Reeves (Vice President, Regulatory & Compliance).
B. The Counterparty
Meridian Credit intelligence, Inc. ("Meridian") is a Georgia corporation, privately held, headquartered at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326. Meridian operates as a consumer and commercial credit bureau, offering data products and analytics to financial institutions, insurance carriers, and other enterprise clients. Meridian is majority-owned (62.5%) by Breckenridge Capital Partners Fund IV, L.P. ("Breckenridge"), a private equity fund. Meridian's Chief Privacy Officer is Lena Vasquez.
C. Counterparty's Outside Counsel and Advisors
Meridian has retained Kessler Pruitt & Ashe LLP ("KP&A") as its outside counsel for this transaction. KP&A's headquarters are in Atlanta, Georgia, and the firm maintains a New York office at 51 Madison Avenue, 22nd Floor, New York, New York 10010. The KP&A team is led by Graham Whitley, Partner in the Technology & Licensing Practice Group, and includes associates Nina Chastain and Derek Fontaine. We anticipate that Ms. Chastain will serve as the primary day-to-day associate contact for document exchanges and negotiations, while Mr. Fontaine will focus on technical schedule matters. Mr. Whitley has been active in data-licensing transactions in the credit-data industry for over fifteen years and is well-regarded; we should expect sophisticated and well-prepared counterparts on the other side of this negotiation.
Additionally, Meridian has retained Whitmore Zanthor & Co. as its investment bank, with Rachel Ng-Castillo serving as the lead advisor. Whitmore Zanthor is advising Meridian on a planned initial public offering currently targeted for the 2025–2026 timeframe. This is a significant factor for our negotiation strategy. Meridian's IPO considerations are likely to influence its positions on several key deal terms, particularly the most favored nation ("MFN") pricing clause (which Meridian may view as constraining its pricing flexibility with other potential licensees and thereby depressing revenue projections in an IPO prospectus) and derived-data rights (where Meridian may seek to maximize the scope of data assets it can claim in connection with its S-1 disclosures). We should anticipate that Breckenridge, as the majority equity holder, will have significant input on negotiation positions and that Whitmore Zanthor may weigh in on terms that could affect Meridian's valuation narrative.
D. Business Purpose
The core business purpose of this transaction is for Quorum to ingest and utilize three of Meridian's flagship data products to enhance its automated underwriting models, claims-fraud detection capabilities, and customer propensity scoring across all of Quorum's insurance lines. Specifically, Quorum seeks to license:
(i) MCI Consumer Credit File™ — encompassing approximately 310 million consumer records;
(ii) MCI CommercialView™ — encompassing approximately 42 million business records; and
(iii) MCI AltSignal™ — encompassing approximately 85 million consumer alternative-data records (including utility payment history, rental payment data, and telecommunications account data).
These data sets will be ingested into Quorum's existing data infrastructure and used as inputs to Quorum's proprietary predictive underwriting model, QuorumScore™, which is the subject of a pending USPTO patent application (Serial No. 97/482,116). The projected business impact is substantial: Quorum's internal projections estimate that the data-enhanced QuorumScore™ model will generate $40–50 million in projected business-to-business licensing revenue by 2027, in addition to significant improvements in loss ratios and underwriting efficiency across Quorum's own book of business.
E. Key Anticipated Negotiation Flashpoints
Based on preliminary discussions with the Client and our initial review of publicly available information regarding Meridian's business and its private equity ownership, we anticipate the following four principal negotiation flashpoints:
(1) Most Favored Nation Pricing Clause. Quorum intends to demand a full MFN pricing clause ensuring that Quorum receives pricing no less favorable than that offered to any comparable licensee. Meridian is expected to resist this provision vigorously, both because of the operational constraints it would impose and because Breckenridge and Whitmore Zanthor may view an MFN commitment as problematic for the IPO valuation narrative.
(2) Ownership and Commercialization Rights for Derived Data. This is expected to be the most contentious issue in the negotiation. Quorum's position is that all data derived from the application of Quorum's proprietary algorithms and models to Meridian's raw data — including, critically, the outputs of the QuorumScore™ model — constitute Quorum's exclusive intellectual property. Meridian is expected to assert a claim to at least a partial interest in derived data, potentially seeking a license-back right, a "sufficient transformation" standard, and a revenue share (reportedly in the range of 15%) on Quorum's commercialization of QuorumScore™.
(3) Lender Consent Under the Standish Credit Agreement. The $60 million total license value exceeds the $25 million threshold in Section 7.12(b) of the Standish Credit Agreement by $35 million (i.e., the license value is approximately 240% of the threshold), triggering a requirement for lender consent. The consent process may be complicated if multiple lenders in the syndicate need to approve.
(4) Dispute Resolution Mechanism. Quorum's preferred position is exclusive jurisdiction in the courts of the State of New York, County of New York, or the United States District Court for the Southern District of New York. Meridian may insist on binding arbitration (potentially administered by the American Arbitration Association), which could limit Quorum's ability to seek emergency injunctive relief. This issue, while less complex than the MFN and derived-data issues, may require creative structuring (e.g., a carve-out for injunctive relief combined with arbitration for monetary disputes).
III. STAFFING PLAN
A. Core Team
The following four individuals will comprise the core team responsible for the day-to-day management and execution of this engagement. Their roles, practice group affiliations, expected levels of involvement, and hourly rates are described below.
1. Leonard Cross — Responsible Partner.
Practice Group: Tax
Role: Leonard will serve as the Responsible Partner on this engagement, providing overall matter supervision and senior-level strategic direction. He will be the primary point of contact for partner-level communications with Graham Whitley at Kessler Pruitt & Ashe LLP and will maintain the client relationship with Carolyn Whitford (General Counsel & EVP) and Meg Tierney (CEO). Leonard's involvement will be concentrated during key negotiation sessions, particularly those addressing the MFN pricing clause, derived-data ownership, and dispute resolution, where his experience and client relationships will be essential to bridging positions and resolving impasses. He will be available for escalation calls, in-person negotiation sessions, and strategic decision points throughout the engagement.
Estimated Involvement: Strategic oversight and key negotiation sessions; available on an as-needed basis for escalation calls and in-person sessions. Leonard's time commitment is expected to be moderate relative to the overall team but concentrated during critical junctures.
Hourly Rate: $1,475
2. Nathaniel Bower — Billing Partner.
Practice Group: Bankruptcy & Restructuring
Role: Nathaniel will serve as the Billing Partner for this engagement. In that capacity, he will be responsible for budget management, monthly invoice preparation, and fee discussions with the Client's billing contact, Gregory Stahl. Beyond his administrative responsibilities, Nathaniel will make substantive contributions to the engagement, particularly on the lender consent and credit agreement workstream. His expertise in credit agreements and restructuring will be invaluable in analyzing the Standish Credit Agreement's covenant structure, developing structuring alternatives to mitigate the Section 7.12(b) covenant trigger (or, alternatively, positioning the consent request for maximum likelihood of approval), and reviewing the corporate authorization documents (board resolution, officer's certificate, and secretary's certificate) for completeness and accuracy. Nathaniel will work closely with Marcus Weill on these workstreams.
Estimated Involvement: Moderate — billing administration duties plus substantive contribution on the lender consent workstream. Nathaniel's involvement will be distributed relatively evenly across the engagement timeline, with somewhat heavier involvement during the initial budget-setting phase and the lender consent period.
Hourly Rate: $1,425
3. Wendy Schultz — Lead Associate.
Practice Group: intellectual Property
Role: Wendy will serve as the Lead Associate and day-to-day project manager for the engagement. She will have the broadest range of responsibilities on the team, including primary drafting and review of the MDLA, all term sheets, and the derived-data provisions (Article VII of the MDLA). She will be the primary interface with Nina Chastain at KP&A for day-to-day document exchanges, issue resolution, and scheduling. In addition to her transactional responsibilities, Wendy will conduct and supervise legal research and analysis on several critical issues, including:
• MFN market practice and enforceability under New York law;
• Derived-data IP ownership under federal copyright and trade secret law;
• The "sufficient transformation" standard and its application to machine-learning model outputs;
• License-back provisions and market norms in comparable data-licensing transactions; and
• IP protection strategies for QuorumScore™, including coordination with Caldwell & Strauss LLP (Angela Firth, Quorum's longstanding outside IP counsel in Hartford, Connecticut) on the intersection with Quorum's existing IP portfolio.
Wendy will also receive and analyze the findings of Pinnacle Ridge Advisory LLC's independent data-quality assessment and pricing benchmark study, which is expected to be a key input for Quorum's MFN negotiating position.
Estimated Involvement: Heaviest time commitment on the team. Wendy is expected to log the most hours of any team member by a significant margin, reflecting her central role in all aspects of the transactional documentation and negotiation.
Hourly Rate: $895
4. Omar Siddiqui — Working Associate.
Practice Group: intellectual Property
Role: Omar will serve as the Working Associate supporting Wendy Schultz across all aspects of the MDLA drafting and redlining process. He will have primary responsibility for the technical schedules, including data delivery specifications and Technical Schedule A, working closely with Priya Nair (Quorum's Director of Data Engineering) to ensure that the technical requirements are accurately reflected in the contractual documentation. Omar will also prepare term sheet comparisons and issues matrices, maintain signature page templates, and conduct research on machine-learning model output ownership under both copyright and trade secret frameworks. He will interface with Derek Fontaine at KP&A on technical schedule comments and revisions.
Estimated Involvement: Substantial. Omar is expected to have the second-highest hourly commitment on the team, after Wendy Schultz, reflecting the volume of drafting, redlining, and research work required.
Hourly Rate: $725
B. Subject-Matter Advisors and Supporting Team
The following four individuals will serve as subject-matter advisors and supporting team members, contributing specialized expertise on discrete workstreams as described below.
5. Patricia Heng — Senior Counsel, Technology Transactions.
Role: Patricia will serve as a subject-matter advisor on technology licensing terms, drawing on her extensive experience in enterprise software and data-licensing transactions. She will be the lead drafter and reviewer of the Service Level Agreement ("SLA") schedule, including the analysis of uptime and latency commitments, service credit structures, and performance benchmarks. Patricia will benchmark the proposed SLA terms against industry standards for credit-data providers, drawing on her familiarity with comparable arrangements involving the major credit bureaus and alternative data vendors. She will also provide input on the MFN market practice memorandum, leveraging her broad view of pricing structures in the data-licensing market.
Estimated Involvement: Moderate; concentrated during the SLA drafting and negotiation phases (expected January–April 2023) and the MFN analysis phase.
Hourly Rate: $1,175
6. David Cartwright — Partner, Data Privacy & Cybersecurity.
Role: David will provide the privacy and cybersecurity regulatory overlay for the engagement. He will serve as the lead attorney on the Data Security Addendum ("DSA") and the incident response and breach notification provisions. David will analyze the requirements of 23 NYCRR 500 (the New York Department of Financial Services Cybersecurity Regulation) as they apply to both Quorum (as a DFS-regulated entity) and the proposed data-sharing arrangement with Meridian. He will also oversee the preparation of a comprehensive regulatory framework memorandum addressing the FCRA, GLBA, and applicable state insurance data-security regulations. David will supervise Lisa Johannsen in the execution of these workstreams and will be responsible for ensuring that all privacy and security provisions in the MDLA and ancillary documents meet the applicable regulatory standards.
Estimated Involvement: Moderate; concentrated during the DSA and DPA drafting and regulatory analysis phases (expected January–March 2023).
Hourly Rate: $1,350
7. Lisa Johannsen — Associate, Data Privacy & Cybersecurity.
Role: Lisa will support David Cartwright across all privacy and data security workstreams. She will serve as the primary drafter of the Data Processing Agreement, with particular focus on CCPA/CPRA compliance, and will prepare the FCRA Permissible Purpose Certification schedule. Lisa will also prepare a detailed memorandum on the CCPA/CPRA implications of Quorum's proposed derived-data commercialization strategy, including the classification of derived data under the CCPA's definition of "personal information" and the applicability of the CCPA's "business purpose" and "commercial purpose" distinctions. Additionally, Lisa will conduct a state-by-state breach notification analysis to ensure that the MDLA's breach notification provisions (which are expected to include a 48-hour notification obligation) comply with the varying requirements across all fifty states and the District of Columbia.
Estimated Involvement: Moderate; concentrated during the privacy and data security documentation phases (expected January–March 2023).
Hourly Rate: $750
8. Marcus Weill — Associate, Corporate/Commercial.
Role: Marcus will manage two principal workstreams. First, he will lead the lender consent workstream, drafting the consent request letter to Philip Yardley (Relationship Manager, Standish National Bank, N.A.) and preparing the formal lender consent/waiver form. This workstream requires careful analysis of Section 7.12(b) of the Standish Credit Agreement, which imposes a $25 million threshold on certain licensing and IP-related commitments. The $60 million total license value of the proposed Meridian transaction exceeds this threshold by $35 million — i.e., the license value is approximately 240% of the covenant threshold — and will therefore require affirmative lender consent. Marcus will prepare a structuring alternatives memorandum exploring potential approaches to mitigating the covenant trigger, including the possibility of structuring the arrangement to fall below the threshold (e.g., through annual commitments, contingent pricing, or other mechanisms), and will handle all follow-up correspondence with Standish.
Second, Marcus will prepare the corporate authorization documents required for closing, including the board resolution (for approval by Harrison Kimble, Board Chair), the officer's certificate, and the secretary's certificate. He will also prepare the closing checklist, conditions precedent tracker, signature page templates, and bring-down certificate.
Estimated Involvement: Moderate; front-loaded for the lender consent workstream (expected November 2022 through Q1 2023) and back-loaded for corporate authorization and closing documents (upon resolution of open negotiation issues).
Hourly Rate: $695
C. External Coordination
In addition to the Calderwood & Harkness team described above, two external parties will contribute to the engagement in a non-billing capacity:
Caldwell & Strauss LLP (Angela Firth, Partner, Hartford, CT). Caldwell & Strauss is Quorum's longstanding outside intellectual property counsel. Angela Firth has represented Quorum in patent prosecution matters and general IP portfolio management for over a decade. Caldwell & Strauss is not billing on this matter but will provide background guidance to Quorum's in-house legal team on the implications of the Meridian transaction for Quorum's existing IP portfolio and on derived-data ownership positions. Wendy Schultz will coordinate with Angela Firth as needed to ensure consistency between the positions taken in the MDLA negotiation and the advice Quorum has received from Caldwell & Strauss on QuorumScore™ and related IP matters.
Pinnacle Ridge Advisory LLC (Franklin Osei, Managing Director, Boston, MA). Pinnacle Ridge has been retained separately by Quorum to conduct an independent data-quality assessment of Meridian's data products and to prepare a pricing benchmark study comparing Meridian's proposed pricing against market rates for comparable credit-data products. The Pinnacle Ridge benchmark study is expected to be delivered in approximately February 2023 and will serve as a key input for Quorum's MFN negotiating position. The C&H team — specifically Wendy Schultz — will receive, analyze, and incorporate Pinnacle Ridge's findings into the negotiation strategy. Pinnacle Ridge's fees are being borne directly by Quorum and are outside the scope of this engagement and budget.
IV. HOURLY RATE SCHEDULE
The following table sets forth the hourly billing rates for each member of the Calderwood & Harkness team assigned to this engagement:
All rates are as set forth in the engagement letter executed on August 8, 2022, by and between Calderwood & Harkness LLP and Quorum Insurance Holdings Corp. These rates are subject to annual adjustment in accordance with the Firm's standard rate adjustment policy, as disclosed to the Client in the engagement letter. The Client will be notified in advance of any rate adjustments.
Expenses — including travel (airfare, ground transportation, lodging, and meals), document production and reproduction, database and legal research charges, courier and delivery services, and similar out-of-pocket costs — will be billed at cost, without markup. Estimated expenses are set forth separately in Section V.C below.
V. BUDGET ESTIMATE
A. Soft Fee Cap
Pursuant to the engagement letter executed on August 8, 2022, Calderwood & Harkness LLP and Quorum Insurance Holdings Corp. have agreed to a soft cap of $1,800,000 for the negotiation and documentation phase of this engagement. The soft cap represents the Firm's good-faith estimate of the total professional fees likely to be incurred under normal circumstances and reflects both the complexity of the transaction and the anticipated scope of the negotiation.
The soft cap is not a hard ceiling. Calderwood & Harkness will use commercially reasonable efforts to complete the engagement within the soft cap amount, but acknowledges that certain contingencies may cause fees to approach or modestly exceed the cap. Such contingencies could include, without limitation: protracted negotiations arising from the MFN pricing clause or derived-data ownership disputes; additional regulatory analysis necessitated by changes in applicable law or regulatory guidance; expanded lender consent requirements involving multiple members of the Standish lending syndicate; or litigation-related work arising from the negotiation process. Any anticipated overrun of the soft cap will be discussed with Gregory Stahl and Carolyn Whitford in advance, and the Firm will not exceed the soft cap without prior notice to the Client.
B. Estimated Hours and Fees by Team Member
The following table presents our estimated range of hours and corresponding fees for each team member, based on our current assessment of the likely scope and complexity of the engagement:
Low-End Estimate ($1,171,000). The low end of the range assumes a relatively smooth negotiation cycle with prompt resolution of the MFN pricing clause and derived-data ownership disputes, limited rounds of drafting (approximately three to four exchanges of the MDLA and ancillary documents), an efficient lender consent process with Standish National Bank, and no significant regulatory complications or changes in applicable law during the engagement period.
High-End Estimate ($1,503,500). The high end of the range assumes extended negotiations with multiple rounds of redlines (potentially five to seven exchanges of the MDLA alone), a protracted impasse on the MFN pricing clause and derived-data ownership issues, the need for additional regulatory analysis (e.g., due to new CCPA/CPRA rulemaking or changes in DFS guidance), and added complexity in the Standish consent process, including potential engagement with multiple lenders in the syndicate.
Both estimates fall within the agreed $1,800,000 soft cap. The resulting buffer between the high-end estimate and the soft cap is approximately $297,000 at the high end, and approximately $629,000 at the low end. This buffer provides a reasonable cushion for unforeseen contingencies.
Risk Factor. We note that if Meridian's resistance to the most favored nation pricing clause and derived-data ownership provisions requires additional negotiation sessions beyond the currently projected range, expert analysis (whether legal or economic), or creative restructuring of the transaction economics, hours could approach or modestly exceed the soft cap. Based on our preliminary assessment of Meridian's negotiating posture — informed by the fact that Breckenridge Capital Partners, as the majority equity holder, has significant influence over Meridian's deal positions, and that Whitmore Zanthor & Co. may advocate for terms that preserve maximum flexibility for the planned 2025–2026 IPO — we believe the risk of an extended negotiation on these issues is meaningful but manageable with proactive negotiation strategy and disciplined project management.
C. Estimated Expenses
In addition to professional fees, we anticipate the following categories of out-of-pocket expenses:
Travel expenses reflect the likelihood of multiple in-person negotiation sessions in New York (at either C&H's offices or KP&A's New York office at 51 Madison Avenue) and potentially one or two sessions in Atlanta at KP&A's headquarters, as well as periodic client meetings in Stamford, Connecticut at Quorum's offices. We will seek to minimize travel costs by conducting routine negotiations via videoconference, reserving in-person sessions for key milestone negotiations on the most complex issues.
D. Total Estimated Engagement Cost
Taking into account both professional fees and estimated expenses, the total estimated cost of the engagement is as follows:
Fees: $1,171,000–$1,503,500
Expenses: $22,500–$41,000
Total Estimated Engagement Cost: $1,193,500–$1,544,500
This total falls comfortably within the agreed $1,800,000 soft cap, inclusive of expenses, under both the low-end and high-end scenarios.
VI. WORKSTREAM BREAKDOWN AND BUDGET ALLOCATION
To provide greater transparency into how the estimated fees will be allocated across the engagement, we have organized the work into ten discrete workstreams. Each workstream is described below with its scope, primary team assignment, estimated fee range, and relevant context.
A. Workstream 1: NDA and Preliminary Agreements
Tasks: Review Meridian's form mutual Non-Disclosure Agreement; prepare a Calderwood & Harkness redline reflecting Quorum's standard NDA positions (including appropriate carve-outs for derived data, residuals, and compelled disclosure); negotiate final terms with KP&A; finalize and execute the Mutual NDA (to be designated NDA-QIH-MCI-2022-001); transmit fully executed copies to KP&A and to the Client.
Primary Team: Wendy Schultz, Omar Siddiqui
Estimated Fees: $15,000–$25,000
Status: The NDA execution is targeted for August 15, 2022. As of the date of this memorandum, this workstream is substantially complete. Meridian's form NDA was received on August 3, 2022, and our redline was transmitted to KP&A on August 7, 2022. We are awaiting KP&A's response, which we expect to receive within the next two to three business days. We do not anticipate significant issues in finalizing the NDA, although we will pay particular attention to the definition of "Confidential Information" and any carve-outs for residual knowledge, given the sensitivity of the derived-data ownership issues that will arise later in the MDLA negotiation.
B. Workstream 2: Term Sheet Analysis and Counter-Drafting
Tasks: Analyze Meridian's initial term sheet upon receipt (expected September 12, 2022, based on the timeline communicated by Graham Whitley to Leonard Cross); prepare a detailed annotated comparison and issues matrix highlighting key differences from Quorum's preferred positions; prepare Quorum's counter-term sheet reflecting the Client's objectives on pricing, MFN, derived-data rights, term length, termination provisions, and dispute resolution; present the issues matrix and counter-term sheet to the Client for review and approval.
Primary Team: Wendy Schultz, Omar Siddiqui, Leonard Cross (review and strategic input)
Input From: Rajesh Anand (Chief Data Officer), Thomas Ng (Vice President, Procurement), Diane Lowell (Senior Vice President, Underwriting Analytics) — all of Quorum's in-house team
Estimated Fees: $40,000–$65,000
This workstream is critical to setting the tone for the negotiation. The issues matrix will serve as the roadmap for all subsequent negotiations, and the counter-term sheet will be the first formal statement of Quorum's positions on all material deal points. We will coordinate closely with Quorum's business team to ensure that the counter-term sheet accurately reflects the Client's commercial priorities and risk tolerance.
C. Workstream 3: MDLA Negotiation and Drafting
Tasks: Review Meridian's form Master Data License Agreement upon receipt from KP&A (initial form expected approximately October 17, 2022, based on KP&A's indicated timeline; Meridian's revised form incorporating term sheet resolutions expected approximately November 4, 2022); prepare a comprehensive redline of the MDLA (target delivery to KP&A: December 2, 2022); conduct multiple rounds of negotiation and drafting, including in-person negotiation sessions in New York and potentially Atlanta; resolve all outstanding issues, with particular focus on the MFN pricing clause, derived-data rights (Article VII), dispute resolution provisions, insurance minimums, late payment terms, and post-termination data obligations.
Primary Team: Wendy Schultz, Omar Siddiqui, Patricia Heng, Leonard Cross
Estimated Fees: $400,000–$550,000
This is the largest workstream by estimated fee allocation and reflects the anticipated complexity and duration of the MDLA negotiation, particularly with respect to the MFN pricing clause and derived-data ownership provisions. The key sub-tasks within this workstream include:
(i) MFN Clause Drafting. Quorum's initial position will be a full MFN clause providing that the pricing offered to Quorum under the MDLA will be no less favorable than the pricing offered to any comparable licensee. The proposed comparator class is United States-domiciled insurance carriers, managing general agents ("MGAs"), and insurtech firms with annual premiums written of $500 million or more. We anticipate that Meridian will resist a full MFN, and we will prepare a fallback position consisting of an annual pricing audit right with a 110% pricing ceiling (i.e., Quorum's pricing may not exceed 110% of the most favorable pricing offered to any licensee in the comparator class), conducted by an independent third-party auditor mutually agreed upon by the parties.
(ii) Derived-Data Rights (Article VII). Quorum's position is that all data derived from the application of Quorum's proprietary algorithms and models to Meridian's raw data is the exclusive property of Quorum. Meridian is expected to resist this position and to demand, at a minimum: (a) a license-back right permitting Meridian to use certain categories of derived data for its own analytical products; (b) a "sufficient transformation" standard requiring that Quorum demonstrate a threshold level of original intellectual contribution before derived-data ownership vests; and (c) a 15% revenue share on Quorum's commercialization of derived-data products, including QuorumScore™. Given that QuorumScore™ has projected B2B licensing revenue of $40–50 million by 2027, the economic stakes of this provision are significant. We will develop a detailed negotiation strategy memorandum addressing the merits and risks of each position.
(iii) Insurance Minimums. The MDLA is expected to include insurance covenants requiring each party to maintain specified levels of coverage. Quorum's proposed minimums are: commercial general liability ("CGL") coverage of not less than $5 million per occurrence, and cyber/technology errors and omissions coverage of not less than $50 million in the aggregate. For Meridian, the proposed minimums are: CGL coverage of not less than $5 million per occurrence, and cyber/technology errors and omissions coverage of not less than $25 million in the aggregate.
(iv) Late Payment Provisions. The MDLA will include a late payment interest provision at a rate of 1.5% per month (18% per annum), applied to any amounts not paid within the specified payment period.
(v) Post-Termination Data Obligations. Upon expiration or termination of the MDLA, Quorum will be required to return or destroy all raw Meridian data within ninety (90) days. The treatment of Derived Data (as defined in the MDLA) upon termination is a distinct and separately negotiated issue; Quorum's position is that Derived Data survives termination as Quorum's exclusive property, while Meridian may seek to require deletion or cessation of commercialization.
(vi) Payment Structure. Year 1 fees of $10,800,000 are to be paid in quarterly installments of $2,700,000. Years 2 through 5 fees of $12,300,000 per year are to be paid in quarterly installments of $3,075,000. An overage rate of $0.003 per record will apply to any usage exceeding the 500 million records per month base tier.
D. Workstream 4: IP and Derived-Data Specialist Analysis
Tasks: Prepare detailed memoranda on the following topics: (i) derived-data IP ownership under federal copyright law, including the "originality" and "creative selection" standards and their application to algorithmically generated outputs; (ii) machine-learning model output ownership under both copyright and trade secret frameworks, including an analysis of the Copyright Office's evolving guidance on AI-generated works; (iii) a critique of the "sufficient transformation" standard proposed by Meridian, including an assessment of its legal basis, enforceability, and practical implications; (iv) a market survey of license-back provisions in comparable data-licensing transactions in the insurance and financial services industries; (v) a QuorumScore™ IP protection strategy, encompassing patent, trade secret, and contractual protections; and (vi) a derived-data commercialization protocol to be incorporated as an exhibit or schedule to the MDLA.
Primary Team: Wendy Schultz, Omar Siddiqui
Coordination: Angela Firth, Caldwell & Strauss LLP (Hartford, CT)
Estimated Fees: $120,000–$170,000
This workstream represents a significant intellectual investment and will produce work product that is essential to Quorum's negotiating position on Article VII of the MDLA. The memoranda produced in this workstream will inform not only the current negotiation but also Quorum's broader IP strategy with respect to derived data and machine-learning model outputs. We will coordinate closely with Angela Firth at Caldwell & Strauss to ensure that our positions are consistent with the advice Quorum has received from its longstanding IP counsel.
E. Workstream 5: Data Security, Privacy, and Regulatory
Tasks: Prepare the initial draft of the Data Security Addendum ("DSA") and negotiate its terms with KP&A; draft the Data Processing Agreement ("DPA") with a focus on CCPA/CPRA compliance; prepare the FCRA Permissible Purpose Certification schedule; prepare comprehensive regulatory framework memoranda addressing the Fair Credit Reporting Act (FCRA), the Gramm-Leach-Bliley Act (GLBA), applicable state insurance data-security regulations, and the New York Department of Financial Services Cybersecurity Regulation (23 NYCRR 500); analyze incident response and breach notification provisions, including the proposed 48-hour data-breach notification obligation; and conduct a state-by-state breach notification analysis.
Primary Team: David Cartwright, Lisa Johannsen
Input From: Claudia Reeves (Quorum Vice President, Regulatory & Compliance) and Lena Vasquez (Meridian Chief Privacy Officer)
Certifications to Address: The DSA and DPA will need to address the parties' respective security certifications and audit reports. Meridian holds a SOC 2 Type II report issued by Galloway Nash LLP for the period ending March 31, 2023, and maintains ISO 27001 certification. Quorum holds a SOC 2 Type II report issued by Felton Thorpe & Co. LLP for the period ending December 31, 2023. The DSA will include provisions requiring ongoing maintenance of these certifications and periodic sharing of updated audit reports.
Estimated Fees: $180,000–$240,000
This is the second-largest workstream by estimated fee allocation, reflecting the significant regulatory complexity of a data-licensing arrangement involving consumer credit data. The FCRA, GLBA, CCPA/CPRA, and 23 NYCRR 500 each impose distinct and sometimes overlapping requirements on the collection, use, sharing, and protection of consumer data. The regulatory framework memoranda will serve as foundational reference documents for the Client's in-house legal and compliance teams throughout the term of the MDLA.
F. Workstream 6: SLA and Technical Schedules
Tasks: Prepare the initial draft of the Service Level Agreement ("SLA") schedule, including uptime requirements (proposed at 99.9% monthly measured availability), latency standards for both batch and API delivery methods, and a service credit framework for failure to meet SLA targets; prepare Technical Schedule A, specifying data formats, refresh frequencies, and delivery methods (SFTP batch delivery and REST API access); negotiate and redline the SLA with KP&A, including benchmarking proposed terms against industry standards for credit-data providers.
Primary Team: Patricia Heng, Omar Siddiqui
Input From: Priya Nair (Quorum Director, Data Engineering)
Technical Context: The base tier under the proposed MDLA is 500 million records per month. Quorum's estimated monthly data volume is approximately 437 million records, or approximately 87.4% of the base tier. This provides a reasonable cushion below the overage threshold, although volume may increase as Quorum onboards additional use cases. The SLA and Technical Schedule A will need to address both current volume requirements and anticipated growth.
Estimated Fees: $80,000–$110,000
G. Workstream 7: Lender Consent and Covenant Compliance
Tasks: Conduct a thorough analysis of Section 7.12(b) of the Amended and Restated Credit Agreement dated June 15, 2021, among Quorum Insurance Holdings Corp., the Lenders party thereto, and Standish National Bank, N.A. as Administrative Agent (the "Standish Credit Agreement"). The $60 million total license value of the proposed Meridian transaction exceeds the $25 million threshold set forth in Section 7.12(b) by $35 million, representing approximately 240% of the covenant threshold. This will require affirmative lender consent. Tasks include: drafting the consent request letter to Philip Yardley (Relationship Manager, Standish National Bank, N.A.); preparing the formal lender consent/waiver form; preparing a structuring alternatives memorandum exploring approaches to mitigate or avoid the covenant trigger; and handling all follow-up correspondence with Standish and, if necessary, other lenders in the syndicate.
Primary Team: Marcus Weill, Nathaniel Bower
Estimated Fees: $60,000–$85,000
Note: Quorum's revolving credit facility under the Standish Credit Agreement is $1.2 billion. The consent process may be complicated if the consent of multiple lenders in the syndicate (rather than solely the Administrative Agent) is required under the terms of the Credit Agreement. We will conduct a careful analysis of the consent mechanics in the Credit Agreement at the outset of this workstream to determine the scope of consents required.
H. Workstream 8: Corporate Authorizations and Closing
Tasks: Prepare the board resolution authorizing Quorum to enter into the MDLA and all ancillary agreements (for approval by Harrison Kimble, Board Chair); prepare the officer's certificate and secretary's certificate; prepare the closing checklist and conditions precedent tracker; prepare signature page templates for all transaction documents; and prepare the bring-down certificate.
Primary Team: Marcus Weill, Omar Siddiqui
Estimated Fees: $30,000–$45,000
This workstream is back-loaded, with most of the work commencing upon resolution of the open negotiation issues and moving into the pre-closing phase. However, certain preliminary work (such as identifying the required corporate authorizations and preparing draft templates) can be initiated earlier in the engagement timeline to ensure readiness when the negotiation reaches its conclusion.
I. Workstream 9: Negotiation Correspondence and Client Communications
Tasks: Prepare and manage all correspondence with Kessler Pruitt & Ashe LLP, including formal letters, email communications, and document transmittal cover sheets; prepare internal client memoranda, including pre-negotiation strategy memoranda, post-session debriefs, and analysis memoranda on specific issues; prepare periodic status reports for the Client summarizing negotiation progress, open issues, and recommended next steps.
Primary Team: Wendy Schultz, Leonard Cross, Omar Siddiqui
Estimated Fees: $60,000–$90,000
While negotiation correspondence and client communications are inherent in every workstream described in this memorandum, this workstream captures the standalone time associated with managing the flow of information between the parties and keeping the Client informed. Effective communication and documentation are critical to maintaining negotiating leverage, ensuring alignment between the legal team and the Client's business objectives, and creating a clear record of the negotiation process.
J. Workstream 10: MFN and Antitrust Analysis
Tasks: Prepare a comprehensive memorandum on MFN market practice and enforceability under New York law, including a survey of judicial treatment of MFN clauses in commercial agreements and an analysis of common drafting approaches and pitfalls; prepare a separate memorandum on antitrust considerations associated with MFN clauses, including DOJ and FTC enforcement trends, price-signaling risks, and the application of antitrust principles to the credit-data industry; integrate the findings of the Pinnacle Ridge Advisory pricing benchmark study (expected February 2023, from Franklin Osei, Managing Director) into the MFN negotiation strategy.
Primary Team: Wendy Schultz, Patricia Heng
Estimated Fees: $35,000–$50,000
This workstream addresses a critical aspect of Quorum's negotiating position. The MFN clause is one of the four principal negotiation flashpoints identified in Section II.E above, and the enforceability and antitrust implications of MFN provisions are areas of active legal development. The Pinnacle Ridge pricing benchmark study will provide the economic foundation for Quorum's MFN demands, and our legal analysis will complement that economic analysis by ensuring that the MFN clause is drafted in a manner that is both enforceable and defensible from an antitrust perspective.
VII. PROJECTED TIMELINE
The following table sets forth our projected timeline for the engagement, organized by phase, with key milestones identified for each phase:
Note on Timeline Assumptions. The projected timeline assumes a reasonably efficient negotiation cycle in which the parties engage in good faith, exchange drafts and comments on mutually agreed schedules, and are available for negotiation sessions with reasonable advance notice. However, there is a meaningful risk of delay if the MFN pricing clause and derived-data ownership issues become protracted. Based on initial indications regarding the posture of Breckenridge Capital Partners (Meridian's majority equity holder) and Whitmore Zanthor & Co. (Meridian's investment bank) with respect to Meridian's planned 2025–2026 IPO, we believe there is a real possibility that Meridian will take aggressive positions on these issues and resist compromise, which could extend the negotiation timeline beyond the projected Q2–Q3 2023 closing window.
Contingency. If negotiations extend beyond Q3 2023, a revised budget memorandum will be prepared and discussed with the Client. Any timeline extension of that nature would likely necessitate a reassessment of the fee estimate and potentially the soft cap, depending on the reasons for the delay and the remaining scope of work.
VIII. BUDGET MONITORING AND REPORTING
Effective budget management is essential to maintaining the Client's confidence and ensuring that the engagement remains within the agreed parameters. The following monitoring and reporting protocols will be implemented:
Monthly Budget Monitoring. Nathaniel Bower, as Billing Partner, will monitor actual hours and fees against the budget on a monthly basis, reviewing time entries by team member and by workstream to identify any deviations from the projected allocation.
Monthly Invoicing. Monthly invoices will be sent to Gregory Stahl, Quorum Vice President, Legal Affairs, in accordance with the engagement letter. Payment terms are Net 30 from the date of invoice.
Quarterly Status Reports. On a quarterly basis, a written status report will be provided to Gregory Stahl summarizing: (i) hours incurred by each team member during the quarter; (ii) cumulative fees incurred to date versus the $1,800,000 soft cap; (iii) a description of work completed during the quarter; and (iv) a summary of anticipated work for the following quarter.
Soft Cap Threshold Alert. If cumulative fees approach 75% of the $1,800,000 soft cap — i.e., $1,350,000 — Nathaniel Bower will initiate a proactive budget discussion with Gregory Stahl and Carolyn Whitford to evaluate the remaining scope of work, the likelihood of completing the engagement within the soft cap, and any adjustments that may be needed to the cap or the scope of the engagement.
Material Scope Changes. Any material changes to the scope of the engagement — such as litigation arising from the negotiation, additional regulatory proceedings, significantly expanded lender negotiations, or other unforeseen developments — will require a separate scope and fee discussion with the Client before additional work is undertaken. Such discussions will be memorialized in a supplemental engagement letter or scope amendment, as appropriate.
IX. ASSUMPTIONS AND QUALIFICATIONS
The budget estimate and projected timeline set forth in this memorandum are based on the following assumptions and qualifications:
1. Single Transaction. This budget assumes a single transaction consisting of the MDLA and its ancillary documents (DSA, DPA, SLA, Technical Schedule A, FCRA Permissible Purpose Certification, and related schedules and exhibits). The budget does not cover any disputes, arbitration proceedings, or litigation that may arise in connection with the negotiation or performance of the MDLA.
2. Counterparty Cooperation. The budget assumes reasonable cooperation from Meridian and Kessler Pruitt & Ashe LLP in exchanging drafts, providing comments on agreed timelines, and scheduling negotiation sessions. If the counterparty is materially unresponsive or engages in dilatory tactics, additional time and fees may be required.
3. Third-Party Fees Excluded. The budget does not include fees for Pinnacle Ridge Advisory LLC, which has been retained separately by Quorum for the independent data-quality assessment and pricing benchmark study. The budget also does not include any fees for Caldwell & Strauss LLP, which is not billing on this matter and is providing background guidance to Quorum's in-house team on a courtesy or existing-retainer basis.
4. Implementation Fee Excluded. The budget does not include the $1,500,000 implementation and integration fee payable by Quorum to Meridian upon execution of the MDLA. This fee is a Quorum business expense and is outside the scope of Calderwood & Harkness's legal fees.