1025-00008 · Quorum Insurance Holdings · Lender Consent

draft-lender-consent-request-letter.docx DOCUMENT M&A / Corporate

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DRAFT — Prepared by Calderwood & Harkness LLP (M. Weill) for Client Signature C&H Matter No. 1025-00008

QUORUM INSURANCE HOLDINGS CORP. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901

November __, 2022

Philip Yardley Relationship Manager Standish National Bank, N.A., as Administrative Agent 280 Congress Street Boston, MA 02210

Re: Request for Consent Under 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 "Credit Agreement") — Proposed Master Data License Agreement with Meridian Credit intelligence, Inc.

Dear Mr. Yardley:

1. Introduction and Purpose

Quorum Insurance Holdings Corp. ("Quorum" or the "Borrower"), a corporation organized and existing under the laws of the State of Delaware (EIN: 83-2147605; Delaware Division of Corporations Entity File No. 7234819), respectfully submits this letter in its capacity as Borrower under that certain Amended and Restated Credit Agreement, dated as of June 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Quorum, the several financial institutions and other entities from time to time party thereto as lenders (collectively, the "Lenders"), and Standish National Bank, N.A. ("Standish"), in its capacity as Administrative Agent for the Lenders. The Credit Agreement governs, among other things, the $1,200,000,000 senior secured revolving credit facility (the "Revolving Facility") established for the benefit of the Borrower thereunder.

The purpose of this letter is to formally request the prior written consent of the Required Lenders (as defined in the Credit Agreement), acting through the Administrative Agent, pursuant to Section 7.12(b) of the Credit Agreement, in connection with Quorum's proposed entry into a Master Data License Agreement (the "MDLA") with Meridian Credit intelligence, Inc. ("Meridian"), a corporation organized and existing under the laws of the State of Georgia, with its principal offices located at 3300 Peachtree Road NE, Suite 2100, Atlanta, GA 30326. The MDLA, as more fully described in Section 2 below, contemplates a multi-year enterprise data-licensing arrangement under which Meridian would grant Quorum a license to access and utilize certain consumer credit, commercial credit, and alternative data products in connection with Quorum's internal business operations, including its underwriting, claims management, and data analytics functions.

All capitalized terms used but not otherwise defined in this letter shall have the respective meanings ascribed to such terms in the Credit Agreement.

2. Description of the Proposed Transaction

2.1 Overview of the MDLA

Quorum proposes to enter into a five-year enterprise data-licensing arrangement with Meridian, pursuant to which Meridian would grant Quorum a non-exclusive, non-transferable license to access and use certain consumer credit data, commercial credit data, and alternative data products (collectively, the "Licensed Data") for Quorum's internal business operations, as described more fully below. The MDLA would establish the terms governing the scope of the license, the delivery mechanisms, the fees payable by Quorum, and the respective rights and obligations of the parties with respect to data security, intellectual property ownership, confidentiality, and related matters.

Meridian is a privately held consumer and commercial credit bureau and data analytics company that provides credit reporting, scoring, and analytics services to financial institutions, insurance carriers, telecommunications providers, and other enterprise customers. Meridian is majority-owned (approximately 62.5% of outstanding equity interests) by Breckenridge Capital Partners Fund IV, L.P., a growth-equity fund. Based on publicly available and diligence information, Meridian's fiscal year 2023 revenue was approximately $1,420,000,000, with earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $438,000,000. Meridian is a well-capitalized, established participant in the credit data and analytics industry and maintains longstanding relationships with major financial institutions and insurance carriers.

2.2 Licensed Data Products

Under the terms of the proposed MDLA, Quorum would receive a license to access and use the following Meridian data products:

(a) MCI Consumer Credit File™ — A full-file consumer tradeline data product covering approximately 310 million consumer records. This product includes comprehensive consumer credit tradeline data, including account types, balances, payment histories, delinquency statuses, public records, and related data fields. Delivery would be available through both daily batch file transmission and real-time application programming interface ("API") access, enabling Quorum to integrate the data into both its batch-processing underwriting workflows and its real-time, point-of-sale underwriting decision engines.

(b) MCI CommercialView™ — A commercial credit data product providing credit and financial profile information on approximately 42 million U.S. businesses, including corporate credit scores, payment behavior indexes, filing and lien data, corporate linkage data, and related commercial credit attributes. Delivery would be via weekly batch file transmission, consistent with Quorum's commercial insurance underwriting cycle.

(c) MCI AltSignal™ — An alternative data product encompassing utility payment data, telecommunications payment data, and rental payment data covering approximately 85 million consumer records. The inclusion of alternative data sources is intended to supplement traditional credit bureau data and improve Quorum's ability to assess creditworthiness and risk profiles for consumers with limited traditional credit histories (commonly referred to as "thin-file" or "credit-invisible" consumers). Delivery would be via daily batch file transmission.

The total estimated monthly data volume under the MDLA is approximately 437,000,000 records per month, aggregated across all three Licensed Data products. This volume falls comfortably within the 500,000,000 records per month base tier established under the proposed MDLA pricing structure, as described in Section 2.4 below.

2.3 Business Purpose

Quorum intends to ingest the Licensed Data provided by Meridian under the MDLA to enhance and support its automated underwriting models, claims-fraud detection algorithms, and customer propensity scoring capabilities across its property and casualty, life, and specialty insurance lines of business. The integration of comprehensive third-party credit and alternative data into Quorum's underwriting and claims operations is consistent with the insurance industry's accelerating adoption of data-driven underwriting practices and represents a critical investment in Quorum's competitive positioning.

In particular, the MDLA supports Quorum's ongoing development and deployment of the QuorumScore™ predictive underwriting model, a proprietary machine-learning-based scoring system that blends third-party credit and alternative data (including the Licensed Data to be obtained under the MDLA) with Quorum's extensive proprietary first-party data assets, including historical claims data, policy-level data, and telematics data derived from Quorum's connected-device programs. Quorum has filed a patent application with respect to the QuorumScore™ model with the United States Patent and Trademark Office (Serial No. 97/482,116), which application remains pending as of the date hereof.

The MDLA is a critical component of Quorum's broader enterprise data strategy, which is overseen by Quorum's Chief Data Officer and Chief Technology Officer and has been reviewed and approved by the relevant committees of Quorum's Board of Directors. The enhanced data capabilities enabled by the MDLA are expected to contribute to improved underwriting profitability through more accurate risk segmentation, reduced claims-fraud losses, and enhanced customer acquisition and retention through more precise propensity scoring and personalized product offerings. Quorum's management believes that the MDLA will strengthen Quorum's competitive positioning relative to both traditional insurance carriers and emerging insurtech competitors.

2.4 Financial Terms of the MDLA

The material financial terms of the proposed MDLA are summarized below:

(a) Total Aggregate License Fees. The total aggregate license fees payable by Quorum to Meridian over the five-year initial term of the MDLA are $60,000,000.

(b) Year 1 Annual License Fee. The Year 1 annual license fee is $10,800,000, reflecting a six-month implementation and ramp period during which Quorum will be integrating the Licensed Data into its systems and workflows. The effective monthly rate during Year 1 is $900,000, payable in quarterly installments of $2,700,000 each.

(c) Years 2–5 Annual License Fee. The annual license fee for each of Years 2 through 5 is $12,300,000 per year, reflecting the full operational run-rate for the Licensed Data products. The effective monthly rate for Years 2 through 5 is $1,025,000, payable in quarterly installments of $3,075,000 each.

(d) Reconciliation. The aggregate license fees are reconciled as follows: $10,800,000 (Year 1) + ($12,300,000 × 4) (Years 2 through 5) = $10,800,000 + $49,200,000 = $60,000,000 total.

(e) Payment Terms. All license fees are payable quarterly in advance, with the first quarterly installment due upon execution and delivery of the MDLA.

(f) Implementation/Integration Fee. A one-time implementation and integration fee of $1,500,000 is payable by Quorum to Meridian in connection with the initial setup, configuration, and integration of the Licensed Data products into Quorum's technology environment. This fee is not included in the $60,000,000 aggregate license value and will be billed separately, payable upon execution and delivery of the MDLA.

(g) Data Overage Rate. In the event that Quorum's actual monthly data consumption exceeds the 500,000,000 records per month base tier, a per-record overage charge of $0.003 per record will apply to each record in excess of the base tier. Based on Quorum's current projected usage of approximately 437,000,000 records per month, Quorum does not anticipate exceeding the base tier during the initial term of the MDLA, though Quorum acknowledges that usage may vary depending on business volumes and the pace of integration.

(h) Late Payment Interest. Overdue amounts under the MDLA will bear interest at a rate of 1.5% per month (18% per annum), calculated from the due date of the applicable payment until the date of actual payment in full.

2.5 Other Material Terms (Summary)

In addition to the financial terms summarized above, the following is a summary of certain other material terms of the proposed MDLA:

(a) Governing Law. The MDLA will be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law.

(b) Data Security. Both Quorum and Meridian will be required to maintain current SOC 2 Type II certifications (or equivalent industry-standard security certifications) throughout the term of the MDLA. Each party will be subject to a 48-hour data-breach notification obligation with respect to any security incident involving unauthorized access to, or exfiltration of, any Licensed Data or derived data.

(c) Insurance Requirements. Meridian will be required to maintain commercial general liability insurance with limits of not less than $5,000,000 per occurrence and cyber and technology errors and omissions insurance with an aggregate limit of not less than $25,000,000. Quorum will be required to maintain commercial general liability insurance with limits of not less than $5,000,000 per occurrence and cyber liability insurance with an aggregate limit of not less than $50,000,000.

(d) Post-Termination Obligations. Upon termination or expiration of the MDLA, Quorum will be required to return or certify the destruction of all Meridian raw data (i.e., Licensed Data in its original, unmodified form) within 90 days following the effective date of termination or expiration. Quorum's rights with respect to derived data, models, and analytics outputs are addressed in Section 4.4 below and remain subject to ongoing negotiation.

(e) Ongoing Negotiations. The Borrower notes that certain commercial terms of the MDLA, including provisions governing Quorum's rights with respect to derived data and certain pricing-related provisions, remain under active negotiation between the parties and their respective counsel. Quorum is represented by Calderwood & Harkness LLP, and Meridian is represented by Kessler Pruitt & Ashe LLP. Quorum will promptly advise the Administrative Agent of any material changes to the terms described herein resulting from the ongoing negotiation process.

3. Applicability of Section 7.12(b) of the Credit Agreement

Section 7.12(b) of the Credit Agreement provides, in relevant part:

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

Quorum has determined, and its outside counsel concurs, that the proposed MDLA constitutes a "license . . . or similar arrangement with respect to intellectual Property" within the meaning of Section 7.12(b) of the Credit Agreement. The Licensed Data to be made available to Quorum under the MDLA consists of proprietary data compilations, databases, and related intellectual property assets owned or controlled by Meridian, and the MDLA grants Quorum a license to access and use such intellectual property for the purposes and during the term specified therein.

The aggregate value of the MDLA, measured by the total license fees payable by Quorum over the five-year initial term, is $60,000,000. This amount exceeds the $25,000,000 threshold set forth in Section 7.12(b) by $35,000,000. Expressed as a multiple, the aggregate value of the MDLA represents approximately 240% of the covenant threshold (i.e., $60,000,000 ÷ $25,000,000 = 2.4×).

Accordingly, Quorum is required to obtain the prior written consent of the Required Lenders, acting through the Administrative Agent, before executing and delivering the MDLA. Quorum is submitting this letter and the enclosed draft form of Lender Consent/Waiver for the purpose of obtaining such consent.

4. Rationale Supporting Consent

Quorum believes that the Required Lenders should grant their consent to the proposed MDLA for the reasons set forth below. Quorum respectfully submits that the MDLA is consistent with, and supportive of, Quorum's business strategy, financial health, and ongoing compliance with its obligations under the Credit Agreement.

4.1 Strategic Importance to Quorum's Business

Quorum is a publicly traded, multi-line insurance carrier and insurance-technology platform operator, listed on the Nasdaq Stock Market under the ticker symbol "QIHC," with a market capitalization of approximately $8,900,000,000 as of August 2022. Quorum's consolidated fiscal year 2023 financial results reflect revenue of approximately $4,180,000,000, net income of approximately $312,000,000, and total assets of approximately $27,600,000,000. Quorum is among the largest insurance carriers in the United States and is widely recognized as a leader in the adoption of advanced data analytics and technology-driven underwriting practices.

The proposed Meridian license is integral to Quorum's competitive positioning and is a central element of Quorum's underwriting technology platform. Access to comprehensive, high-quality consumer and commercial credit data has become essential for insurance carriers seeking to maintain and enhance their underwriting accuracy and operational efficiency. The insurance industry has undergone a significant transformation in recent years, with leading carriers increasingly relying on third-party data assets — including credit bureau data and alternative data sources — to inform risk assessment, pricing, and customer segmentation. The MDLA would ensure that Quorum has access to a broad, high-quality data ecosystem that is comparable to, or exceeds, the data assets available to its principal competitors.

4.2 Manageable Financial Impact

The financial impact of the MDLA on Quorum's operations and cash flows is manageable and immaterial relative to Quorum's scale. The total aggregate license fee of $60,000,000 is payable over a five-year period, with annual payments ranging from $10,800,000 in Year 1 to $12,300,000 in each of Years 2 through 5. These annual payment amounts represent less than 0.3% of Quorum's annual consolidated revenue (based on FY 2023 revenue of approximately $4,180,000,000).

The quarterly payment structure further reduces the cash flow impact: the maximum quarterly installment of $3,075,000 (applicable in Years 2 through 5) is well within Quorum's ordinary-course cash flow generation and operating budget. Quorum's management has reviewed the projected payment obligations under the MDLA and has confirmed that such obligations can be satisfied from operating cash flows without any impact on Quorum's ability to fund its ongoing operations, satisfy its debt service obligations, or maintain adequate liquidity.

The one-time implementation and integration fee of $1,500,000 is immaterial relative to Quorum's overall technology and capital expenditure budget and does not warrant separate analysis.

4.3 No Adverse Impact on Credit Agreement Obligations

Quorum wishes to emphasize several important structural features of the MDLA that are relevant to the Lenders' evaluation of this consent request:

(a) The MDLA does not involve any disposition, transfer, assignment, or encumbrance of any intellectual property owned by Quorum. Under the MDLA, Quorum is the licensee — not the licensor — and is receiving a license to use Meridian's proprietary data assets. No intellectual property of Quorum will be conveyed, pledged, or otherwise made available to Meridian or any third party as a result of the MDLA.

(b) The MDLA will not result in the creation, incurrence, or assumption of any liens on any assets of Quorum (including any Collateral, as defined in the Credit Agreement). The license fees payable under the MDLA are ordinary-course operating expenditures and do not constitute Indebtedness (as defined in the Credit Agreement) or give rise to any Lien (as defined in the Credit Agreement).

(c) The MDLA will not result in the incurrence of any additional Indebtedness by Quorum. The payment obligations under the MDLA are fixed, determinable operating expenses and are not in the nature of borrowed funds, guarantees, or contingent liabilities.

(d) Quorum's ability to perform its obligations under the Credit Agreement and to service the $1,200,000,000 Revolving Facility will not be impaired as a result of the MDLA. The annual license fees represent a de minimis portion of Quorum's consolidated revenue, operating cash flow, and total assets.

(e) As of the date of this letter, Quorum is in full compliance with all financial covenants, affirmative covenants, negative covenants, and other terms and conditions of the Credit Agreement. No Default or Event of Default (each as defined in the Credit Agreement) has occurred and is continuing, and the execution and delivery of the MDLA will not, in and of itself, give rise to any Default or Event of Default.

4.4 IP Ownership Retained by Quorum

A matter of particular importance to the Lenders is the treatment of intellectual property ownership under the proposed MDLA. Under the terms of the MDLA as proposed by Quorum and currently under negotiation, Quorum will retain full and unencumbered ownership of all intellectual property in and to any and all derived data, models, scores, analytics outputs, and other work product created by Quorum using the Licensed Data as an input, including, without limitation, the QuorumScore™ predictive underwriting model and any enhancements, modifications, or derivative works thereof. Quorum's proprietary intellectual property — including its first-party data assets, proprietary models, algorithms, software, trade secrets, and related technology — will not be subject to any ownership claim, license, or lien in favor of Meridian as a result of the MDLA.

The Licensed Data provided by Meridian under the MDLA will remain the property of Meridian at all times. Quorum's rights with respect to the Licensed Data are limited to a non-exclusive, non-transferable license to access and use such data during the term of the MDLA and solely for the specified business purposes described herein. Quorum will have no right to resell, sublicense, or otherwise distribute the Licensed Data to third parties.

Critically, the MDLA does not grant Meridian any ownership interest in, security interest in, or lien upon, any of Quorum's proprietary intellectual property, including any intellectual property that constitutes Collateral under the Credit Agreement and the related Security Documents. The Lenders' security interests in Quorum's intellectual property will not be adversely affected by the MDLA.

5. Form of Consent Requested

In light of the foregoing, Quorum respectfully requests that Standish, as Administrative Agent under the Credit Agreement, circulate this consent request to the Lenders and obtain the written consent of the Required Lenders to Quorum's execution and delivery of the MDLA with Meridian, substantially on the terms described in this letter, pursuant to and in accordance with Section 7.12(b) of the Credit Agreement.

Quorum proposes that the consent, if granted, be expressly limited in scope to the MDLA as described in this letter and that such consent shall not constitute a waiver of Section 7.12(b) of the Credit Agreement with respect to any other transaction, arrangement, or course of conduct, whether now existing or hereafter arising. The consent should not be deemed to establish any course of dealing or to modify or amend the Credit Agreement in any respect other than as expressly set forth in the consent.

For the convenience of the Administrative Agent and the Lenders, Quorum encloses herewith a draft form of Lender Consent/Waiver, prepared by Calderwood & Harkness LLP on behalf of Quorum, for the Administrative Agent's review and consideration. Quorum understands that the Administrative Agent may propose modifications to the draft form of consent and welcomes any comments or revisions that the Administrative Agent or the Lenders may deem appropriate.

6. Supporting Documentation

In connection with this consent request, Quorum is prepared to make available to the Administrative Agent and the Lenders, upon request, the following supporting materials and documentation:

(a) Draft Master Data License Agreement between Quorum Insurance Holdings Corp. and Meridian Credit intelligence, Inc. (current negotiation draft, subject to completion of ongoing negotiations between the parties and their respective counsel);

(b) Summary of key commercial terms of the MDLA (term sheet format);

(c) Description of Meridian Credit intelligence, Inc., including corporate history, ownership structure (including the 62.5% equity interest held by Breckenridge Capital Partners Fund IV, L.P.), management team, and financial profile;

(d) Quorum's most recent quarterly financial statements (unaudited), as filed with the Securities and Exchange Commission;

(e) SOC 2 Type II report for Quorum Insurance Holdings Corp., issued by Felton Thorpe & Co. LLP, for the period ending December 31, 2023 (to be made available upon issuance); and

(f) Any other information, documentation, or materials reasonably requested by the Administrative Agent or the Required Lenders in connection with their review and evaluation of this consent request.

Quorum is committed to providing full transparency and cooperation in connection with this request and will respond promptly to any inquiries from the Administrative Agent or the Lenders.

7. Timing and Next Steps

Quorum respectfully requests that the Administrative Agent process this consent request on an expedited basis. The MDLA remains subject to active negotiation between Quorum and Meridian and their respective counsel, and the parties have expressed a mutual desire to reach definitive documentation and execute the MDLA as promptly as practicable. Obtaining lender consent in advance of the completion of negotiations will enable Quorum to execute the MDLA promptly upon agreement on final terms, thereby avoiding unnecessary closing delays and preserving Quorum's negotiating position.

Quorum acknowledges that the MDLA has not yet been executed and that certain terms remain subject to negotiation, as noted in Section 2.5 above. Quorum will promptly notify the Administrative Agent of any material changes to the terms of the MDLA as described in this letter, including any changes to the aggregate value, payment terms, intellectual property provisions, or other terms that may be relevant to the Lenders' evaluation of this consent request. In the event that the final terms of the MDLA differ materially from those described herein, Quorum will consult with the Administrative Agent to determine whether any supplemental consent or amendment is required.

8. Contact Information

All correspondence, inquiries, and communications regarding this consent request should be directed to the following individuals:

For the Borrower: Gregory Stahl Vice President, Legal Affairs Quorum Insurance Holdings Corp. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901 Telephone: (203) 555-7200

Email: gstahl@quoruminsurance.com

For Outside Counsel to the Borrower: Marcus Weill Associate, Corporate/Commercial Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Telephone: (212) 555-4300

Email: mweill@calderwoodharkness.com

C&H Matter No. 1025-00008

Mr. Stahl and Mr. Weill are available to discuss this consent request and to provide any additional information or documentation at the Administrative Agent's convenience. Quorum is also prepared to arrange a conference call or in-person meeting with the Administrative Agent and representatives of the Lender group, if desired.

We thank Standish National Bank and the Lenders for their ongoing support of Quorum and for their prompt attention to this consent request. We look forward to your response at your earliest convenience and remain available to address any questions or comments you may have.

Very truly yours,

QUORUM INSURANCE HOLDINGS CORP.

By: ________

Name: ________

Title: ________

Date: ________

Anticipated Signatory: Carolyn Whitford, General Counsel & Executive Vice President, or Thomas Ng, Vice President, Enterprise Procurement

Enclosure:

Draft Form of Lender Consent/Waiver (Standish National Bank, N.A., as Administrative Agent, re: Section 7.12(b) of the Credit Agreement)

cc:

Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp. Leonard Cross, Partner, Calderwood & Harkness LLP Nathaniel Bower, Partner, Calderwood & Harkness LLP Marcus Weill, Associate, Calderwood & Harkness LLP

DRAFT — For Discussion Purposes Only — Subject to Client Review and Approval Calderwood & Harkness LLP, 425 Park Avenue, New York, NY 10022 C&H Matter No. 1025-00008

DRAFT — Prepared by Calderwood & Harkness LLP (M. Weill) for Client Signature C&H Matter No. 1025-00008
QUORUM INSURANCE HOLDINGS CORP. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901
November __, 2022
Philip Yardley Relationship Manager Standish National Bank, N.A., as Administrative Agent 280 Congress Street Boston, MA 02210
Re: Request for Consent Under 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 "Credit Agreement") — Proposed Master Data License Agreement with Meridian Credit intelligence, Inc.
Dear Mr. Yardley:
1. Introduction and Purpose
Quorum Insurance Holdings Corp. ("Quorum" or the "Borrower"), a corporation organized and existing under the laws of the State of Delaware (EIN: 83-2147605; Delaware Division of Corporations Entity File No. 7234819), respectfully submits this letter in its capacity as Borrower under that certain Amended and Restated Credit Agreement, dated as of June 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Quorum, the several financial institutions and other entities from time to time party thereto as lenders (collectively, the "Lenders"), and Standish National Bank, N.A. ("Standish"), in its capacity as Administrative Agent for the Lenders. The Credit Agreement governs, among other things, the $1,200,000,000 senior secured revolving credit facility (the "Revolving Facility") established for the benefit of the Borrower thereunder.
The purpose of this letter is to formally request the prior written consent of the Required Lenders (as defined in the Credit Agreement), acting through the Administrative Agent, pursuant to Section 7.12(b) of the Credit Agreement, in connection with Quorum's proposed entry into a Master Data License Agreement (the "MDLA") with Meridian Credit intelligence, Inc. ("Meridian"), a corporation organized and existing under the laws of the State of Georgia, with its principal offices located at 3300 Peachtree Road NE, Suite 2100, Atlanta, GA 30326. The MDLA, as more fully described in Section 2 below, contemplates a multi-year enterprise data-licensing arrangement under which Meridian would grant Quorum a license to access and utilize certain consumer credit, commercial credit, and alternative data products in connection with Quorum's internal business operations, including its underwriting, claims management, and data analytics functions.
All capitalized terms used but not otherwise defined in this letter shall have the respective meanings ascribed to such terms in the Credit Agreement.
2. Description of the Proposed Transaction
2.1 Overview of the MDLA
Quorum proposes to enter into a five-year enterprise data-licensing arrangement with Meridian, pursuant to which Meridian would grant Quorum a non-exclusive, non-transferable license to access and use certain consumer credit data, commercial credit data, and alternative data products (collectively, the "Licensed Data") for Quorum's internal business operations, as described more fully below. The MDLA would establish the terms governing the scope of the license, the delivery mechanisms, the fees payable by Quorum, and the respective rights and obligations of the parties with respect to data security, intellectual property ownership, confidentiality, and related matters.
Meridian is a privately held consumer and commercial credit bureau and data analytics company that provides credit reporting, scoring, and analytics services to financial institutions, insurance carriers, telecommunications providers, and other enterprise customers. Meridian is majority-owned (approximately 62.5% of outstanding equity interests) by Breckenridge Capital Partners Fund IV, L.P., a growth-equity fund. Based on publicly available and diligence information, Meridian's fiscal year 2023 revenue was approximately $1,420,000,000, with earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $438,000,000. Meridian is a well-capitalized, established participant in the credit data and analytics industry and maintains longstanding relationships with major financial institutions and insurance carriers.
2.2 Licensed Data Products
Under the terms of the proposed MDLA, Quorum would receive a license to access and use the following Meridian data products:
(a) MCI Consumer Credit File™ — A full-file consumer tradeline data product covering approximately 310 million consumer records. This product includes comprehensive consumer credit tradeline data, including account types, balances, payment histories, delinquency statuses, public records, and related data fields. Delivery would be available through both daily batch file transmission and real-time application programming interface ("API") access, enabling Quorum to integrate the data into both its batch-processing underwriting workflows and its real-time, point-of-sale underwriting decision engines.
(b) MCI CommercialView™ — A commercial credit data product providing credit and financial profile information on approximately 42 million U.S. businesses, including corporate credit scores, payment behavior indexes, filing and lien data, corporate linkage data, and related commercial credit attributes. Delivery would be via weekly batch file transmission, consistent with Quorum's commercial insurance underwriting cycle.
(c) MCI AltSignal™ — An alternative data product encompassing utility payment data, telecommunications payment data, and rental payment data covering approximately 85 million consumer records. The inclusion of alternative data sources is intended to supplement traditional credit bureau data and improve Quorum's ability to assess creditworthiness and risk profiles for consumers with limited traditional credit histories (commonly referred to as "thin-file" or "credit-invisible" consumers). Delivery would be via daily batch file transmission.
The total estimated monthly data volume under the MDLA is approximately 437,000,000 records per month, aggregated across all three Licensed Data products. This volume falls comfortably within the 500,000,000 records per month base tier established under the proposed MDLA pricing structure, as described in Section 2.4 below.
2.3 Business Purpose
Quorum intends to ingest the Licensed Data provided by Meridian under the MDLA to enhance and support its automated underwriting models, claims-fraud detection algorithms, and customer propensity scoring capabilities across its property and casualty, life, and specialty insurance lines of business. The integration of comprehensive third-party credit and alternative data into Quorum's underwriting and claims operations is consistent with the insurance industry's accelerating adoption of data-driven underwriting practices and represents a critical investment in Quorum's competitive positioning.
In particular, the MDLA supports Quorum's ongoing development and deployment of the QuorumScore™ predictive underwriting model, a proprietary machine-learning-based scoring system that blends third-party credit and alternative data (including the Licensed Data to be obtained under the MDLA) with Quorum's extensive proprietary first-party data assets, including historical claims data, policy-level data, and telematics data derived from Quorum's connected-device programs. Quorum has filed a patent application with respect to the QuorumScore™ model with the United States Patent and Trademark Office (Serial No. 97/482,116), which application remains pending as of the date hereof.
The MDLA is a critical component of Quorum's broader enterprise data strategy, which is overseen by Quorum's Chief Data Officer and Chief Technology Officer and has been reviewed and approved by the relevant committees of Quorum's Board of Directors. The enhanced data capabilities enabled by the MDLA are expected to contribute to improved underwriting profitability through more accurate risk segmentation, reduced claims-fraud losses, and enhanced customer acquisition and retention through more precise propensity scoring and personalized product offerings. Quorum's management believes that the MDLA will strengthen Quorum's competitive positioning relative to both traditional insurance carriers and emerging insurtech competitors.
2.4 Financial Terms of the MDLA
The material financial terms of the proposed MDLA are summarized below:
(a) Total Aggregate License Fees. The total aggregate license fees payable by Quorum to Meridian over the five-year initial term of the MDLA are $60,000,000.
(b) Year 1 Annual License Fee. The Year 1 annual license fee is $10,800,000, reflecting a six-month implementation and ramp period during which Quorum will be integrating the Licensed Data into its systems and workflows. The effective monthly rate during Year 1 is $900,000, payable in quarterly installments of $2,700,000 each.
(c) Years 2–5 Annual License Fee. The annual license fee for each of Years 2 through 5 is $12,300,000 per year, reflecting the full operational run-rate for the Licensed Data products. The effective monthly rate for Years 2 through 5 is $1,025,000, payable in quarterly installments of $3,075,000 each.
(d) Reconciliation. The aggregate license fees are reconciled as follows: $10,800,000 (Year 1) + ($12,300,000 × 4) (Years 2 through 5) = $10,800,000 + $49,200,000 = $60,000,000 total.
(e) Payment Terms. All license fees are payable quarterly in advance, with the first quarterly installment due upon execution and delivery of the MDLA.
(f) Implementation/Integration Fee. A one-time implementation and integration fee of $1,500,000 is payable by Quorum to Meridian in connection with the initial setup, configuration, and integration of the Licensed Data products into Quorum's technology environment. This fee is not included in the $60,000,000 aggregate license value and will be billed separately, payable upon execution and delivery of the MDLA.
(g) Data Overage Rate. In the event that Quorum's actual monthly data consumption exceeds the 500,000,000 records per month base tier, a per-record overage charge of $0.003 per record will apply to each record in excess of the base tier. Based on Quorum's current projected usage of approximately 437,000,000 records per month, Quorum does not anticipate exceeding the base tier during the initial term of the MDLA, though Quorum acknowledges that usage may vary depending on business volumes and the pace of integration.
(h) Late Payment Interest. Overdue amounts under the MDLA will bear interest at a rate of 1.5% per month (18% per annum), calculated from the due date of the applicable payment until the date of actual payment in full.
2.5 Other Material Terms (Summary)
In addition to the financial terms summarized above, the following is a summary of certain other material terms of the proposed MDLA:
(a) Governing Law. The MDLA will be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law.
(b) Data Security. Both Quorum and Meridian will be required to maintain current SOC 2 Type II certifications (or equivalent industry-standard security certifications) throughout the term of the MDLA. Each party will be subject to a 48-hour data-breach notification obligation with respect to any security incident involving unauthorized access to, or exfiltration of, any Licensed Data or derived data.
(c) Insurance Requirements. Meridian will be required to maintain commercial general liability insurance with limits of not less than $5,000,000 per occurrence and cyber and technology errors and omissions insurance with an aggregate limit of not less than $25,000,000. Quorum will be required to maintain commercial general liability insurance with limits of not less than $5,000,000 per occurrence and cyber liability insurance with an aggregate limit of not less than $50,000,000.
(d) Post-Termination Obligations. Upon termination or expiration of the MDLA, Quorum will be required to return or certify the destruction of all Meridian raw data (i.e., Licensed Data in its original, unmodified form) within 90 days following the effective date of termination or expiration. Quorum's rights with respect to derived data, models, and analytics outputs are addressed in Section 4.4 below and remain subject to ongoing negotiation.
(e) Ongoing Negotiations. The Borrower notes that certain commercial terms of the MDLA, including provisions governing Quorum's rights with respect to derived data and certain pricing-related provisions, remain under active negotiation between the parties and their respective counsel. Quorum is represented by Calderwood & Harkness LLP, and Meridian is represented by Kessler Pruitt & Ashe LLP. Quorum will promptly advise the Administrative Agent of any material changes to the terms described herein resulting from the ongoing negotiation process.
3. Applicability of Section 7.12(b) of the Credit Agreement
Section 7.12(b) of the Credit Agreement provides, in relevant part:
"The Borrower shall not enter into any license, sublicense, or similar arrangement with respect to intellectual Property having an aggregate value in excess of $25,000,000 without the prior written consent of the Required Lenders."
Quorum has determined, and its outside counsel concurs, that the proposed MDLA constitutes a "license . . . or similar arrangement with respect to intellectual Property" within the meaning of Section 7.12(b) of the Credit Agreement. The Licensed Data to be made available to Quorum under the MDLA consists of proprietary data compilations, databases, and related intellectual property assets owned or controlled by Meridian, and the MDLA grants Quorum a license to access and use such intellectual property for the purposes and during the term specified therein.
The aggregate value of the MDLA, measured by the total license fees payable by Quorum over the five-year initial term, is $60,000,000. This amount exceeds the $25,000,000 threshold set forth in Section 7.12(b) by $35,000,000. Expressed as a multiple, the aggregate value of the MDLA represents approximately 240% of the covenant threshold (i.e., $60,000,000 ÷ $25,000,000 = 2.4×).
Accordingly, Quorum is required to obtain the prior written consent of the Required Lenders, acting through the Administrative Agent, before executing and delivering the MDLA. Quorum is submitting this letter and the enclosed draft form of Lender Consent/Waiver for the purpose of obtaining such consent.
4. Rationale Supporting Consent
Quorum believes that the Required Lenders should grant their consent to the proposed MDLA for the reasons set forth below. Quorum respectfully submits that the MDLA is consistent with, and supportive of, Quorum's business strategy, financial health, and ongoing compliance with its obligations under the Credit Agreement.
4.1 Strategic Importance to Quorum's Business
Quorum is a publicly traded, multi-line insurance carrier and insurance-technology platform operator, listed on the Nasdaq Stock Market under the ticker symbol "QIHC," with a market capitalization of approximately $8,900,000,000 as of August 2022. Quorum's consolidated fiscal year 2023 financial results reflect revenue of approximately $4,180,000,000, net income of approximately $312,000,000, and total assets of approximately $27,600,000,000. Quorum is among the largest insurance carriers in the United States and is widely recognized as a leader in the adoption of advanced data analytics and technology-driven underwriting practices.
The proposed Meridian license is integral to Quorum's competitive positioning and is a central element of Quorum's underwriting technology platform. Access to comprehensive, high-quality consumer and commercial credit data has become essential for insurance carriers seeking to maintain and enhance their underwriting accuracy and operational efficiency. The insurance industry has undergone a significant transformation in recent years, with leading carriers increasingly relying on third-party data assets — including credit bureau data and alternative data sources — to inform risk assessment, pricing, and customer segmentation. The MDLA would ensure that Quorum has access to a broad, high-quality data ecosystem that is comparable to, or exceeds, the data assets available to its principal competitors.
4.2 Manageable Financial Impact
The financial impact of the MDLA on Quorum's operations and cash flows is manageable and immaterial relative to Quorum's scale. The total aggregate license fee of $60,000,000 is payable over a five-year period, with annual payments ranging from $10,800,000 in Year 1 to $12,300,000 in each of Years 2 through 5. These annual payment amounts represent less than 0.3% of Quorum's annual consolidated revenue (based on FY 2023 revenue of approximately $4,180,000,000).
The quarterly payment structure further reduces the cash flow impact: the maximum quarterly installment of $3,075,000 (applicable in Years 2 through 5) is well within Quorum's ordinary-course cash flow generation and operating budget. Quorum's management has reviewed the projected payment obligations under the MDLA and has confirmed that such obligations can be satisfied from operating cash flows without any impact on Quorum's ability to fund its ongoing operations, satisfy its debt service obligations, or maintain adequate liquidity.
The one-time implementation and integration fee of $1,500,000 is immaterial relative to Quorum's overall technology and capital expenditure budget and does not warrant separate analysis.
4.3 No Adverse Impact on Credit Agreement Obligations
Quorum wishes to emphasize several important structural features of the MDLA that are relevant to the Lenders' evaluation of this consent request:
(a) The MDLA does not involve any disposition, transfer, assignment, or encumbrance of any intellectual property owned by Quorum. Under the MDLA, Quorum is the licensee — not the licensor — and is receiving a license to use Meridian's proprietary data assets. No intellectual property of Quorum will be conveyed, pledged, or otherwise made available to Meridian or any third party as a result of the MDLA.
(b) The MDLA will not result in the creation, incurrence, or assumption of any liens on any assets of Quorum (including any Collateral, as defined in the Credit Agreement). The license fees payable under the MDLA are ordinary-course operating expenditures and do not constitute Indebtedness (as defined in the Credit Agreement) or give rise to any Lien (as defined in the Credit Agreement).
(c) The MDLA will not result in the incurrence of any additional Indebtedness by Quorum. The payment obligations under the MDLA are fixed, determinable operating expenses and are not in the nature of borrowed funds, guarantees, or contingent liabilities.
(d) Quorum's ability to perform its obligations under the Credit Agreement and to service the $1,200,000,000 Revolving Facility will not be impaired as a result of the MDLA. The annual license fees represent a de minimis portion of Quorum's consolidated revenue, operating cash flow, and total assets.
(e) As of the date of this letter, Quorum is in full compliance with all financial covenants, affirmative covenants, negative covenants, and other terms and conditions of the Credit Agreement. No Default or Event of Default (each as defined in the Credit Agreement) has occurred and is continuing, and the execution and delivery of the MDLA will not, in and of itself, give rise to any Default or Event of Default.
4.4 IP Ownership Retained by Quorum
A matter of particular importance to the Lenders is the treatment of intellectual property ownership under the proposed MDLA. Under the terms of the MDLA as proposed by Quorum and currently under negotiation, Quorum will retain full and unencumbered ownership of all intellectual property in and to any and all derived data, models, scores, analytics outputs, and other work product created by Quorum using the Licensed Data as an input, including, without limitation, the QuorumScore™ predictive underwriting model and any enhancements, modifications, or derivative works thereof. Quorum's proprietary intellectual property — including its first-party data assets, proprietary models, algorithms, software, trade secrets, and related technology — will not be subject to any ownership claim, license, or lien in favor of Meridian as a result of the MDLA.
The Licensed Data provided by Meridian under the MDLA will remain the property of Meridian at all times. Quorum's rights with respect to the Licensed Data are limited to a non-exclusive, non-transferable license to access and use such data during the term of the MDLA and solely for the specified business purposes described herein. Quorum will have no right to resell, sublicense, or otherwise distribute the Licensed Data to third parties.
Critically, the MDLA does not grant Meridian any ownership interest in, security interest in, or lien upon, any of Quorum's proprietary intellectual property, including any intellectual property that constitutes Collateral under the Credit Agreement and the related Security Documents. The Lenders' security interests in Quorum's intellectual property will not be adversely affected by the MDLA.
5. Form of Consent Requested
In light of the foregoing, Quorum respectfully requests that Standish, as Administrative Agent under the Credit Agreement, circulate this consent request to the Lenders and obtain the written consent of the Required Lenders to Quorum's execution and delivery of the MDLA with Meridian, substantially on the terms described in this letter, pursuant to and in accordance with Section 7.12(b) of the Credit Agreement.
Quorum proposes that the consent, if granted, be expressly limited in scope to the MDLA as described in this letter and that such consent shall not constitute a waiver of Section 7.12(b) of the Credit Agreement with respect to any other transaction, arrangement, or course of conduct, whether now existing or hereafter arising. The consent should not be deemed to establish any course of dealing or to modify or amend the Credit Agreement in any respect other than as expressly set forth in the consent.
For the convenience of the Administrative Agent and the Lenders, Quorum encloses herewith a draft form of Lender Consent/Waiver, prepared by Calderwood & Harkness LLP on behalf of Quorum, for the Administrative Agent's review and consideration. Quorum understands that the Administrative Agent may propose modifications to the draft form of consent and welcomes any comments or revisions that the Administrative Agent or the Lenders may deem appropriate.
6. Supporting Documentation
In connection with this consent request, Quorum is prepared to make available to the Administrative Agent and the Lenders, upon request, the following supporting materials and documentation:
(a) Draft Master Data License Agreement between Quorum Insurance Holdings Corp. and Meridian Credit intelligence, Inc. (current negotiation draft, subject to completion of ongoing negotiations between the parties and their respective counsel);
(b) Summary of key commercial terms of the MDLA (term sheet format);
(c) Description of Meridian Credit intelligence, Inc., including corporate history, ownership structure (including the 62.5% equity interest held by Breckenridge Capital Partners Fund IV, L.P.), management team, and financial profile;
(d) Quorum's most recent quarterly financial statements (unaudited), as filed with the Securities and Exchange Commission;
(e) SOC 2 Type II report for Quorum Insurance Holdings Corp., issued by Felton Thorpe & Co. LLP, for the period ending December 31, 2023 (to be made available upon issuance); and
(f) Any other information, documentation, or materials reasonably requested by the Administrative Agent or the Required Lenders in connection with their review and evaluation of this consent request.
Quorum is committed to providing full transparency and cooperation in connection with this request and will respond promptly to any inquiries from the Administrative Agent or the Lenders.
7. Timing and Next Steps
Quorum respectfully requests that the Administrative Agent process this consent request on an expedited basis. The MDLA remains subject to active negotiation between Quorum and Meridian and their respective counsel, and the parties have expressed a mutual desire to reach definitive documentation and execute the MDLA as promptly as practicable. Obtaining lender consent in advance of the completion of negotiations will enable Quorum to execute the MDLA promptly upon agreement on final terms, thereby avoiding unnecessary closing delays and preserving Quorum's negotiating position.
Quorum acknowledges that the MDLA has not yet been executed and that certain terms remain subject to negotiation, as noted in Section 2.5 above. Quorum will promptly notify the Administrative Agent of any material changes to the terms of the MDLA as described in this letter, including any changes to the aggregate value, payment terms, intellectual property provisions, or other terms that may be relevant to the Lenders' evaluation of this consent request. In the event that the final terms of the MDLA differ materially from those described herein, Quorum will consult with the Administrative Agent to determine whether any supplemental consent or amendment is required.
8. Contact Information
All correspondence, inquiries, and communications regarding this consent request should be directed to the following individuals:
For the Borrower: Gregory Stahl Vice President, Legal Affairs Quorum Insurance Holdings Corp. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901 Telephone: (203) 555-7200
Email: gstahl@quoruminsurance.com
For Outside Counsel to the Borrower: Marcus Weill Associate, Corporate/Commercial Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Telephone: (212) 555-4300
Email: mweill@calderwoodharkness.com
C&H Matter No. 1025-00008
Mr. Stahl and Mr. Weill are available to discuss this consent request and to provide any additional information or documentation at the Administrative Agent's convenience. Quorum is also prepared to arrange a conference call or in-person meeting with the Administrative Agent and representatives of the Lender group, if desired.
We thank Standish National Bank and the Lenders for their ongoing support of Quorum and for their prompt attention to this consent request. We look forward to your response at your earliest convenience and remain available to address any questions or comments you may have.
Very truly yours,
QUORUM INSURANCE HOLDINGS CORP.
By: ________
Name: ________
Title: ________
Date: ________
Anticipated Signatory: Carolyn Whitford, General Counsel & Executive Vice President, or Thomas Ng, Vice President, Enterprise Procurement
Enclosure:
Draft Form of Lender Consent/Waiver (Standish National Bank, N.A., as Administrative Agent, re: Section 7.12(b) of the Credit Agreement)
cc:
Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp. Leonard Cross, Partner, Calderwood & Harkness LLP Nathaniel Bower, Partner, Calderwood & Harkness LLP Marcus Weill, Associate, Calderwood & Harkness LLP
DRAFT — For Discussion Purposes Only — Subject to Client Review and Approval Calderwood & Harkness LLP, 425 Park Avenue, New York, NY 10022 C&H Matter No. 1025-00008

DRAFT — Prepared by Calderwood & Harkness LLP (M. Weill) for Client Signature C&H Matter No. 1025-00008

QUORUM INSURANCE HOLDINGS CORP.

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