ANNOTATED COMPARISON
Meridian Initial Term Sheet (September 12, 2022)
vs.
Quorum Counter-Term Sheet (September 30, 2022)
Date: October 3, 2022
Prepared by: Omar Siddiqui, Associate, intellectual Property Practice Group, Calderwood & Harkness LLP
Matter: C&H Matter No. 1025-00008
Client: Quorum Insurance Holdings Corp.
Counterparty: Meridian Credit intelligence, Inc.
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum has been prepared by Calderwood & Harkness LLP at the direction of and for the exclusive use of Quorum Insurance Holdings Corp. and its authorized representatives. This document is protected by the attorney-client privilege and the attorney work product doctrine. Any disclosure, distribution, or copying of this memorandum or its contents to any person or entity not listed in the distribution below without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.
Distribution:
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I. EXECUTIVE SUMMARY
This memorandum provides a comprehensive, side-by-side annotated comparison of the Meridian Initial Term Sheet delivered on September 12, 2022 by Kessler Pruitt & Ashe LLP (on behalf of Meridian Credit intelligence, Inc.) against the Quorum Counter-Term Sheet delivered on September 30, 2022 (prepared by Calderwood & Harkness LLP on behalf of Quorum Insurance Holdings Corp.). The comparison is intended to give the Quorum deal team and internal counsel a detailed understanding of the current state of play across every material provision in both term sheets, in advance of the anticipated drafting phase of the Master Data License Agreement ("MDLA").
The scope of this memorandum covers every material provision across both term sheets. For each provision, this document identifies (a) areas of alignment between the parties, (b) gaps and divergences where the parties' respective positions differ in substance or degree, and (c) recommended negotiation priorities and strategic considerations for the upcoming MDLA drafting and negotiation phase. This document does not address detailed legal drafting issues, which will be reserved for the MDLA markup stage once Meridian's form agreement is received from Kessler Pruitt & Ashe LLP (anticipated in early November 2022).
Overall Assessment. The parties are substantially aligned on the general commercial framework of the proposed transaction. Both term sheets contemplate a five-year initial license term, a defined suite of three data products (MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™), a total aggregate deal value of $60,000,000 over the five-year term, and a one-time implementation and integration fee of $1,500,000. The annual fee structure, quarterly payment cadence, and data volume tiers are also largely consistent across both term sheets.
However, the parties have significant and, in some cases, diametrically opposed positions on two critical issues that will define the commercial architecture of this transaction:
(1) Most Favored Nation ("MFN") Pricing (Section 7). Meridian's term sheet is entirely silent on any MFN commitment, pricing benchmarking, or audit rights. Quorum's counter-term sheet proposes a comprehensive MFN clause with automatic price adjustment, notification obligations, and annual audit rights. This divergence is expected to be among the most heavily contested issues in the negotiation.
(2) Derived Data and intellectual Property Ownership (Section 8). The parties' positions are diametrically opposed. Meridian asserts broad IP rights over all "Derived Data," demands a perpetual royalty-free license-back on all Derived Data, requires Meridian's sole discretion to approve any external commercialization of Derived Data, and imposes a 15% revenue share on approved external commercialization. Quorum asserts complete and unrestricted ownership of all Derived Data, with no license-back, no revenue share, and no requirement for Meridian's consent. This issue is the single most commercially consequential provision in the entire deal, given its direct impact on QuorumScore™ and Quorum's projected B2B licensing revenue line.
In addition to these two critical divergences, the term sheets contain secondary but material disagreements on the following issues: (i) license term, renewal structure, and convenience termination rights; (ii) scope of the license grant, affiliate coverage, and permitted use fields; (iii) dispute resolution mechanism and forum; (iv) limitation of liability caps and carve-outs from the consequential damages exclusion; (v) post-termination data treatment, particularly as it relates to Derived Data; (vi) governing law; (vii) service level commitments and uptime thresholds; (viii) representations and warranties, particularly ongoing data accuracy representations; and (ix) indemnification caps and scope.
Recommendation. We strongly recommend that Quorum prioritize the resolution of the MFN pricing and Derived Data/IP ownership issues as threshold commercial matters before committing significant legal drafting resources to the full MDLA. These two issues will shape every other material term in the agreement, and premature investment in detailed drafting without first establishing consensus on these foundational points would be inefficient and could create false expectations on both sides. If counsel-level discussions with Kessler Pruitt & Ashe LLP do not produce meaningful progress on these issues within the first two negotiation sessions, we recommend escalating these issues directly to the business principals — specifically, Meg Tierney (Quorum CEO) and Vince Halstead (Meridian CEO) — to test whether there is executive-level willingness to bridge the gap. Absent resolution of MFN and Derived Data, the commercial viability of the overall transaction will remain in question.
II. METHODOLOGY AND LEGEND
A. Comparison Format
This memorandum is organized as a provision-by-provision annotated comparison. For each material term addressed in the Meridian Initial Term Sheet and/or the Quorum Counter-Term Sheet, the comparison follows a four-part structure:
(i) Meridian Term Sheet Position. A summary of the relevant provision as set forth in the Meridian Initial Term Sheet dated September 12, 2022.
(ii) Quorum Counter-Term Sheet Position. A summary of the corresponding provision as set forth in the Quorum Counter-Term Sheet dated September 30, 2022, highlighting all changes, additions, deletions, and counter-proposals relative to the Meridian position.
(iii) Annotation. An analytical discussion of the alignment or divergence between the two positions, including relevant legal, commercial, and strategic context, potential counterparty objections, and proposed compromise frameworks where applicable.
(iv) Priority Classification. A color-coded priority designation reflecting the materiality of the divergence and the recommended level of negotiation attention, using the legend set forth below.
B. Priority Legend
The following three-tier priority classification system is used throughout this memorandum:
C. Important Caveats
This comparison reflects term-sheet-level positions only. Both term sheets are expressly non-binding and are intended solely to frame the parties' respective negotiating positions for purposes of the definitive MDLA. Detailed legal drafting issues — including precise definitions, condition-precedent mechanics, notice provisions, boilerplate provisions, and the interplay between the MDLA and its ancillary agreements (Data Security Addendum, FCRA Permissible Purpose Certification, SLA Schedule, etc.) — will be addressed comprehensively during the MDLA markup phase. Certain provisions that are standard in data license agreements of this type but that are not addressed in either term sheet (e.g., force majeure, audit rights beyond MFN audits, export control, compliance with sanctions laws) are also not covered in this comparison but will be addressed in the MDLA drafting.
III. COMPARISON TABLE — PROVISION-BY-PROVISION ANALYSIS
Section 1: Parties
Meridian Term Sheet:
Licensor: Meridian Credit intelligence, Inc., a Georgia corporation, with its principal place of business at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326.
Licensee: Quorum Insurance Holdings Corp., a Delaware corporation, with its principal place of business at 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901.
Quorum Counter-Term Sheet:
Identical identification of parties, including corporate names, jurisdictions of organization, and principal place of business addresses.
Annotation:
The identification of the parties is fully aligned across both term sheets. The legal entity names, states of incorporation, and registered business addresses are identical. No issues or further discussion are required on this provision.
We note for completeness that the contracting entity on the Quorum side is the parent holding company, Quorum Insurance Holdings Corp. The MDLA will need to address how the license extends to Quorum's operating subsidiaries and affiliates, which is taken up in Section 6 (License Grant and Scope of Use) below.
Priority: GREEN — Fully aligned. No issues.
Section 2: Licensed Data Products
Meridian Term Sheet:
The term sheet identifies three licensed data products:
(i) MCI Consumer Credit File™ — Approximately 310 million consumer credit records, delivered via daily batch (SFTP) and real-time access (REST API).
(ii) MCI CommercialView™ — Approximately 42 million business/commercial credit records, delivered via weekly batch (SFTP).
(iii) MCI AltSignal™ — Approximately 85 million consumer alternative data records (including utility payments, rental payments, and non-traditional financial behavior data), delivered via daily batch (SFTP).
Quorum Counter-Term Sheet:
Identical product scope — the same three data products are identified, with the same approximate record volumes and delivery mechanisms (daily batch + real-time API for Consumer Credit File; weekly batch for CommercialView; daily batch for AltSignal).
Quorum's counter-term sheet adds two provisions not present in Meridian's term sheet:
(a) Full-Field Access Requirement. Explicit language requiring that Meridian provide "all data fields available in production" for each Licensed Data Product, rather than a limited subset or restricted field selection. This is intended to ensure that Quorum receives the full breadth of data attributes available in Meridian's production systems, consistent with the scope of data that Meridian makes available to its other enterprise licensees.
(b) Pre-Signing Deliverables. A requirement that Meridian deliver to Quorum, prior to execution of the MDLA, a complete sample data schema and comprehensive data dictionary for each of the three Licensed Data Products. These deliverables are intended to allow Quorum's data engineering and actuarial teams to validate the data fields, formats, and structures before the agreement is finalized, and to ensure that the data will integrate with Quorum's existing data infrastructure and downstream analytics pipelines.
Annotation:
The parties are substantively aligned on the identity, scope, and approximate volume of the three Licensed Data Products. The approximate total monthly record volume across all three products is estimated at approximately 437 million records (310 million + 42 million + 85 million, with the caveat that the CommercialView product is delivered weekly rather than daily, so its monthly contribution depends on the number of weekly deliveries). This estimated aggregate volume is well within the proposed 500 million records/month base tier discussed in Section 5 below, representing approximately 87.4% utilization of the base tier and providing adequate headroom for growth during the initial years of the term.
Quorum's additions regarding full-field access and the pre-signing data dictionary deliverable are commercially reasonable and reflect standard practice in enterprise data licensing transactions. Full-field access ensures that Quorum is not inadvertently agreeing to license a restricted data set that may omit fields critical to its underwriting and analytics use cases. The data dictionary requirement is a sensible due diligence step that will facilitate more efficient technical integration post-signing and reduce the risk of post-execution disputes over data scope and quality. We do not anticipate that Meridian will object to either of these provisions, although the data dictionary deliverable may require a brief timeline negotiation.
We note that Meridian's term sheet identifies these products by their registered trademarks (™ designations), which is consistent with Meridian's broader IP protection strategy discussed in Section 8 below.
Priority: GREEN — Substantively aligned. Minor drafting point on full-field access language and data dictionary deliverable timing.
Section 3: License Term
Meridian Term Sheet:
• Initial Term: Five (5) years, commencing on the "Effective Date," defined as the date of execution of the MDLA by both parties.
• Renewal: One (1) automatic renewal for a period of two (2) years, unless either party provides one hundred eighty (180) days' prior written notice of non-renewal before the expiration of the then-current term.
• Convenience Termination: No provision for termination for convenience by either party.
Quorum Counter-Term Sheet:
• Initial Term: Five (5) years, same Effective Date definition (date of execution of the MDLA). Aligned with Meridian.
• Renewal: One (1) automatic renewal for a period of one (1) year (reduced from two years), unless either party provides one hundred twenty (120) days' prior written notice of non-renewal (reduced from 180 days) before the expiration of the then-current term.
• Convenience Termination: Quorum proposes a right to terminate the MDLA for convenience upon twelve (12) months' prior written notice, exercisable at any time after the second anniversary of the Effective Date (i.e., after Year 2 of the initial term).
Annotation:
There is a moderate divergence between the parties on three sub-issues within the license term provision:
(a) Renewal Term Length. Meridian proposes a two-year automatic renewal period; Quorum proposes a one-year automatic renewal period. Meridian's preference for a longer renewal period is understandable from a revenue-certainty perspective — a two-year renewal provides greater visibility into post-initial-term revenue, which is relevant both to Meridian's internal financial planning and to the revenue projections that its investment bank, Whitmore Zanthor & Co., will present to potential IPO investors. Quorum's preference for a shorter renewal period reflects the standard licensee desire for flexibility to reassess the commercial relationship at shorter intervals and to avoid being locked into a long extension if market conditions, pricing dynamics, or data quality change.
(b) Non-Renewal Notice Period. Meridian proposes 180 days' prior written notice of non-renewal; Quorum proposes 120 days. The difference (60 days) is modest but reflects the parties' respective interests: Meridian wants longer notice to ensure adequate time to plan for revenue replacement, while Quorum prefers a shorter window to preserve optionality.
(c) Convenience Termination Right. This is the most significant sub-issue. Quorum's proposal grants Quorum a unilateral right to terminate the agreement for any reason (or no reason) after Year 2, subject to 12 months' advance notice. Meridian's term sheet is entirely silent on convenience termination, which is typical for a licensor seeking revenue certainty over the full initial term. Meridian is expected to resist this provision firmly, particularly given the following considerations: (i) a convenience termination right effectively shortens the guaranteed revenue period from five years to as little as three years (Year 2 anniversary + 12 months' notice = termination at the end of Year 3), which would materially reduce the guaranteed contract value from $60 million to approximately $33.9 million; (ii) from Breckenridge Capital Partners' perspective, a convenience termination right creates revenue-stream uncertainty that could negatively impact Meridian's valuation in the IPO process; and (iii) as a matter of negotiating principle, licensors in data-licensing transactions are generally reluctant to grant convenience termination rights in exchange for nothing.
Recommendation: We recommend proposing a compromise on the renewal term and notice period: a one-year automatic renewal with 150 days' notice of non-renewal. This splits the difference on both sub-issues and should be achievable. On the convenience termination right, we recommend that Quorum be prepared to withdraw this provision in exchange for meaningful concessions on the MFN pricing (Section 7) or Derived Data/IP ownership (Section 8) provisions. The convenience termination right has significant trade value and should be deployed strategically rather than defended as a core requirement.
Priority: YELLOW — Moderate divergence. Renewal term and notice period are readily negotiable; convenience termination is a more significant issue but is tradeable.
Section 4: License Fees and Payment Terms
Meridian Term Sheet:
• Total Deal Value: $60,000,000 over the five-year initial term.
• Annual Fee Structure:
• Year 1: $10,800,000 (reflecting a six-month implementation and ramp period during which Quorum may not be at full utilization; effective monthly rate of $900,000).
• Years 2–5: $12,300,000 per year (effective monthly rate of $1,025,000).
• Payment cadence: Quarterly in advance.
• Year 1 quarterly installments: $2,700,000 ($10,800,000 ÷ 4).
• Years 2–5 quarterly installments: $3,075,000 ($12,300,000 ÷ 4).
• Implementation Fee: One-time implementation and integration fee of $1,500,000, billed separately and not included in the $60,000,000 aggregate license value.
• Late Payment Interest: 1.5% per month (18% per annum, simple interest) on any overdue amounts.
Quorum Counter-Term Sheet:
• Total Deal Value: Accepts the aggregate deal value of $60,000,000 over the five-year initial term.
• Annual Fee Structure: Accepts the annual fee breakdown as proposed by Meridian ($10,800,000 for Year 1; $12,300,000 for each of Years 2–5).
• Payment cadence: Accepts the quarterly-in-advance payment structure and the corresponding installment amounts ($2,700,000 for Year 1 quarters; $3,075,000 for Years 2–5 quarters).
• Implementation Fee: Accepts the one-time implementation fee of $1,500,000.
• Late Payment Interest: Counter-proposes a late payment interest rate of 1.0% per month (12% per annum), reduced from Meridian's proposed 1.5% per month (18% per annum).
• Right of Offset: Adds a new provision not present in Meridian's term sheet: a "right of offset" clause permitting Quorum to offset amounts owed to Meridian under the MDLA against service credits earned by Quorum under the Service Level Agreement ("SLA") schedule. This provision ensures that Quorum can deduct accrued but unpaid service credits from its quarterly license fee payments without the need for a separate invoice or payment process from Meridian.
Annotation:
The parties are substantially aligned on the core fee structure. The aggregate deal value ($60,000,000), the annual fee breakdown, the quarterly-in-advance payment cadence, the quarterly installment amounts, and the one-time implementation fee ($1,500,000) are all accepted by Quorum without modification. For the record, we have confirmed the arithmetic reconciliation: $10,800,000 + ($12,300,000 × 4) = $10,800,000 + $49,200,000 = $60,000,000. This is correct and consistent across both term sheets.
The two points of divergence are secondary:
(a) Late Payment Interest Rate. Meridian proposes 1.5% per month (18% per annum); Quorum counter-proposes 1.0% per month (12% per annum). Both rates are within the range commonly seen in enterprise data licensing agreements. The 18% per annum rate proposed by Meridian is on the higher end of market and may raise enforceability concerns in certain jurisdictions (although neither Georgia nor New York has a usury cap that would apply to a commercial transaction between sophisticated corporate parties). The 12% per annum rate proposed by Quorum is more in line with prevailing market practice. We expect this point to be resolved at 1.0% to 1.25% per month and do not regard it as a significant negotiation issue.
(b) Right of Offset. Quorum's proposed right of offset is a commercially reasonable provision that ensures efficient administration of service credits. Without an offset right, Quorum would need to pay its full quarterly installment and then separately invoice Meridian for accrued service credits, creating unnecessary administrative burden and potential collection risk. Offset rights are standard in enterprise technology and data licensing agreements and should be achievable.
Important Note — Lender Consent Requirement: The $60,000,000 aggregate license value of this transaction exceeds the $25,000,000 threshold for intellectual property licenses requiring lender consent under Section 7.12(b) of Quorum's Amended and Restated Credit Agreement dated June 15, 2021, with Standish National Bank, N.A., as Administrative Agent. Accordingly, lender consent or waiver from Standish National Bank will be required as a condition precedent to closing the MDLA. This issue is addressed further in Section 19 (Termination) below and is the subject of a separate memorandum being prepared by Marcus Weill (C&H Banking & Finance) regarding covenant analysis and the lender consent request process. We note that timely initiation of the lender consent process is important given the typical 30–60 day turnaround time for bank consent requests.
Priority: GREEN on the core fee structure (fully aligned). YELLOW on the late payment interest rate differential and the right of offset (both readily negotiable).
Section 5: Data Volume Tiers and Overage
Meridian Term Sheet:
• Base Tier: Up to 500 million records per month (consumer and commercial data combined across all three Licensed Data Products).
• Overage Rate: $0.003 per record for each record delivered or accessed in excess of the 500 million records/month base tier threshold.
Quorum Counter-Term Sheet:
• Base Tier: Accepts the 500 million records/month base tier as proposed.
• Overage Rate: Accepts the $0.003 per record overage rate as proposed.
• Notice and Cure Provisions (New). Quorum adds two protective provisions not present in Meridian's term sheet:
(a) Advance Notice Requirement. Meridian must provide Quorum with no less than thirty (30) days' advance written notice before invoicing any overage charges, including a detailed breakdown of the records exceeding the base tier by product, date, and delivery mechanism.
(b) Cure Right for Inadvertent Overages. In the event that Quorum inadvertently exceeds the base tier threshold, Quorum shall have a right to cure such overage within fifteen (15) business days of receiving notice from Meridian, without incurring overage fees. This provision is intended to protect against situations where automated data pulls, testing environments, or system errors cause temporary spikes in record volume that do not reflect Quorum's actual production-level consumption.
Annotation:
The parties are fully aligned on the base tier (500 million records/month) and the overage rate ($0.003/record). Based on the estimated total monthly volume across all three Licensed Data Products — approximately 437 million records (310 million Consumer Credit File + 42 million CommercialView + 85 million AltSignal) — Quorum's current projected consumption represents approximately 87.4% of the base tier, providing approximately 63 million records per month of headroom. This buffer should be more than adequate to accommodate normal growth in data consumption during the initial years of the term, particularly given that the Year 1 ramp period is expected to involve lower-than-steady-state consumption.
Quorum's proposed notice-and-cure provisions are commercially reasonable and operationally practical. Enterprise data consumers frequently experience temporary volume spikes due to system testing, data migration activities, one-time analytics projects, or automated process errors that do not reflect sustained production-level consumption. The 30-day notice requirement ensures that Quorum has visibility into potential overage charges before they are invoiced, and the 15-business-day cure right provides a brief window to identify and correct inadvertent overages. These provisions are common in data licensing agreements and should be non-controversial.
Priority: GREEN — Aligned on base tier and overage pricing. Notice-and-cure provisions are reasonable and should be achievable.
Section 6: License Grant and Scope of Use
Meridian Term Sheet:
• License Type: Non-exclusive, non-transferable, non-sublicensable license.
• Permitted Use: Access to and use of the Licensed Data Products solely for Quorum's internal business purposes in the following fields: (i) insurance underwriting, (ii) claims management, (iii) fraud detection, and (iv) customer analytics.
• Licensee Universe: Use restricted to Quorum Insurance Holdings Corp. and its wholly owned subsidiaries. No right to sublicense to affiliates that are not wholly owned.
• Third-Party Sharing: No express provision addressing sharing with third-party service providers.
Quorum Counter-Term Sheet:
• License Type: Non-exclusive license. Agrees to non-transferability, subject to a customary change-of-control assignment right (discussed further in Section 18 below).
• Sublicensing: Seeks the right to sublicense the Licensed Data Products to all Quorum affiliates and subsidiaries, not limited to wholly owned entities. This expansion would extend the license to entities in which Quorum holds a majority but non-100% equity stake, as well as certain joint ventures and strategic minority investments.
• Permitted Use: Broadens the permitted use field from the four enumerated categories (underwriting, claims, fraud, analytics) to encompass "any lawful business purpose of Licensee related to its insurance, fintech, or data analytics operations." This formulation is intended to provide Quorum with flexibility to deploy the Licensed Data Products across the full range of its current and future business activities without the need to renegotiate the permitted use field as Quorum's business evolves.
• Third-Party Service Providers: Adds an express right to share Licensed Data with Quorum's third-party service providers (including cloud infrastructure providers, managed services providers, data analytics contractors, actuarial consultants, and software vendors) subject to confidentiality obligations at least as protective as those in the MDLA and written agreements restricting such service providers' use of Licensed Data to the performance of services for Quorum.
Annotation:
There is a moderate divergence on this provision across three dimensions:
(a) Affiliate / Subsidiary Scope. Meridian limits the license to Quorum and its wholly owned subsidiaries. Quorum seeks extension to all affiliates and subsidiaries, regardless of ownership percentage. This is a significant commercial issue for Meridian because each additional entity that gains access to the Licensed Data Products represents a potential separate licensing opportunity that Meridian forgoes. Meridian's sales team and its majority owner, Breckenridge Capital Partners, will view any expansion of the licensee universe as dilutive to Meridian's per-entity revenue potential. However, from Quorum's perspective, the restriction to wholly owned subsidiaries is commercially impractical given Quorum's corporate structure, which includes several majority-owned (but not 100%-owned) operating insurance subsidiaries, joint ventures, and strategic minority investments.
Recommendation: We recommend proposing a compromise definition of "Authorized Affiliates" that includes entities in which Quorum holds a greater than 50% ownership interest or over which Quorum exercises management control (i.e., "controlled affiliates"). This is a narrower formulation than Quorum's current "all affiliates and subsidiaries" proposal but is significantly broader than Meridian's "wholly owned" restriction. This compromise is market-standard and should be defensible.
(b) Permitted Use Field. Meridian's enumerated list of four permitted uses (underwriting, claims, fraud, analytics) is narrow and may not capture the full range of Quorum's current business activities, let alone future business lines that Quorum may develop during the five-year term. Quorum's counter-proposal ("any lawful business purpose related to insurance, fintech, or data analytics operations") is very broad and may appear to Meridian to be effectively unlimited. Meridian will likely argue that an overly broad permitted use field undermines the value of the license by making it impossible to sell incremental use-case licenses.
Recommendation: We recommend tightening the permitted use language to avoid appearing unlimited while preserving Quorum's operational flexibility. A formulation such as "internal business purposes in connection with Licensee's insurance underwriting, claims management, fraud detection, risk assessment, customer analytics, actuarial analysis, regulatory compliance, product development, and related business operations" would capture Quorum's principal use cases without appearing to be a blank check.
(c) Third-Party Service Provider Carve-Out. Quorum's proposed right to share Licensed Data with third-party service providers, subject to appropriate confidentiality and use restrictions, is standard market practice in data licensing transactions. In the modern enterprise technology environment, virtually all data consumers rely on third-party cloud infrastructure providers (e.g., Meridian Technologies, Azure, GCP), managed services providers, and specialized analytics contractors to process and analyze licensed data. A prohibition on sharing with service providers would be commercially unworkable. We expect Meridian to accept this provision in principle, subject to negotiation of the specific confidentiality and use restriction requirements.
Priority: YELLOW — Moderate divergence on affiliate scope and permitted use breadth. The third-party service provider carve-out should be achievable with standard protective language.
Section 7: Most Favored Nation Pricing
Meridian Term Sheet:
No MFN clause of any kind. The Meridian term sheet is entirely silent on pricing benchmarking, competitive pricing commitments, pricing audit rights, or any other mechanism by which Quorum could verify that its pricing terms are competitive relative to Meridian's other enterprise licensees.
Quorum Counter-Term Sheet:
Includes a comprehensive most favored nation pricing clause with the following key elements:
(a) MFN Trigger. If, during the term of the MDLA, Meridian enters into or amends any data license agreement with any other U.S.-domiciled insurance carrier, managing general agent ("MGA"), or insurtech firm with annual premiums written of $500 million or more, under which such licensee receives a more favorable per-record price, volume discount, or fee structure for comparable data products and comparable data volumes, then Quorum's pricing under the MDLA shall be automatically adjusted to match the more favorable terms.
(b) Notification Obligation. Meridian is required to notify Quorum in writing within thirty (30) days of entering into any agreement that triggers the MFN clause.
(c) Retroactive Adjustment. Any MFN-triggered price adjustment shall be retroactive to the date of the triggering agreement, and Meridian shall promptly issue a credit or refund to Quorum for any overpayment during the interim period.
(d) Annual Audit Right. Quorum shall have the right, exercisable no more than once per contract year, to engage an independent third-party auditor (at Quorum's expense, unless the audit reveals a discrepancy of 5% or more, in which case Meridian bears the audit cost) to verify Meridian's compliance with the MFN clause. Meridian shall cooperate with such audits and provide access to relevant pricing records, subject to appropriate confidentiality protections.
Annotation:
This is a critical divergence and one of the two potential deal-breakers in this negotiation.
Meridian's term sheet contains no MFN provision whatsoever, while Quorum's counter proposes one of the most comprehensive MFN frameworks we have seen in a data licensing context. The gap between the two positions could not be wider.
Based on our preliminary intelligence regarding Meridian's strategic posture and the interests of its stakeholders, we expect Meridian to categorically refuse any form of MFN clause. The anticipated basis for Meridian's resistance includes the following:
(a) Confidentiality Obligations to Other Licensees. Meridian will argue that it owes contractual confidentiality obligations to its existing licensees and that an MFN clause — particularly one with audit rights — would require Meridian to disclose or allow inspection of pricing terms that are confidential as to those licensees. This is a legitimate concern, although it can be addressed through the use of an independent third-party auditor with strict confidentiality protocols.
(b) Impracticability of Cross-Licensee Comparison. Meridian will argue that its data licensing agreements are bespoke arrangements with unique combinations of data products, data fields, delivery mechanisms, volume tiers, service levels, and value-added services, making it impossible to perform an apples-to-apples comparison of pricing across licensees. There is some merit to this objection, although a well-drafted MFN clause can address it by defining "comparable data products and comparable volumes" with sufficient specificity.
(c) IPO Narrative Concerns. Meridian's majority owner, Breckenridge Capital Partners Fund IV, L.P. (which holds a 62.5% equity stake in Meridian, with Caleb Rourke serving as Breckenridge's board representative), and Meridian's investment bank, Whitmore Zanthor & Co. (with Rachel Ng-Castillo as the lead banker), are actively considering a 2025–2026 IPO of Meridian. An MFN clause in a major enterprise license would be viewed as a margin risk and pricing constraint in IPO due diligence. Whitmore Zanthor will advise Meridian that MFN commitments could compress the revenue multiple achievable in the IPO by signaling to public market investors that Meridian's pricing power is contractually constrained. This is likely to be the most powerful driver of Meridian's resistance.
(d) Antitrust Sensitivities. Meridian may also raise concerns about the potential antitrust implications of MFN pricing commitments in credit data markets, particularly in light of recent FTC scrutiny of most-favored-nation clauses in other industries. While the antitrust risk of a buyer-side MFN in a data licensing context is low, Meridian may invoke this argument as an additional reason for refusal.
Recommended Strategy:
Given the anticipated strength of Meridian's resistance, we recommend the following two-stage approach:
Stage 1: Quorum should lead with its full MFN proposal (automatic price adjustment, notification, retroactive adjustment, annual audit right) as set forth in the counter-term sheet. This establishes Quorum's opening position and signals the importance of competitive pricing to Quorum.
Stage 2 (Fallback): If Meridian categorically refuses the full MFN, Quorum should have a pre-developed fallback position ready for deployment. We recommend the following fallback framework: (i) no automatic price adjustment; (ii) no notification obligation; (iii) instead, a limited pricing audit right, exercisable no more than once per contract year, through an independent third-party auditor mutually agreed by the parties, at Quorum's expense (unless the audit reveals a discrepancy of 5% or more); (iv) if the audit reveals that Quorum's effective per-record rate exceeds 110% of the lowest comparable rate offered by Meridian to any comparable licensee (as defined), Quorum's rate shall be adjusted to 110% of such rate on a prospective basis. This fallback retains the core protective mechanism (pricing verification) while addressing several of Meridian's anticipated objections (no automatic adjustment, no retroactivity, a 10% cushion).
This fallback should not be introduced until Quorum has tested and confirmed the depth of Meridian's resistance to the full MFN. Premature introduction of the fallback would effectively establish it as the ceiling rather than the floor of Quorum's pricing protection.
We further note that Pinnacle Ridge Advisory LLC (engagement partner: Franklin Osei) has been retained by Quorum to perform a comprehensive pricing benchmark study of enterprise data licensing transactions in the insurance sector. The results of this study are expected by mid-February 2023 and will be critical in informing Quorum's leverage on the MFN issue. If the study reveals that Meridian's proposed pricing is already at or near market, the MFN issue becomes less commercially significant (though still strategically important as a protective mechanism). If the study reveals that Meridian's pricing is above market, the data will provide powerful ammunition for Quorum's MFN negotiating position.
Priority: RED — CRITICAL DIVERGENCE / POTENTIAL DEAL-BREAKER. This issue must be addressed at the threshold of MDLA negotiations and should not be deferred to the drafting phase.
Section 8: Derived Data and intellectual Property Ownership
Meridian Term Sheet:
(a) Meridian IP Ownership. All intellectual property in the Licensed Data Products — including all trademarks (MCI Consumer Credit File™, MCI CommercialView™, MCI AltSignal™), copyrights, trade secrets, and database rights — remains solely and exclusively with Meridian. No transfer of any IP rights in the Licensed Data Products to Quorum.
(b) Derived Data Definition and Characterization. Any data, models, scores, indices, or analytics outputs that "incorporate, are based on, or are traceable to" the Licensed Data Products are defined as "Derived Data." Meridian characterizes all Derived Data as "derivative works" under applicable copyright law and asserts that all Derived Data remains subject to Meridian's underlying intellectual property rights.
(c) License-Back. Meridian demands a perpetual, royalty-free, irrevocable license-back from Quorum to Meridian on all Derived Data, for Meridian's own internal and external commercial use, without restriction. This license-back would grant Meridian the right to use, reproduce, distribute, display, and commercially exploit any Derived Data created by Quorum using Meridian's Licensed Data Products.
(d) Third-Party Commercialization Restrictions. Quorum may not sell, sublicense, or otherwise make Derived Data available to any third party unless the Derived Data has been "sufficiently transformed" such that no Meridian raw data can be reverse-engineered from it. Critically, Meridian retains sole discretion to determine whether "sufficient transformation" has occurred. Quorum may not commercialize Derived Data externally without Meridian's prior written approval based on this sole-discretion determination.
(e) Revenue Share. If Quorum receives Meridian's approval to commercialize Derived Data externally, Meridian receives 15% of net revenues attributable to such Derived Data.
Quorum Counter-Term Sheet:
(a) Quorum IP Ownership. Quorum owns all intellectual property in all Derived Data. Derived Data is defined as any data, models, scores, indices, analytics outputs, or other materials created by Quorum using Licensed Data Products as one input among others. Quorum's position is that Derived Data is an original work of Quorum, reflecting Quorum's proprietary algorithms, methodologies, first-party data, and analytical expertise, and is not a "derivative work" of Meridian's raw data.
(b) Unrestricted Rights. Quorum has unrestricted rights to use, sublicense, distribute, and commercialize all Derived Data — including to third parties outside Quorum's corporate group — without additional fees, revenue sharing, or Meridian's prior consent.
(c) No License-Back. No license-back to Meridian on any Derived Data under any circumstances.
(d) Meridian's Retained Rights. Meridian retains all intellectual property rights in the raw Licensed Data Products only. Meridian's IP rights do not extend to any works, products, models, or outputs created by Quorum, regardless of whether such works incorporate or were informed by Licensed Data Products.
Annotation:
This is the most commercially consequential issue in the entire deal and is a critical divergence that constitutes a potential deal-breaker.
The parties' positions on Derived Data and IP ownership are diametrically opposed and reflect fundamentally different views of the value chain in data licensing transactions. The distance between the two positions is significant: Meridian seeks to retain effective control over all downstream value created using its data, including a perpetual license-back and a 15% revenue share; Quorum asserts complete and unrestricted ownership of all value it creates, with no obligations to Meridian beyond the license fees.
Strategic Context — QuorumScore™. The stakes of this provision are directly tied to Quorum's most strategically important asset: QuorumScore™, Quorum's proprietary predictive underwriting model. QuorumScore blends Meridian consumer credit data with Quorum's own first-party claims data, policyholder data, telematics data, and other proprietary data sources, using Quorum's proprietary machine learning algorithms and actuarial methodologies, to generate a composite risk score used in underwriting, pricing, and risk selection. A USPTO trademark application for QuorumScore is pending (Serial No. 97/482,116). QuorumScore is central to Quorum's competitive advantage in the insurance marketplace and is the foundation of Quorum's planned B2B licensing revenue line, which is projected to generate $40–50 million in annual revenue by 2027 based on licensing QuorumScore outputs to other carriers, MGAs, and distribution partners.
The impact of Meridian's Derived Data proposal on QuorumScore would be severe:
(i) The perpetual license-back would give Meridian unrestricted access to QuorumScore and all QuorumScore outputs for Meridian's own commercial use — including potentially licensing QuorumScore-derived insights to Quorum's competitors. This is commercially unacceptable.
(ii) The "sole discretion" standard for "sufficient transformation" gives Meridian an effective veto over Quorum's ability to commercialize QuorumScore outputs to third parties. A standard that allows one party's sole discretion to determine whether the other party can pursue a $40–50 million revenue line is commercially unworkable and creates an unacceptable level of counterparty risk.
(iii) The 15% revenue share on approved external commercialization would impose a significant ongoing cost on Quorum's B2B licensing revenue. At the projected $40–50 million annual revenue level, a 15% revenue share would represent $6.0–7.5 million per year in payments to Meridian — on top of the $12.3 million annual license fee — for the right to commercialize models that Quorum built using its own proprietary algorithms, first-party data, and analytical expertise.
Legal Analysis — "Derivative Work" Characterization. Meridian's term sheet characterizes all Derived Data as "derivative works" under applicable copyright law. This characterization is analytically questionable. Under 17 U.S.C. § 101, a "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. The application of the derivative work doctrine to machine learning model outputs that are generated using raw data as one input among many is unsettled and analytically problematic: a trained ML model that produces a composite risk score using multiple data inputs (only one of which is Meridian credit data) does not "recast, transform, or adapt" the Meridian data in the way that the Copyright Act contemplates for derivative works. The output (a numerical risk score) is not a recognizable transformation of the input (individual consumer credit records) — it is a new and independent creation reflecting the application of Quorum's proprietary algorithms and methodologies to a diverse set of inputs. A detailed analysis of this issue is being prepared by Wendy Schultz and Omar Siddiqui in a forthcoming memorandum on the ownership of ML model outputs under copyright law.
Recommended Strategy:
Lead Position. Quorum should open with its maximalist position as set forth in the counter-term sheet: full ownership of all Derived Data, no license-back, no revenue share, no requirement for Meridian's consent. This position should be framed as the only commercially viable structure that allows Quorum to realize the full value of its proprietary analytics capabilities and first-party data assets.
Fallback (Second-Round Proposal). If Meridian's initial response to Quorum's maximalist position is a categorical rejection, Quorum should have the following compromise framework prepared for introduction in a subsequent negotiation session:
(a) Quorum owns all Derived Data. No license-back to Meridian.
(b) Quorum may commercialize Derived Data to third parties, provided that the Derived Data meets an objective, jointly agreed de-identification and transformation standard (not Meridian's sole discretion). This standard should be based on quantifiable technical criteria — for example, a requirement that no individual Meridian data record can be reconstructed from the Derived Data output with a probability exceeding a specified threshold (e.g., 1 in 10,000).
(c) No revenue share on any Derived Data commercialization.
(d) An explicit QuorumScore carve-out confirming that QuorumScore and all QuorumScore outputs are Quorum's exclusive property and are not subject to any Meridian IP claims, restrictions, or revenue-sharing obligations.
This compromise addresses Meridian's legitimate interest in preventing the resale of raw Meridian data disguised as "Derived Data" while preserving Quorum's commercial freedom to develop and monetize its proprietary analytics products.
This compromise framework should be held in reserve and should not be introduced until Quorum has established the strength of Meridian's resistance to the full ownership position.
We also note that coordination with Caldwell & Strauss LLP (Angela Firth) is advisable to ensure that Quorum's negotiating positions on Derived Data are consistent with Quorum's broader IP portfolio strategy and any existing IP license agreements that may contain analogous provisions.
Priority: RED — CRITICAL DIVERGENCE / POTENTIAL DEAL-BREAKER. This issue must be resolved as a threshold matter alongside MFN pricing before significant MDLA drafting resources are committed.
Section 9: Data Security and Privacy
Meridian Term Sheet:
• Regulatory Compliance. Licensee (Quorum) must comply with all applicable data-protection laws, including: the Fair Credit Reporting Act ("FCRA"), the Gramm-Leach-Bliley Act ("GLBA"), the California Consumer Privacy Act / California Privacy Rights Act ("CCPA/CPRA"), and applicable state insurance data-security regulations.
• Security Certifications. Licensee must maintain SOC 2 Type II certification throughout the term. Meridian represents that it currently maintains SOC 2 Type II and ISO 27001 certifications.
• Data Breach Notification. Each party must notify the other within forty-eight (48) hours of discovery of any data breach involving Licensed Data.
• Ancillary Agreements. The parties agree to execute a separate Data Security Addendum and an FCRA Permissible Purpose Certification as conditions to the commencement of data delivery.
• Post-Termination Data Treatment. Upon termination or expiration of the MDLA, Licensee must return or destroy all Licensed Data Products within ninety (90) days and provide written certification of destruction.
Quorum Counter-Term Sheet:
• Regulatory Compliance. Accepts the regulatory compliance obligations specified by Meridian (FCRA, GLBA, CCPA/CPRA, state insurance regulations). Adds an express reference to the New York Department of Financial Services Cybersecurity Regulation (23 NYCRR 500), which is directly applicable to Quorum as a New York-regulated insurance holding company.
• Security Certifications. Accepts the requirement that both parties maintain SOC 2 Type II certification throughout the term. Adds a requirement that Meridian maintain its ISO 27001 certification throughout the entire term of the MDLA (not only at signing). This ongoing certification requirement is intended to ensure that Meridian's information security management system continues to meet the ISO 27001 standard as it evolves over the five-year term.