COUNTER-TERM SHEET — DRAFT
Proposed Terms for Enterprise Data License Agreement
Between
Quorum Insurance Holdings Corp. ("Quorum" or "Licensee")
and
Meridian Credit intelligence, Inc. ("Meridian" or "Licensor")
DRAFT — FOR DISCUSSION PURPOSES ONLY — NOT BINDING
September 28, 2022
Prepared by Calderwood & Harkness LLP, 425 Park Avenue, New York, NY 10022, Counsel to Quorum Insurance Holdings Corp.
In response to Meridian Credit intelligence, Inc.'s Initial Term Sheet dated September 12, 2022.
Subject to the Mutual Non-Disclosure Agreement, Reference No. NDA-QIH-MCI-2022-001, dated August 15, 2022. All information contained herein is confidential and proprietary. Distribution or disclosure of this document or any portion hereof to any person other than authorized representatives of the parties and their respective legal counsel is strictly prohibited without the prior written consent of Quorum Insurance Holdings Corp.
This counter-term sheet (this "Counter-Term Sheet") sets forth the principal commercial and legal terms proposed by Quorum Insurance Holdings Corp. ("Quorum") for a Master Data License Agreement (the "MDLA") with Meridian Credit intelligence, Inc. ("Meridian"). This Counter-Term Sheet is submitted in response to Meridian's Initial Term Sheet dated September 12, 2022, and reflects Quorum's proposed modifications and additions to the terms set forth therein.
This Counter-Term Sheet is intended solely as a basis for further negotiation between the parties and does not constitute, and shall not be deemed to constitute, a binding agreement, commitment, or obligation of either party, whether express, implied, or otherwise. The parties' respective rights and obligations with respect to the transactions contemplated herein will arise only upon the negotiation, execution, and delivery of a definitive MDLA and such related ancillary agreements as may be required therein. No party shall have any liability to the other party on account of this Counter-Term Sheet, except with respect to the obligations of confidentiality set forth in the Mutual Non-Disclosure Agreement referenced above. Terms, conditions, and commercial points not specifically addressed in this Counter-Term Sheet remain subject to negotiation and documentation in the definitive MDLA and ancillary agreements.
Section 1: Parties
1.1 Licensee. Full Legal Name: Quorum Insurance Holdings Corp.
Entity Type: Corporation organized and existing under the laws of the State of Delaware.
Principal Place of Business: 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901.
Nasdaq Ticker Symbol: QIHC.
Primary Business: Quorum is a multi-line insurance carrier and insurance-technology platform operator, providing property and casualty, life, and specialty-line insurance products to individual and commercial customers throughout the United States. Quorum operates a proprietary data-driven underwriting platform that leverages advanced analytics, predictive modeling, and machine-learning techniques to enhance the speed, accuracy, and efficiency of its underwriting and claims-adjudication processes.
Primary Contacts for this Transaction:
1.2 Licensor. Full Legal Name: Meridian Credit intelligence, Inc.
Entity Type: Corporation organized and existing under the laws of the State of Georgia.
Principal Place of Business: 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326.
Primary Business: Meridian is a consumer and commercial credit bureau and data-analytics provider, maintaining one of the nation's largest repositories of consumer and commercial credit tradeline data and alternative data signals. Meridian provides data products, analytics, and decisioning tools to financial institutions, insurance carriers, government agencies, and other enterprise clients.
Primary Contacts for this Transaction:
Section 2: Licensed Data Products
2.1 Description of Data Products
The following table summarizes the data products to be licensed under the MDLA (each, a "Licensed Data Product" and collectively, the "Licensed Data Products"). Detailed technical specifications, data dictionaries, record schemas, field-level definitions, and delivery protocols for each Licensed Data Product shall be set forth in Technical Schedule A to the definitive MDLA.
2.2 Total Estimated Monthly Volume
Based on the data products and refresh frequencies described above, Quorum estimates that its total monthly data consumption will be approximately 437 million records per month (combined across all Licensed Data Products). This estimated volume falls within the proposed base-tier threshold of 500 million records per month, as described in Section 4.5 below. The parties acknowledge that actual monthly volumes may fluctuate, and Quorum's consumption will be measured in accordance with the record-counting methodology to be set forth in Technical Schedule A.
2.3 Permitted Uses
The Licensed Data Products shall be licensed to Quorum for the following uses (collectively, the "Permitted Uses"):
(a) Integration into and use within Quorum's automated underwriting models across all of Quorum's insurance lines of business, including property and casualty, life, and specialty lines;
(b) Deployment in Quorum's claims-fraud detection algorithms and related investigative analytics;
(c) Development, execution, and refinement of customer propensity scoring models used by Quorum for marketing, cross-selling, retention, and customer segmentation purposes;
(d) Internal risk analytics, actuarial analysis, and portfolio management activities conducted by or on behalf of Quorum;
(e) Development, training, validation, testing, and ongoing operation of Quorum's proprietary predictive models, including without limitation QuorumScore™ (as further described in Section 8.7), and any successor, replacement, or derivative models thereof; and
(f) Creation of Derived Data (as defined in Section 8.1) and the commercialization thereof, subject to and in accordance with the terms set forth in Section 8 of this Counter-Term Sheet.
The definitive MDLA shall include a comprehensive definition of "Permitted Uses" consistent with the foregoing, and shall be drafted with sufficient breadth to accommodate Quorum's evolving business needs and technological capabilities during the Term.
Section 3: Term
3.1 Initial Term
The initial term of the MDLA shall be five (5) years, commencing on the effective date of the fully executed MDLA (the "Effective Date") and continuing until the fifth (5th) anniversary thereof, unless earlier terminated in accordance with the provisions of Section 14 (the "Initial Term").
3.2 Renewal. Subject to further negotiation in the context of the definitive MDLA, Quorum proposes that the MDLA automatically renew for successive one (1)-year periods (each, a "Renewal Term") following the expiration of the Initial Term, unless either party provides written notice of non-renewal to the other party at least one hundred eighty (180) days prior to the expiration of the then-current term (whether the Initial Term or any Renewal Term). The terms applicable during any Renewal Term, including pricing, shall be subject to good-faith negotiation and agreement by the parties; provided, however, that if the parties are unable to agree on revised pricing for a Renewal Term, the pricing in effect during the final year of the immediately preceding term shall continue to apply during such Renewal Term, subject to adjustment not to exceed the lesser of (i) three percent (3%) per annum or (ii) the percentage increase in the Consumer Price Index (CPI-U, All Items, as published by the U.S. Bureau of Labor Statistics) for the most recent twelve-month period. The specific renewal pricing mechanism remains subject to negotiation.
3.3 Year 1 Ramp Period
The first year of the Initial Term shall include a six (6)-month implementation and ramp period (the "Ramp Period"), during which Quorum will progressively onboard and integrate the Licensed Data Products into its systems and platforms. During the Ramp Period, Meridian shall provide reasonable technical support and cooperation in accordance with the implementation plan to be set forth in Technical Schedule A. The pricing for Year 1 of the Initial Term has been structured to reflect the Ramp Period, as further described in Section 4 below.
Section 4: Fees and Payment Terms
4.1 Annual License Fees
Quorum proposes the following annual license fee structure for the Initial Term of the MDLA:
For purposes of reconciliation, the aggregate five-year license fee commitment is calculated as follows: Year 1 ($10,800,000) plus Years 2 through 5 ($12,300,000 × 4 = $49,200,000) equals $60,000,000 in total aggregate license fees.
4.2 Year 1 discount Rationale
The Year 1 annual fee of $10,800,000 reflects a discount relative to the annualized rate for Years 2 through 5 in recognition of the six (6)-month implementation and ramp period described in Section 3.3, during which Quorum will not have full access to, or the ability to fully utilize, all Licensed Data Products. The effective annualized rate for Year 1 is discounted accordingly to ensure that Quorum pays a fair and proportionate fee reflecting the actual scope and availability of Licensed Data Products during the Ramp Period. Quorum expects to achieve full production utilization of all Licensed Data Products by no later than the conclusion of the Ramp Period.
4.3 Payment Schedule
All annual license fees shall be payable quarterly in advance, in equal quarterly installments, as follows:
(a) Year 1: Four (4) quarterly installments of $2,700,000 each (totaling $10,800,000 for Year 1).
(b) Years 2 through 5: Four (4) quarterly installments of $3,075,000 each per year (totaling $12,300,000 per year).
(c) First Installment: The first quarterly installment for Year 1 ($2,700,000) shall be due and payable within thirty (30) calendar days following the Effective Date.
(d) Subsequent Installments: Each subsequent quarterly installment shall be due and payable on the first business day of the applicable calendar quarter (or such other payment dates as may be mutually agreed in the definitive MDLA).
Meridian shall issue invoices for each quarterly installment no later than thirty (30) days prior to the applicable due date. All payments shall be made by wire transfer in immediately available funds to an account designated by Meridian in writing.
4.4 Implementation/Integration Fee
In addition to the annual license fees described above, Quorum shall pay Meridian a one-time implementation and integration fee of $1,500,000 (the "Implementation Fee") in consideration of Meridian's technical support, professional services, and other resources dedicated to the initial integration and onboarding of the Licensed Data Products. The Implementation Fee shall be payable in two (2) equal installments as follows:
(i) $750,000 due and payable upon execution of the definitive MDLA; and
(ii) $750,000 due and payable upon completion of data-feed integration and successful completion of mutually agreed acceptance testing criteria as set forth in Technical Schedule A.
For the avoidance of doubt, the Implementation Fee is separate from and in addition to the $60,000,000 aggregate license fee described in Section 4.1 and is non-refundable except in the event of a material breach by Meridian of its implementation obligations under the MDLA.
4.5 Data-Volume Tiers and Overages
The annual license fees set forth in Section 4.1 include a base-tier data-volume allocation of up to five hundred million (500,000,000) records per calendar month, measured on a combined basis across all Licensed Data Products (consumer and commercial).
In the event that Quorum's actual monthly data consumption exceeds the 500,000,000 record/month base-tier threshold in any given calendar month, Quorum shall pay an overage fee of $0.003 (three-tenths of one cent) per record for each record in excess of the base-tier threshold. Overage fees shall be invoiced monthly in arrears, based on actual record counts as determined in accordance with the record-counting methodology to be specified in Technical Schedule A. Overage invoices shall be due and payable within thirty (30) days of invoice date.
The parties shall work in good faith to establish a mutually acceptable record-counting methodology that accounts for duplicate records, partial records, error records, and test-environment records, and that provides for transparent and auditable volume reporting.
4.6 Late Payment
Any amounts not paid when due under the MDLA shall bear interest at the rate of one and one-half percent (1.5%) per month (equivalent to eighteen percent (18%) per annum), calculated as simple interest from the applicable due date until the date of actual payment in full. The imposition of late-payment interest shall be in addition to, and not in limitation of, any other rights or remedies available to the non-breaching party under the MDLA or at law or in equity.
4.7 Taxes. All fees set forth in this Counter-Term Sheet are exclusive of any and all applicable sales, use, value-added, goods and services, withholding, or similar taxes, duties, or governmental charges (collectively, "Indirect Taxes"). Quorum shall be responsible for the payment of all Indirect Taxes imposed on or with respect to the license fees, Implementation Fee, and overage fees payable under the MDLA, except to the extent that a valid exemption certificate or other documentation is provided. Each party shall be solely responsible for all taxes imposed on its own income, capital, or net worth.
Section 5: Most Favored Nation Pricing
5.1 MFN Commitment
Quorum proposes the inclusion of a most favored nation ("MFN") pricing clause in the definitive MDLA. Specifically, Quorum proposes that, if at any time during the Term (including the Initial Term and any Renewal Term), Meridian enters into or amends a data license agreement with any Comparable Licensee (as defined in Section 5.2 below) on terms that provide such Comparable Licensee with more favorable per-record pricing, volume discounts, or aggregate fee terms than those set forth in the MDLA (collectively, "More Favorable Terms"), Meridian shall promptly, and in any event within thirty (30) calendar days of the effective date of such More Favorable Terms, (a) notify Quorum in writing of the existence of such More Favorable Terms (without disclosing the identity of the Comparable Licensee, except as required for verification under Section 5.3), and (b) automatically adjust Quorum's pricing under the MDLA to match the More Favorable Terms, effective retroactively to the date on which such More Favorable Terms became effective for the Comparable Licensee. Any overpayment by Quorum resulting from the retroactive application of adjusted pricing shall be credited against future quarterly installments or, at Quorum's election, refunded within thirty (30) days.
5.2 Definition of Comparable Licensee
For purposes of this Counter-Term Sheet and the definitive MDLA, "Comparable Licensee" shall mean any United States-domiciled insurance carrier, managing general agent ("MGA"), managing general underwriter ("MGU"), or insurance-technology company ("insurtech") with annual gross premiums written (or, in the case of an MGA, MGU, or insurtech, annual managed or facilitated gross premiums written) of five hundred million dollars ($500,000,000) or more that licenses from Meridian any one or more of the Licensed Data Products, or data products that are substantially similar in scope, content, volume, and utility to one or more of the Licensed Data Products. The determination of whether a data product is "substantially similar" shall be made in good faith by reference to objective criteria, including the types and categories of data fields included, the volume and coverage of records, and the intended end-use of the data.
5.3 Verification and Audit
Quorum shall have the right, exercisable not more than once per contract year during the Term, to request that Meridian certify in writing its compliance with the MFN commitment set forth in this Section 5. Such certification shall be delivered by Meridian within thirty (30) days of Quorum's written request and shall be signed by an authorized officer of Meridian with knowledge of Meridian's data-licensing activities.
In the event that Quorum has a reasonable, good-faith basis to dispute the accuracy or completeness of Meridian's certification, Quorum shall have the right to engage an independent third-party auditor, mutually agreed upon by the parties (such agreement not to be unreasonably withheld, conditioned, or delayed), to verify Meridian's compliance with the MFN commitment. The scope, methodology, and reporting format of any such audit shall be structured to protect the confidentiality of third-party licensee information, as further described in Section 5.4 below. The cost of such audit shall be borne by Quorum; provided, however, that if the audit reveals a material breach of the MFN commitment (defined as a pricing disparity resulting in an aggregate overcharge to Quorum of $250,000 or more during the applicable contract year), Meridian shall bear the full cost of the audit and shall promptly remit to Quorum the amount of the overcharge, together with interest thereon at the rate specified in Section 4.6.
5.4 Confidentiality. Quorum acknowledges that the specific pricing terms, fee structures, and commercial arrangements of Meridian's agreements with other licensees are confidential and proprietary to Meridian and such licensees. Accordingly, the MFN verification and audit process described in Section 5.3 shall be structured in a manner that protects the confidentiality of third-party licensee information. Without limiting the foregoing, Quorum agrees that any audit conducted pursuant to Section 5.3 shall be subject to the following restrictions:
(a) The independent auditor shall report to Quorum on a pass/fail basis only, confirming either (i) that Meridian is in compliance with the MFN commitment, or (ii) that the auditor has identified one or more instances of non-compliance, together with the aggregate amount of any pricing adjustment required;
(b) The auditor shall not disclose to Quorum the identity of any Comparable Licensee, the specific pricing terms of any third-party agreement, or any other confidential business information of Meridian or its licensees; and
(c) The auditor shall execute a confidentiality agreement in form and substance reasonably satisfactory to Meridian prior to commencing any audit.
Section 6: Service Levels
6.1 General. The definitive MDLA will include a Service Level Agreement ("SLA") as a schedule or exhibit thereto, specifying in detail the parties' respective obligations with respect to system availability, data-delivery windows, latency standards for API access, data quality, service credits for SLA failures, escalation procedures, incident-management protocols, planned maintenance windows, and force majeure provisions. The specific terms of the SLA remain subject to negotiation; however, Quorum sets forth below its proposed key SLA metrics as a framework for discussion.
6.2 Proposed Key SLA Metrics
Quorum proposes that the SLA include, at a minimum, the following performance commitments:
(a) System Availability (API): Meridian shall maintain a monthly uptime percentage of not less than 99.9% for the REST API used to access the MCI Consumer Credit File™ data. "Uptime" shall be measured on a calendar-month basis and shall exclude scheduled maintenance windows (not to exceed four (4) hours per month, conducted during off-peak hours as mutually agreed).
(b) Batch Data Delivery: Meridian shall deliver all SFTP batch data feeds within agreed delivery windows: daily batch delivery for the MCI Consumer Credit File™ and MCI AltSignal™ data products, and weekly batch delivery for the MCI CommercialView™ data product. Specific delivery deadlines (expressed as Eastern Time cutoffs) shall be set forth in the SLA.
(c) API Response Time: The average API response time (measured as end-to-end latency from request receipt to response delivery) shall not exceed mutually agreed thresholds, which Quorum proposes to set at no more than 250 milliseconds for standard single-record lookups under normal operating conditions. Thresholds for bulk and batch API queries shall be separately agreed.
(d) Service Credits: In the event that Meridian fails to meet any SLA commitment in a given calendar month, Quorum shall be entitled to service credits against future quarterly installments, calculated in accordance with a graduated credit schedule to be set forth in the SLA. Quorum proposes the following indicative credit schedule:
(e) Escalation: The SLA shall include a multi-tier escalation framework with defined response times and escalation contacts for critical, high, medium, and low-severity incidents.
6.3 Data Quality
Meridian shall deliver the Licensed Data Products in conformity with mutually agreed data-quality acceptance criteria, which shall address, at a minimum, the following dimensions of data quality: accuracy (the degree to which data values correctly represent the real-world facts they are intended to represent), completeness (the extent to which required data fields are populated), timeliness (the currency of data relative to the real-world events it describes), and consistency (the absence of internal contradictions and conformity to agreed data formats and schemas). Specific data-quality thresholds, measurement methodologies, and remediation protocols shall be detailed in Technical Schedule A to the MDLA. In the event that Meridian delivers Licensed Data Products that fail to meet the agreed data-quality standards, Quorum shall have the right to reject such data delivery and, if such failure is not remedied within a reasonable cure period, to receive service credits or pursue other remedies as may be set forth in the SLA.
Section 7: Data Delivery and Integration
7.1 Delivery Methods
The Licensed Data Products shall be delivered to Quorum via the following methods:
(a) SFTP Batch Delivery: The MCI Consumer Credit File™ (daily), MCI CommercialView™ (weekly), and MCI AltSignal™ (daily) shall each be delivered via secure SFTP batch transfer to Quorum-designated endpoints. All SFTP transfers shall be encrypted in transit using TLS 1.2 or higher, and files shall be encrypted at rest using AES-256 encryption. Specific file formats, naming conventions, compression standards, checksum/hash verification procedures, and delivery schedules shall be documented in Technical Schedule A.
(b) REST API: Real-time access to MCI Consumer Credit File™ data shall be provided via a REST API hosted and maintained by Meridian. The API shall support standard authentication mechanisms (OAuth 2.0 or equivalent), rate limiting, and comprehensive error handling. Meridian shall provide Quorum with complete API documentation, including endpoint specifications, request/response schemas, authentication procedures, rate limits, and code samples, as part of Technical Schedule A.
7.2 Implementation. Meridian shall provide reasonable technical support, professional services, and subject-matter expertise during the six (6)-month implementation and ramp period described in Section 3.3 to facilitate the timely and efficient integration of the Licensed Data Products into Quorum's systems and platforms. The parties shall collaborate in good faith to develop and execute a mutually agreed implementation plan, which shall include key milestones, deliverables, resource commitments, and acceptance criteria. Detailed integration specifications, data formats, record schemas, field-level mapping documentation, API documentation, test data environments, and acceptance testing criteria shall be set forth in Technical Schedule A to the MDLA.
Quorum expects that the implementation plan will contemplate the following key phases: (i) environment provisioning and connectivity setup; (ii) data-feed configuration and initial test-data delivery; (iii) schema validation and field-level mapping; (iv) integration development and unit testing; (v) end-to-end acceptance testing; and (vi) production cutover and monitoring. Each phase shall have defined completion criteria and sign-off procedures.
7.3 Quorum Technical Contact
The primary technical contact for Quorum with respect to implementation, integration, and ongoing technical matters related to the Licensed Data Products shall be:
Priya Nair Director, Data Engineering Quorum Insurance Holdings Corp. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901
Email: p.nair@quorumins.com
Phone: (203) 555-4380
Meridian shall designate a corresponding primary technical contact prior to the commencement of the Ramp Period.
Section 8: Intellectual Property — Derived Data Ownership and Commercialization
This Section 8 sets forth Quorum's proposed terms regarding the ownership, use, and commercialization of Derived Data and is of critical importance to Quorum's willingness to enter into the MDLA. Quorum's proposed position on Derived Data represents a material departure from the terms set forth in Meridian's Initial Term Sheet dated September 12, 2022, and Quorum respectfully submits that the terms set forth below are both commercially reasonable and consistent with prevailing market practice for enterprise data-license transactions of this type and magnitude.
8.1 Definitions. "Derived Data" means any and all data, databases, datasets, models (including machine-learning model weights, parameters, coefficients, and architectures), scores, indices, analytics outputs, statistical summaries, blended risk scores, propensity models, enriched datasets, aggregated or anonymized datasets, insights, reports, visualizations, and any other information, content, or work product created, developed, generated, compiled, or derived by or on behalf of Quorum (including by Quorum's employees, contractors, agents, or affiliates) using the Licensed Data Products, in whole or in part, as an input, training dataset, validation dataset, reference source, or calibration benchmark, including without limitation all QuorumScore™ outputs, model weights, and derivative analytics.
8.2 Ownership of Derived Data
Quorum shall exclusively own all right, title, and interest (including all intellectual property rights, whether arising under patent, copyright, trade secret, trademark, database, or other applicable law) in and to all Derived Data. For the avoidance of doubt, Derived Data shall not constitute a "derivative work" (as such term is defined in Section 101 of the Copyright Act of 1976, 17 U.S.C. § 101) of the Licensed Data Products, and Meridian shall have no ownership interest, license, lien, encumbrance, or other right in or to any Derived Data, regardless of whether such Derived Data incorporates, is based upon, or was created using Licensed Data Products. Quorum's ownership of Derived Data shall vest automatically upon creation and shall not be conditioned upon any further action, consent, or approval by Meridian. To the extent that any Derived Data is deemed under applicable law to constitute a derivative work or to include any copyrightable element attributable to the Licensed Data Products, Meridian hereby irrevocably assigns (and agrees to assign) to Quorum all of Meridian's right, title, and interest in and to such elements, and the MDLA shall include appropriate assignment language to effectuate this intent.
8.3 Unrestricted Commercialization Rights
Quorum shall have the unrestricted right to use, reproduce, modify, adapt, enhance, create further derivatives of, distribute, display, perform, sublicense, sell, offer for sale, lease, and otherwise commercially exploit Derived Data — including to third parties outside Quorum's corporate group and affiliated entities — without the payment of any additional fees, royalties, revenue-sharing amounts, or other financial consideration to Meridian, and without obtaining Meridian's prior consent, approval, or notification. This right shall include, without limitation, the right to (a) incorporate Derived Data into products and services offered by Quorum to its insurance policyholders, reinsurers, brokers, agents, and other business partners; (b) license or sublicense Derived Data to third-party data consumers, analytics providers, financial institutions, or other enterprises; and (c) publish or disclose aggregated or anonymized Derived Data in research papers, white papers, marketing materials, and public filings, subject to compliance with applicable law.
8.4 No License-Back
The MDLA shall not include any license-back, grant-back, march-in right, or similar provision requiring or permitting Quorum to license, assign, transfer, or otherwise make available any Derived Data (including QuorumScore™ outputs, model weights, or analytics) to Meridian, whether on an exclusive or non-exclusive basis, and whether with or without consideration. Quorum shall have sole and absolute discretion over whether, when, and on what terms to share, disclose, or license any Derived Data to any person or entity, including Meridian.
8.5 No Revenue Share
The MDLA shall not include any revenue-sharing, royalty, profit-sharing, earn-out, or similar financial obligation from Quorum to Meridian with respect to Quorum's creation, use, commercialization, sublicensing, or other exploitation of Derived Data. The annual license fees set forth in Section 4 constitute the sole and complete financial consideration payable by Quorum to Meridian under the MDLA, and Meridian shall have no right to receive any additional compensation in connection with Quorum's Derived Data activities.
8.6 Machine-Learning Model Outputs
Quorum's position with respect to machine-learning model outputs is as follows:
(a) Quorum's machine-learning models are trained on, among other things, Licensed Data Products, together with Quorum's proprietary first-party data (including claims data, policy data, telematics data, and customer-interaction data) and data from other third-party sources.
(b) The trained model weights, parameters, coefficients, and architectures of such models, to the extent they incorporate or are informed by Licensed Data Products, fall within the scope of "Derived Data" as defined in Section 8.1 and are subject to the ownership and commercialization provisions set forth in this Section 8.
(c) However, live predictions, inference outputs, risk scores, classifications, and other outputs generated by Quorum's trained models when applied to new, non-Meridian input data (i.e., input data that does not itself constitute or contain Licensed Data Products) are independent works solely owned by Quorum and are not Derived Data for purposes of the MDLA. Such outputs are not subject to any restriction, limitation, or obligation under the MDLA, including without limitation any restrictions on use, distribution, commercialization, or disclosure.
(d) The distinction between trained model weights/parameters (which constitute Derived Data) and live inference outputs generated from non-Meridian inputs (which do not) is fundamental to Quorum's data-driven business model and is consistent with the prevailing understanding of machine-learning model development and deployment in the insurance and financial-services industries.
8.7 QuorumScore™. QuorumScore™ is Quorum's proprietary predictive underwriting model and scoring system, designed to generate risk scores and underwriting recommendations by blending Licensed Data Products with Quorum's own first-party claims history data, policy data, telematics data, and other proprietary and third-party data sources. QuorumScore™ is the subject of a pending United States Patent and Trademark Office trademark application (Serial No. 97/482,116). All QuorumScore™ outputs — including individual risk scores, model predictions, aggregated analytics, model weights, and any other work product generated by or derived from the QuorumScore™ system — shall constitute Derived Data exclusively owned by Quorum, with full and unrestricted commercialization rights as set forth in Sections 8.2 through 8.6 above.
8.8 Meridian IP
Quorum acknowledges and agrees that Meridian retains all right, title, and interest in and to the Licensed Data Products in their original, unmodified form, and in and to Meridian's trademarks, service marks, and trade names, including MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™. Nothing in the MDLA or this Counter-Term Sheet shall be construed to transfer, assign, or convey to Quorum any ownership interest in Meridian's underlying raw data, proprietary data-collection and processing methodologies, scoring algorithms, trademarks, or other intellectual property, except for the limited license to use the Licensed Data Products for the Permitted Uses expressly set forth herein.
Section 9: Data Security and Privacy
9.1 Data Security Addendum
The definitive MDLA will include a Data Security Addendum ("DSA") as a schedule or ancillary agreement, establishing the parties' respective obligations with respect to the security of the Licensed Data Products, Derived Data, and any other confidential or personal information exchanged or processed in connection with the MDLA. The DSA shall address, at a minimum, administrative, technical, and physical safeguards; access controls and authentication requirements; encryption standards (in transit and at rest); network security and monitoring; vulnerability management and penetration testing; employee training and background checks; incident response and business continuity planning; and subcontractor and third-party access controls. The specific terms of the DSA remain subject to negotiation between the parties.
9.2 Certifications. The following security certifications shall be required of each party and maintained throughout the Term:
(a) Meridian: Meridian shall maintain, and shall provide to Quorum upon request, current SOC 2 Type II and ISO 27001 certifications (or equivalent successor certifications) covering the systems, facilities, and processes used to collect, store, process, and deliver the Licensed Data Products. Meridian shall provide copies of the most recent audit reports and certifications to Quorum promptly upon execution of the MDLA and annually thereafter.
(b) Quorum: Quorum shall maintain, and shall provide to Meridian upon request, a current SOC 2 Type II certification (or equivalent successor certification) covering the systems, facilities, and processes used to receive, store, process, and use the Licensed Data Products and Derived Data. Quorum shall provide copies of the most recent audit report and certification to Meridian promptly upon execution of the MDLA and annually thereafter.
9.3 Data Breach Notification
Each party shall notify the other party without unreasonable delay, and in any event within forty-eight (48) hours of discovery, of any security incident or data breach (whether confirmed or reasonably suspected) involving or potentially involving the Licensed Data Products, Derived Data, or any system or environment used to store, process, or transmit such data. Such notification shall include, to the extent known at the time, a description of the nature and scope of the incident, the types of data affected, the estimated number of individuals or records affected, the remedial actions taken or planned, and the name and contact information of a designated incident-response contact. The parties shall cooperate in good faith in the investigation, remediation, and notification of any such incident, including with respect to any notifications required by applicable law or regulation.
9.4 Regulatory Compliance
The MDLA and all ancillary agreements shall be structured to ensure compliance with all applicable data-protection, privacy, and information-security laws and regulations, including without limitation:
(a) The Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., and applicable regulations thereunder, including Regulation V (12 C.F.R. Part 1022);
(b) The Gramm-Leach-Bliley Act ("GLBA"), 15 U.S.C. § 6801 et seq., including the Safeguards Rule (16 C.F.R. Part 314) and the Privacy Rule (12 C.F.R. Part 1016);
(c) The California Consumer Privacy Act / California Privacy Rights Act ("CCPA/CPRA"), Cal. Civ. Code § 1798.100 et seq., and applicable regulations;
(d) The New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR Part 500;
(e) Applicable insurance data-security laws and regulations of the fifty (50) states, the District of Columbia, and U.S. territories, including the NAIC Insurance Data Security Model Law as adopted by applicable jurisdictions; and
(f) Any other applicable federal, state, or local data-protection, privacy, or information-security laws and regulations.
Quorum will provide FCRA permissible purpose certifications, in form and substance mutually agreed, as a schedule to the MDLA, certifying the specific permissible purposes under which Quorum will access and use the Licensed Data Products.
9.5 Data Processing Agreement
The parties shall negotiate and execute a Data Processing Agreement ("DPA") as an ancillary agreement to the MDLA, addressing, inter alia, the parties' respective roles and obligations as "businesses" and "service providers" or "contractors" (as such terms are defined in the CCPA/CPRA), restrictions on the sale or sharing of personal information, data subject access request procedures, data minimization and purpose limitation requirements, and any other obligations arising under applicable data-protection and privacy laws. The DPA shall be consistent with the terms of the MDLA and this Counter-Term Sheet.
Section 10: Representations and Warranties
10.1 Meridian Representations and Warranties
The definitive MDLA shall include the following representations and warranties by Meridian, which shall be made as of the Effective Date and shall be deemed repeated as of each date on which Licensed Data Products are delivered:
(a) Meridian has all necessary rights, licenses, consents, and authorizations to license the Licensed Data Products to Quorum for all of the Permitted Uses contemplated by this Counter-Term Sheet and the MDLA, and the grant of such license does not and will not violate, conflict with, or result in a breach of any agreement, obligation, or restriction to which Meridian is a party or by which it is bound;
(b) The Licensed Data Products, and Quorum's use thereof for the Permitted Uses, do not and will not infringe, misappropriate, or otherwise violate the intellectual property rights or any other rights of any third party;
(c) Meridian is in compliance in all material respects with all applicable federal, state, and local laws, rules, and regulations, including the FCRA, GLBA, CCPA/CPRA, and all applicable state insurance and data-security laws, in connection with its collection, processing, storage, and distribution of the Licensed Data Products; and
(d) Meridian's data collection, processing, and distribution practices comply in all material respects with applicable privacy and data-protection laws, and Meridian has obtained all necessary consents, permissions, and authorizations from data subjects and data furnishers required for the licensing and use of the Licensed Data Products as contemplated herein.
10.2 Quorum Representations and Warranties
The definitive MDLA shall include the following representations and warranties by Quorum:
(a) Quorum has the corporate power and authority to enter into the MDLA and to perform its obligations thereunder, and the execution and delivery of the MDLA has been duly authorized by all necessary corporate action on the part of Quorum; and
(b) Quorum will use the Licensed Data Products solely for the Permitted Uses specified in the MDLA and in compliance with all applicable federal, state, and local laws, rules, and regulations, including the FCRA, GLBA, CCPA/CPRA, and all applicable state insurance and data-security laws.
Section 11: Indemnification
11.1 Meridian Indemnification
Meridian shall indemnify, defend, and hold harmless Quorum and its directors, officers, employees, agents, affiliates, successors, and permitted assigns (collectively, the "Quorum Indemnitees") from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of litigation) (collectively, "Losses") arising out of or relating to:
(a) Any breach of Meridian's representations and warranties set forth in Section 10.1;
(b) Any claim by a third party that the Licensed Data Products, or Quorum's use thereof for the Permitted Uses, infringe, misappropriate, or otherwise violate the intellectual property rights or any other rights of such third party; and
(c) Any violation by Meridian of applicable data-protection, privacy, or information-security laws, rules, or regulations in connection with Meridian's collection, processing, storage, or distribution of the Licensed Data Products.
11.2 Quorum Indemnification
Quorum shall indemnify, defend, and hold harmless Meridian and its directors, officers, employees, agents, affiliates, successors, and permitted assigns (collectively, the "Meridian Indemnitees") from and against any and all Losses arising out of or relating to:
(a) Any breach of Quorum's representations and warranties set forth in Section 10.2;
(b) Quorum's use of the Licensed Data Products outside the scope of the Permitted Uses or otherwise in violation of the terms of the MDLA; and
(c) Any third-party claims arising from Quorum's creation, use, distribution, or commercialization of Derived Data, to the extent that such claims do not arise from, and are not attributable to, the Licensed Data Products themselves or any act or omission of Meridian.
11.3 Procedures. The definitive MDLA shall include standard indemnification procedures, including provisions governing (a) prompt written notice of any claim or proceeding for which indemnification is sought; (b) the indemnifying party's right to assume and control the defense of such claim at its expense, using counsel reasonably acceptable to the indemnified party; (c) the indemnified party's obligation to cooperate with the indemnifying party in the defense of such claim; (d) restrictions on the indemnified party's right to settle any claim without the indemnifying party's prior written consent; and (e) the indemnifying party's obligation not to settle any claim in a manner that imposes any liability, obligation, or restriction on the indemnified party without the indemnified party's prior written consent.
Section 12: Limitation of Liability
Mutual limitation of liability provisions shall be negotiated and included in the definitive MDLA. Quorum's proposed position on limitation of liability is as follows:
(a) Consequential Damages Exclusion: The exclusion of indirect, incidental, special, consequential, and punitive damages (including lost profits, lost revenues, loss of data, and loss of business opportunity) shall be mutual and shall apply to both parties equally, regardless of the form of action (whether in contract, tort, strict liability, or otherwise) and whether or not the party has been advised of the possibility of such damages.
(b) Direct Damage Cap: Each party's aggregate liability for direct damages arising under or in connection with the MDLA shall be capped at an amount equal to two times (2×) the annual license fee paid or payable by Quorum in the year in which the claim first arises (i.e., a maximum cap of $24,600,000 for any claim arising during Years 2 through 5, and $21,600,000 for any claim arising during Year 1).
(c) Carve-Outs: The following categories of liability shall be excluded from, and shall not be subject to, the general consequential damages exclusion and the direct damage cap described above:
(i) Indemnification obligations under Section 11;
(ii) Breaches of confidentiality obligations under Section 15;
(iii) Willful misconduct, fraud, or gross negligence;
(iv) Damages arising from a data breach or security incident, including regulatory fines, penalties, notification costs, credit monitoring costs, and related expenses; and
(v) Quorum's obligation to pay the license fees, Implementation Fee, and other amounts due under the MDLA.
Section 13: Insurance
13.1 Meridian Required Insurance
Meridian shall obtain and maintain, at its own cost and expense, the following insurance coverage throughout the Term:
(a) Commercial General Liability Insurance: Minimum coverage of $5,000,000 per occurrence and $10,000,000 in the aggregate, including coverage for bodily injury, property damage, personal injury, and advertising injury.
(b) Cyber/Technology Errors & Omissions Insurance: Minimum coverage of $25,000,000 in the aggregate, including coverage for data breaches, network security failures, privacy liability, technology errors and omissions, and media liability.
13.2 Quorum Required Insurance
Quorum shall obtain and maintain, at its own cost and expense, the following insurance coverage throughout the Term:
(a) Commercial General Liability Insurance: Minimum coverage of $5,000,000 per occurrence and $10,000,000 in the aggregate, including coverage for bodily injury, property damage, personal injury, and advertising injury.
(b) Cyber Liability Insurance: Minimum coverage of $50,000,000 in the aggregate, including coverage for data breaches, network security failures, privacy liability, and regulatory proceedings.
13.3 Certificates. Each party shall provide to the other party certificates of insurance evidencing the required coverage described above (a) prior to the Effective Date, and (b) promptly upon each annual renewal of such coverage throughout the Term. Each party shall provide not less than thirty (30) days' prior written notice to the other party of any material change in, cancellation of, or non-renewal of any required insurance coverage.
Section 14: Termination
14.1 Termination for Cause
Either party may terminate the MDLA upon material breach by the other party that remains uncured after the expiration of a sixty (60)-day cure period commencing upon the breaching party's receipt of written notice from the non-breaching party specifying the nature of the breach in reasonable detail. If the material breach is of a nature that cannot reasonably be cured within sixty (60) days, the cure period shall be extended for such additional period as is reasonably necessary, provided the breaching party has commenced cure efforts within the initial sixty (60)-day period and is diligently pursuing such cure to completion. Notwithstanding the foregoing, no cure period shall be required in the case of a breach of confidentiality obligations, a breach of data security obligations resulting in a data breach, or a payment default that remains uncured for more than thirty (30) days after written notice thereof.
14.2 Termination for Convenience
Subject to further negotiation in the context of the definitive MDLA, Quorum's position is that either party should have the right to terminate the MDLA for convenience (i.e., without cause) upon not less than twelve (12) months' prior written notice to the other party. In the event of termination for convenience, the terminating party's obligations with respect to the payment of fees and the provision of data services, as applicable, shall continue through the effective date of termination. Quorum's position is that no early-termination penalty or break fee should apply in the event of termination for convenience, provided that all fees accrued through the effective date of termination have been paid in full.
14.3 Termination for Insolvency
Either party may terminate the MDLA, effective immediately upon written notice to the other party, if the other party: (a) becomes the subject of a voluntary or involuntary petition in bankruptcy or insolvency that is not dismissed within sixty (60) days; (b) makes an assignment for the benefit of creditors; (c) has a receiver, trustee, or similar officer appointed over all or a substantial portion of its assets; (d) enters into a composition or arrangement with its creditors; or (e) ceases to conduct business in the ordinary course.
14.4 Post-Termination Data Obligations
Upon the termination or expiration of the MDLA for any reason:
(a) Return or Destruction of Licensed Data Products: Quorum shall, within ninety (90) calendar days following the effective date of termination or expiration, return to Meridian or certifiably destroy all Licensed Data Products in Quorum's possession or control in their original or unmodified form (i.e., Meridian raw data as received from Meridian). Quorum shall, upon request, provide Meridian with a written certification signed by an authorized officer of Quorum confirming the completion of such return or destruction.
(b) Retention of Derived Data: Quorum shall retain all Derived Data following termination or expiration of the MDLA. Quorum's right to retain, use, and commercially exploit Derived Data shall be perpetual, irrevocable, fully paid-up, royalty-free, transferable, and sublicensable, and shall survive the termination or expiration of the MDLA without restriction. For the avoidance of doubt, Derived Data is not subject to the return or destruction obligation set forth in subsection (a) above, and Quorum shall have no obligation to cease using, delete, or destroy any Derived Data following termination or expiration, regardless of the reason for termination.
(c) Transition Assistance: Upon Quorum's request, Meridian shall provide reasonable transition assistance for a period of up to ninety (90) days following the effective date of termination or expiration, at Meridian's then-prevailing professional services rates, to facilitate an orderly transition of data feeds and services.