CONFIDENTIAL

CONFIDENTIAL
COUNTER-TERM SHEET
Proposed Enterprise Data License
September 30, 2022
From:
Quorum Insurance Holdings Corp. 1200 Atlantic Street, Suite 3400 Stamford, CT 06901
To:
Meridian Credit intelligence, Inc. 3300 Peachtree Road NE, Suite 2100 Atlanta, GA 30326
Attention: Keith Marlow, SVP, Data Licensing & Partnerships; Arthur Pennington, General Counsel
CC: Jordan Prescott, VP, Enterprise Sales (Meridian); Graham Whitley, Kessler Pruitt & Ashe LLP
Delivered Via: Calderwood & Harkness LLP, 425 Park Avenue, New York, NY 10022, outside counsel to Quorum Insurance Holdings Corp.
Prepared By: Calderwood & Harkness LLP, outside counsel to Quorum Insurance Holdings Corp.
Reference: In response to Meridian Credit intelligence, Inc.'s Initial Term Sheet dated September 12, 2022
C&H Matter No.: 1025-00008
Mutual NDA: NDA-QIH-MCI-2022-001, executed August 15, 2022
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INTRODUCTORY NOTE AND DISCLAIMER
This Counter-Term Sheet (this "Counter-Term Sheet") is submitted by Quorum Insurance Holdings Corp. ("Quorum") to Meridian Credit intelligence, Inc. ("Meridian") in response to Meridian's Initial Term Sheet dated September 12, 2022 (the "Initial Term Sheet") and is intended solely to set forth certain proposed terms and conditions to facilitate the negotiation of a definitive Master Data License Agreement (the "MDLA") between Quorum and Meridian. This Counter-Term Sheet is non-binding and does not constitute a commitment, undertaking, or obligation of any kind on the part of either party.
All terms described herein are subject to further negotiation, the drafting and execution of a definitive MDLA and all ancillary agreements, the satisfaction of all conditions precedent (including, without limitation, approval by the Board of Directors of Quorum Insurance Holdings Corp. and receipt of all required consents from Quorum's lenders under its existing credit facility), and the completion of Quorum's due diligence review of Meridian's data products, security infrastructure, and regulatory compliance posture.
This Counter-Term Sheet is governed by, and subject to, the confidentiality obligations set forth in the Mutual Non-Disclosure Agreement between the parties, dated August 15, 2022 (NDA Reference No. NDA-QIH-MCI-2022-001) (the "Mutual NDA"). Neither party shall disclose the existence or contents of this Counter-Term Sheet to any third party, except as expressly permitted under the Mutual NDA or as required by applicable law.
This Counter-Term Sheet reflects the comments and input of Quorum's Chief Data Officer, Rajesh Anand, and VP, Enterprise Procurement, Thomas Ng, and has been reviewed and approved for submission by Quorum's General Counsel & EVP, Carolyn Whitford.
Unless the context requires otherwise, capitalized terms used but not defined in this Counter-Term Sheet shall have the meanings ascribed to them in the Initial Term Sheet or, where applicable, the meanings that will be given to them in the definitive MDLA.
SECTION 1: PARTIES
1.1 Licensee.  Quorum Insurance Holdings Corp. ("Quorum" or the "Licensee") is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. Quorum's principal executive offices are located at 1200 Atlantic Street, Suite 3400, Stamford, CT 06901.
•  Delaware Entity File No.: 7234819
•  Employer Identification Number (EIN): 83-2147605
•  Nasdaq Ticker Symbol: QIHC
Quorum's principal contacts for the purposes of this transaction are as follows:
•  Carolyn Whitford, General Counsel & Executive Vice President — overall legal oversight and authority
•  Rajesh Anand, Chief Data Officer — data strategy, technical requirements, and data-quality standards
•  Thomas Ng, VP, Enterprise Procurement — commercial terms, pricing, and vendor management
•  Gregory Stahl, VP, Legal Affairs — day-to-day coordination of legal workstreams and drafting
1.2 Licensor.  Meridian Credit intelligence, Inc. ("Meridian" or the "Licensor") is a corporation duly organized, validly existing, and in good standing under the laws of the State of Georgia. Meridian's principal executive offices are located at 3300 Peachtree Road NE, Suite 2100, Atlanta, GA 30326.
•  Georgia Control No.: 22049371
•  Employer Identification Number (EIN): 58-3891274
Meridian's principal contacts for the purposes of this transaction are as follows:
•  Arthur Pennington, General Counsel — legal oversight and authority
•  Keith Marlow, SVP, Data Licensing & Partnerships — commercial terms and business relationship
•  Jordan Prescott, VP, Enterprise Sales — sales coordination and account management
1.3 Outside Counsel
Quorum's Outside Counsel:
Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Lead Contact: Wendy Schultz, Partner
Meridian's Outside Counsel:
Kessler Pruitt & Ashe LLP 1180 Peachtree Street NE, Suite 3000 Atlanta, GA 30309
New York Office: 51 Madison Avenue, 22nd Floor New York, NY 10010
Lead Contact: Graham Whitley, Partner
SECTION 2: TRANSACTION OVERVIEW
Proposed Transaction. Quorum and Meridian propose to enter into a five (5)-year enterprise data-licensing arrangement under which Meridian will license to Quorum certain consumer credit, commercial credit, and alternative-data products, as more fully described in Section 3 below (collectively, the "Licensed Data Products").
Form of Agreement. The parties intend that the transaction will be documented through the execution of a Master Data License Agreement (the "MDLA"), together with the following ancillary schedules, addenda, and agreements, each of which shall form an integral part of the MDLA:
(a) Data Security Addendum ("DSA")
(b) Service Level Agreement ("SLA")
(c) Technical Schedule A (data-feed specifications, delivery windows, and technical integration requirements)
(d) FCRA Permissible Purpose Certification
(e) Data Processing Agreement ("DPA")
Business Purpose. Quorum intends to ingest Meridian's data feeds across its enterprise data platform to enhance and power the following core business operations and strategic initiatives:
(i) Automated underwriting models across Quorum's property and casualty ("P&C"), life, and specialty insurance lines of business;
(ii) Claims-fraud detection and investigation algorithms;
(iii) Customer propensity scoring and marketing analytics supporting Quorum's policyholder acquisition, retention, and cross-sell programs; and
(iv) Such other internal business purposes as may be within the scope of the license grant set forth in Section 4 below.
The integration of Meridian's Licensed Data Products is a strategic priority for Quorum and a key element of Quorum's enterprise data strategy, as approved by Quorum's Board of Directors and senior leadership team. Quorum views this proposed arrangement as a long-term partnership with significant mutual value.
SECTION 3: LICENSED DATA PRODUCTS
The following data products are proposed to be included within the scope of the MDLA. Product descriptions, record universes, and delivery specifications set forth below are based on information provided by Meridian in the Initial Term Sheet and in subsequent discussions between the parties' commercial and technical teams. Quorum reserves the right to conduct further due diligence and testing of each data product during the implementation period.
3.1 MCI Consumer Credit File™
Description: Full-file consumer tradeline data, including credit account information, payment histories, public records, collection items, inquiries, and consumer identifying information, as maintained and compiled by Meridian from its furnisher network and public-record sources.
Record Universe: Approximately 310 million consumer records, representing Meridian's national consumer credit database.
Refresh Frequency: Daily batch delivery of updated and new records, plus real-time access via Meridian's application programming interface ("API") for individual consumer-level inquiries and transaction-time decisioning.
Delivery Method: SFTP batch file delivery for daily bulk updates; REST API for real-time, on-demand access. Detailed technical specifications, file formats, field mappings, and API endpoint documentation to be set forth in Technical Schedule A.
3.2 MCI CommercialView™
Description: Commercial credit data, including business tradeline information, payment performance, financial filing data, corporate linkage data, and business identifying information, covering small, medium, and large commercial enterprises.
Record Universe: Approximately 42 million business records.
Refresh Frequency: Weekly batch delivery of updated and new records.
Delivery Method: SFTP batch file delivery. Detailed technical specifications, file formats, and field mappings to be set forth in Technical Schedule A.
3.3 MCI AltSignal™
Description: Alternative data feeds, including utility payment data, telecom payment data, rental payment history, and other non-traditional credit information compiled by Meridian from third-party data furnishers and public-record sources.
Record Universe: Approximately 85 million consumer alternative-data records.
Refresh Frequency: Daily batch delivery of updated and new records.
Delivery Method: SFTP batch file delivery. Detailed technical specifications, file formats, and field mappings to be set forth in Technical Schedule A.
3.4 Aggregate Estimated Monthly Volume
Based on the record universes and refresh frequencies described in Sections 3.1 through 3.3 above, Quorum estimates total monthly data volume of approximately 437 million records per month (combined consumer credit, commercial credit, and alternative data), subject to seasonal variation and ramp-up during the initial implementation period. This estimated volume represents approximately 87.4% of the proposed base-tier cap of 500 million records per month, as set forth in Section 6.4 below.
Quorum expects that actual monthly volumes may fluctuate based on Quorum's operational requirements, the pace of integration and deployment across Quorum's various business lines, and the volume of real-time API transactions. Quorum's volume estimates are provided for purposes of pricing and capacity planning and do not constitute a minimum volume commitment.
SECTION 4: LICENSE GRANT AND SCOPE
4.1 License Grant
Subject to the terms and conditions of the MDLA, Meridian shall grant to Quorum a non-exclusive, worldwide (subject to applicable regulatory limitations in specific jurisdictions), non-transferable (except as set forth in Section 4.2 below) license to access, receive, store, process, and use the Licensed Data Products for Quorum's internal business purposes, including without limitation the following:
(a) Automated underwriting and risk assessment: Ingestion and use of the Licensed Data Products as inputs to Quorum's automated underwriting decision engines, risk-scoring models, and real-time policy pricing algorithms across all of Quorum's insurance lines of business (including P&C, life, and specialty lines);
(b) Claims-fraud detection and investigation: Use of the Licensed Data Products to support claims-fraud detection algorithms, special investigations unit ("SIU") activities, and post-claim analytics;
(c) Customer propensity scoring and marketing analytics: Use of the Licensed Data Products to develop and deploy customer propensity models, cross-sell and up-sell scoring, marketing segmentation, and customer lifetime value analytics, in each case subject to compliance with applicable consumer-protection and marketing regulations;
(d) Portfolio monitoring and account review: Use of the Licensed Data Products for ongoing portfolio monitoring, periodic account review, and in-force book management;
(e) Development and training of proprietary models and algorithms: Use of the Licensed Data Products as training data for machine-learning models, statistical models, and other proprietary analytical tools and algorithms developed by or on behalf of Quorum; and
(f) Creation, ownership, and commercialization of Derived Data: Use of the Licensed Data Products as an input to the creation of Derived Data (as defined in Section 9 below), which Derived Data shall be solely owned by Quorum and subject to the commercialization rights set forth in Section 9.
4.2 Permitted Users
The license grant set forth in Section 4.1 shall extend to Quorum and its controlled affiliates and subsidiaries (collectively, "Quorum Affiliates") and to authorized third-party service providers retained by Quorum or any Quorum Affiliate in connection with the permitted uses described above, provided that any such third-party service provider (a) is bound by written confidentiality and data-security obligations at least as protective as those set forth in the MDLA and the DSA, (b) uses the Licensed Data Products solely on behalf of and for the benefit of Quorum or the applicable Quorum Affiliate, and (c) does not further sublicense, distribute, or disclose the Licensed Data Products to any other party.
Quorum shall be responsible for ensuring that all Quorum Affiliates and authorized third-party service providers comply with the terms of the MDLA and shall be liable for any breach by a Quorum Affiliate or third-party service provider to the same extent as if such breach were committed by Quorum directly.
4.3 License Restrictions
The license grant set forth in Section 4.1 is subject to the following restrictions, which Quorum acknowledges and agrees to observe:
(a) No resale or redistribution of raw data. Quorum shall not resell, redistribute, sublicense, or otherwise make available to any third party the Licensed Data Products in their raw, unmodified form. For the avoidance of doubt, this restriction does not apply to Derived Data (as defined in Section 9), which is subject to the commercialization rights set forth therein.
(b) Compliance with applicable law. Quorum shall use the Licensed Data Products in compliance with all applicable federal, state, and local laws, rules, and regulations, including without limitation the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq.; the Gramm-Leach-Bliley Act ("GLBA"), 15 U.S.C. § 6801 et seq.; the California Consumer Privacy Act / California Privacy Rights Act ("CCPA/CPRA"), Cal. Civ. Code § 1798.100 et seq.; and all applicable state insurance data-security and privacy regulations.
(c) FCRA permissible purpose certification. Quorum shall certify, as a condition to receiving consumer credit data constituting a "consumer report" under the FCRA, that Quorum has a permissible purpose for each access to or use of such data, as required by Section 604 of the FCRA (15 U.S.C. § 1681b). The FCRA Permissible Purpose Certification shall be executed by Quorum and attached as a schedule to the MDLA.
SECTION 5: TERM AND RENEWAL
5.1 Initial Term
The initial term of the MDLA (the "Initial Term") shall commence on the date the MDLA becomes effective following satisfaction of all conditions precedent set forth in Section 16 below (the "Effective Date") and shall continue for a period of five (5) years from the Effective Date, unless earlier terminated in accordance with Section 5.3.
5.2 Renewal.  Upon expiration of the Initial Term, the MDLA shall automatically renew for successive periods of one (1) year each (each, a "Renewal 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). For clarity, a notice of non-renewal delivered fewer than 180 days prior to the expiration of the then-current term shall not be effective to prevent the automatic renewal for the immediately following Renewal Term but shall be treated as a notice of non-renewal effective at the end of such following Renewal Term.
5.3 Early Termination
The MDLA may be terminated prior to the expiration of the then-current term as follows:
(a) Termination for material breach. Either party may terminate the MDLA upon written notice to the other party if the other party commits a material breach of any provision of the MDLA and fails to cure such breach within sixty (60) days after receipt of written notice specifying the nature of the breach in reasonable detail; provided, however, that the cure period for a payment default by either party shall be thirty (30) days after receipt of written notice of such payment default.
(b) Termination for convenience by Quorum. Quorum may terminate the MDLA for convenience, without cause, upon one hundred eighty (180) days' prior written notice to Meridian, subject to payment by Quorum of an early termination fee equal to the lesser of: (i) the aggregate remaining license fees payable for the then-current contract year (i.e., the portion of the annual license fee allocable to the period from the effective date of termination through the end of the then-current contract year), and (ii) one (1) full year's license fee at the annual rate then in effect. The early termination fee shall be payable within thirty (30) days following the effective date of termination.
(c) Termination upon insolvency or change of control. Quorum may terminate the MDLA immediately upon written notice to Meridian if: (i) Meridian becomes insolvent, makes a general assignment for the benefit of creditors, files a voluntary petition in bankruptcy, or has an involuntary petition in bankruptcy filed against it that is not dismissed within ninety (90) days; or (ii) a "change of control" of Meridian occurs, meaning any transaction or series of related transactions resulting in a change in the beneficial ownership of more than fifty percent (50%) of the outstanding voting equity of Meridian, or a sale, transfer, or disposition of all or substantially all of Meridian's assets. Quorum's termination right under this Section 5.3(c) shall be exercisable at Quorum's sole election and shall not be subject to any cure period.
SECTION 6: FEES AND PAYMENT TERMS
6.1 Annual License Fees
Quorum proposes the following annual license fee schedule for the Initial Term. The fee schedule set forth below reflects Quorum's counter-proposal to the pricing structure set forth in Meridian's Initial Term Sheet and takes into account the Year 1 implementation ramp period, the scale of Quorum's five-year volume commitment, and the competitive pricing benchmarks developed by Quorum's independent advisor, Pinnacle Ridge Advisory LLC.
Year 1 discount Rationale. The reduced Year 1 fee of $10,800,000 (compared to the $12,300,000 annual fee in Years 2 through 5) reflects the anticipated six (6)-month implementation and ramp period following the Effective Date, during which Quorum will be completing technical integration, data-feed configuration, testing, and validation, and will not have full production-level access to the Licensed Data Products. The effective annualized rate for Year 1 is $10,800,000 and reflects Quorum's expectation that production-level usage will not begin until approximately six months after the Effective Date.
6.2 Implementation / Integration Fee
In addition to the annual license fees set forth in Section 6.1 above, Quorum shall pay to Meridian a one-time implementation and integration fee in the amount of $1,500,000, payable upon execution of the MDLA. This fee is separate from and in addition to the aggregate $60,000,000 in license fees payable over the five-year Initial Term, bringing the total contractual consideration to $61,500,000.
The implementation and integration fee covers the following services and deliverables by Meridian:
(a) Initial data-feed configuration and provisioning, including SFTP channel setup and API credential issuance;
(b) API provisioning and sandbox/testing environment setup;
(c) Data mapping, schema documentation, and field-level specification support;
(d) Meridian professional services support during the implementation period, including dedicated integration engineering resources and project management; and
(e) Initial data-quality validation and acceptance testing support.
6.3 Payment Terms
All license fees shall be invoiced and paid on a quarterly-in-advance basis. Meridian shall issue invoices to Quorum on or before the first business day of each calendar quarter, and payment shall be due net thirty (30) days from the date of each invoice.
Late payment interest shall accrue on any overdue amounts at a rate of 1.5% per month (equivalent to 18% per annum), calculated as simple interest from the date such payment was due through the date of actual payment. Quorum shall not be required to pay late-payment interest with respect to any invoiced amount that is the subject of a good-faith dispute, provided that Quorum timely pays all undisputed amounts and notifies Meridian in writing of the basis for the dispute within the applicable payment period.
6.4 Data-Volume Tiers and Overages
The annual license fees set forth in Section 6.1 include a monthly data-volume allowance of up to 500 million records per month (consumer credit, commercial credit, and alternative data combined) (the "Base Tier").
For each calendar month in which Quorum's actual data volume exceeds the Base Tier, Quorum shall pay an overage fee at a rate of $0.003 per record for each record in excess of the 500 million monthly Base Tier. Volume reconciliation shall be performed on a monthly basis using Meridian's system-of-record usage reports, and overage fees shall be invoiced in arrears in the following calendar quarter. Quorum shall have the right to review and audit Meridian's volume-measurement methodology and usage reports upon reasonable written notice.
6.5 Fee Escalation (Renewal Terms)
During any Renewal Term, the annual license fee shall be subject to annual escalation. The annual license fee for each Renewal Term shall not increase by more than the sum of (a) the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average, All Items, as published by the Bureau of Labor Statistics, for the most recently available twelve (12)-month period, plus (b) two percent (2%), applied to the Year 5 annual license fee (or the annual license fee for the most recently completed contract year, if later). In no event shall the annual license fee during a Renewal Term be less than the annual license fee for the immediately preceding contract year.
6.6 Taxes.  All fees set forth in this Counter-Term Sheet are exclusive of, and Quorum shall be responsible for, all applicable sales, use, value-added, and similar transactional taxes imposed on the transactions contemplated by the MDLA, excluding any taxes based on Meridian's net income, franchise taxes, or similar taxes imposed on Meridian as a result of its own business activities. Meridian shall separately state all applicable taxes on its invoices.
SECTION 7: MOST FAVORED NATION PRICING
7.1 MFN Commitment (Quorum's Primary Position)
Quorum proposes the inclusion of a most favored nation ("MFN") pricing clause in the MDLA as a material term of the arrangement. Quorum views MFN protections as essential to ensure pricing fairness and competitive equity given the significant scale and duration of Quorum's financial commitment under the proposed arrangement.
Scope. If, at any time during the term of the MDLA (including any Renewal Term), Meridian enters into any data-licensing agreement, amendment, side letter, or other arrangement with any other U.S.-domiciled insurance carrier, managing general agent ("MGA"), or insurance technology company ("insurtech firm") with annual gross premiums written of $500 million or greater (each, a "Comparable Licensee") that provides the Comparable Licensee with more favorable per-record pricing, volume discounts, or aggregate fee terms for substantially similar data products and data volumes as those licensed to Quorum under the MDLA, then Meridian shall be obligated to promptly notify Quorum and automatically adjust Quorum's pricing to match or improve upon the more favorable terms extended to the Comparable Licensee.
Notification Obligation. Meridian shall be required to notify Quorum in writing within thirty (30) days of entering into any agreement or arrangement with a Comparable Licensee that contains pricing terms more favorable than those in effect for Quorum under the MDLA. The notification shall include sufficient detail (which may be redacted for business confidentiality purposes, but must include effective per-record rates and aggregate fee levels) to enable Quorum to evaluate the pricing comparison.
Retroactive Adjustment. Any pricing adjustment resulting from the MFN clause shall be retroactive to the date on which the more favorable terms first became effective for the Comparable Licensee. Meridian shall issue a credit to Quorum for any overpayment resulting from the retroactive adjustment, such credit to be applied against the next quarterly invoice.
Audit Right. Quorum shall have the right, upon thirty (30) days' prior written notice and no more than once per contract year, to engage an independent auditor (to be mutually agreed upon by both parties, acting reasonably and in good faith) to verify Meridian's compliance with the MFN commitment. The audit shall be conducted at Quorum's expense (unless the audit reveals a material pricing disparity in Quorum's favor, in which case the cost of the audit shall be borne by Meridian). The independent auditor shall have access to Meridian's relevant pricing records and agreements with Comparable Licensees, subject to appropriate confidentiality protections and procedures.
Confidentiality. Any information obtained by Quorum or its auditor through the exercise of the MFN audit right shall be treated as Meridian's confidential information, shall be used solely for the purpose of verifying compliance with the MFN commitment, and shall not be disclosed to any third party (other than Quorum's outside counsel and financial advisors, subject to appropriate confidentiality obligations).
7.2 Fallback Position (Pricing Audit Right)
In the event that Meridian is unwilling to accept the full MFN clause as described in Section 7.1 above, Quorum would consider, as an alternative, a limited pricing audit right structured as follows:
(a) The pricing audit right would be exercisable by Quorum no more than once per contract year.
(b) The audit would be conducted by an independent third-party auditor mutually approved by both parties.
(c) The auditor would verify that Quorum's effective per-record rate (calculated as total fees paid divided by total records delivered during the applicable period) does not exceed one hundred ten percent (110%) of the lowest effective per-record rate charged by Meridian to any Comparable Licensee for substantially similar data products and substantially similar data volumes during the same period.
(d) If the audit reveals that Quorum's effective per-record rate exceeds 110% of the lowest Comparable Licensee rate, Meridian shall adjust Quorum's pricing on a prospective basis to achieve parity within the 110% ceiling, effective as of the first day of the calendar quarter following delivery of the audit report.
(e) Full details of the pricing audit right, including scope, methodology, confidentiality protections, cost allocation, and dispute resolution procedures, shall be negotiated and documented in the definitive MDLA.
Quorum wishes to emphasize that the limited pricing audit right described in this Section 7.2 is a fallback position only and that Quorum strongly prefers the full MFN commitment set forth in Section 7.1. The fallback position is offered in the spirit of constructive negotiation and should not be construed as a concession of Quorum's primary position.
7.3 Rationale.  Quorum has retained Pinnacle Ridge Advisory LLC (200 Clarendon Street, Suite 4400, Boston, MA 02116; Managing Director: Franklin Osei) as an independent data-pricing benchmark consultant to provide market analysis and competitive intelligence regarding prevailing pricing terms for enterprise data-licensing arrangements of comparable scope and scale. Pinnacle Ridge's analysis, based on a review of publicly available information, proprietary benchmark databases, and confidential industry surveys, supports the commercial reasonableness of Quorum's proposed MFN scope and pricing levels. Quorum is prepared to share relevant, non-confidential portions of the Pinnacle Ridge analysis with Meridian upon request.
Quorum's position is that MFN protections are essential given the following considerations:
(a) The aggregate five-year financial commitment of $60,000,000 (plus the $1,500,000 implementation fee) represents one of the largest enterprise data-licensing commitments in the U.S. insurance industry;
(b) The five-year Initial Term creates significant switching costs and vendor lock-in for Quorum, which would be exacerbated if a competitor were to obtain more favorable pricing for substantially similar products;
(c) MFN protections are standard market practice in enterprise data-licensing arrangements of this magnitude and duration; and
(d) MFN protections align the interests of both parties by ensuring that Meridian's pricing remains competitive throughout the term of the arrangement, thereby reducing the risk of early termination and supporting a long-term, mutually beneficial relationship.
SECTION 8: DATA SECURITY, PRIVACY, AND REGULATORY COMPLIANCE
8.1 Data Security Standards
Both parties acknowledge the critical importance of maintaining robust data security throughout the term of the MDLA, given the sensitive nature of the Licensed Data Products (which include consumer credit data, commercial credit data, and alternative data containing personally identifiable information).
SOC 2 Type II Certification. Each party shall obtain and maintain a current SOC 2 Type II certification (or equivalent successor certification) throughout the term of the MDLA, including any Renewal Terms. Each party shall provide the other with a copy of its most recent SOC 2 Type II report upon request, no more than once per year, subject to applicable confidentiality restrictions.
•  Meridian's current SOC 2 Type II report was issued by Galloway Nash LLP for the reporting period ending March 31, 2023.
•  Quorum's current SOC 2 Type II report was issued by Felton Thorpe & Co. LLP for the reporting period ending December 31, 2023.
ISO 27001 Certification. In addition to SOC 2 Type II, Meridian shall obtain and maintain ISO/IEC 27001 certification (or equivalent successor certification) for its information security management system throughout the term of the MDLA. Meridian shall provide Quorum with a copy of its most recent ISO 27001 certificate and statement of applicability upon request.
Data Security Addendum. Detailed data-security obligations, requirements, and standards applicable to both parties shall be set forth in the Data Security Addendum (the "DSA"), which shall be attached to and incorporated by reference into the MDLA. The DSA shall address, among other things, encryption standards (at rest and in transit), access controls, employee background checks, vulnerability management, penetration testing, incident response procedures, and physical security requirements.
8.2 Data-Breach Notification
Each party shall notify the other party in writing within forty-eight (48) hours of discovery of any actual or reasonably suspected data breach or security incident involving the Licensed Data Products, Derived Data, or any system or network used to access, store, process, or transmit the Licensed Data Products or Derived Data.
The notification shall include, at a minimum, the following information (to the extent known at the time of notification):
(a) A description of the nature and scope of the breach or security incident;
(b) The categories and approximate number of data records affected;
(c) The identity of the affected data subjects or entities, to the extent known;
(d) A description of the remediation steps taken or planned, including steps to contain the breach and prevent recurrence; and
(e) An estimated timeline for completion of the investigation and remediation.
The notifying party shall cooperate with the other party in connection with any investigation, notification obligation, or remediation activity arising from the breach, and shall provide updates as additional information becomes available.
8.3 Regulatory Compliance
The MDLA and the parties' performance thereunder shall comply with all applicable federal, state, and local laws, rules, and regulations, including without limitation:
(a) Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., and all regulations promulgated thereunder, including Regulation V (12 C.F.R. Part 1022);
(b) Gramm-Leach-Bliley Act (GLBA), 15 U.S.C. § 6801 et seq., and all regulations promulgated thereunder, including the FTC Safeguards Rule (16 C.F.R. Part 314);
(c) California Consumer Privacy Act / California Privacy Rights Act (CCPA/CPRA), Cal. Civ. Code § 1798.100 et seq.;
(d) New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR Part 500; and
(e) Connecticut and all other applicable state insurance data-security and privacy regulations.
Quorum shall provide a fully executed FCRA Permissible Purpose Certification as a schedule to the MDLA, certifying the specific permissible purposes under Section 604 of the FCRA for which Quorum will access and use consumer credit data constituting "consumer reports."
Compliance with the CCPA/CPRA shall be addressed in a Data Processing Agreement (the "DPA"), which shall be attached to and incorporated by reference into the MDLA. The DPA shall address, among other things, data-subject rights, processing limitations, subprocessor obligations, and cross-border data transfer requirements to the extent applicable.
8.4 Insurance Requirements
Each party shall maintain the following minimum insurance coverages throughout the term of the MDLA, and shall provide the other party with certificates of insurance evidencing such coverages upon request:
Each party shall name the other party as an additional insured on its Commercial General Liability policy, to the extent commercially available and customary. Each party shall provide the other party with at least thirty (30) days' prior written notice of any material change in, cancellation of, or non-renewal of any required insurance coverage.
SECTION 9: DERIVED DATA — INTELLECTUAL PROPERTY OWNERSHIP AND COMMERCIALIZATION
This Section 9 addresses one of the most commercially significant aspects of the proposed transaction and constitutes a core term for Quorum. Quorum's positions on Derived Data ownership and commercialization differ materially from those set forth in Meridian's Initial Term Sheet, and Quorum anticipates that this Section will be a focal point of the parties' negotiations.
9.1 Definition of Derived Data
For purposes of this Counter-Term Sheet and the definitive MDLA, "Derived Data" means any and all data, databases, models, algorithms, scores, indices, analytics outputs, enriched datasets, blended risk scores, propensity models, and any other information or intellectual property created, developed, or generated by or on behalf of Quorum (including through machine-learning training and inference processes) that uses, incorporates, or is informed by the Licensed Data Products as an input, whether alone or in combination with Quorum's own first-party data (including policyholder data, claims data, and telematics data) or third-party data sources obtained independently by Quorum.
For clarity, Derived Data includes, without limitation:
(a) Blended risk scores, propensity scores, and underwriting decision outputs generated by Quorum's proprietary models;
(b) Enriched datasets created by combining Meridian data with Quorum's internal data sources;
(c) Statistical and machine-learning model weights, parameters, and architectures developed through training processes that include Meridian data among the training inputs;
(d) Analytical reports, dashboards, and visualizations produced using the Licensed Data Products; and
(e) Any derivative works, compilations, or transformations of the Licensed Data Products created by Quorum.
9.2 Ownership.  Quorum shall be the sole and exclusive owner of all right, title, and interest (including all intellectual property rights, whether arising under patent, copyright, trade secret, or other applicable law) in and to all Derived Data. Nothing in the MDLA shall be construed to grant Meridian any ownership interest, license, right of access, or other right in or to any Derived Data, whether during the term of the MDLA or thereafter.
For the avoidance of doubt, Meridian retains all right, title, and interest in and to the Licensed Data Products in their raw, unmodified form, and nothing in this Counter-Term Sheet or the MDLA shall be construed to transfer or assign any such rights to Quorum. Quorum's rights in Derived Data do not diminish Meridian's ownership of the underlying raw data.
9.3 Commercialization Rights
Quorum shall have unrestricted rights to use, reproduce, distribute, display, sublicense, sell, license, and otherwise commercially exploit Derived Data, including distribution and licensing to third parties outside Quorum's corporate group, without any of the following:
(a) Any additional fees, royalties, or other payments to Meridian;
(b) Any requirement to obtain Meridian's prior consent or approval;
(c) Any obligation to share revenue, profits, or other economic benefits with Meridian; or
(d) Any restriction on the manner, scope, or territory of commercialization (subject only to applicable law).
QuorumScore™ Context. Quorum notes the central importance of this provision to its proprietary QuorumScore™ predictive underwriting model. QuorumScore is an advanced machine-learning-based risk-scoring platform that blends consumer credit data (including Meridian data) with Quorum's own first-party claims, policy, telematics, and behavioral data to produce real-time underwriting decisions and risk assessments. A United States Patent and Trademark Office ("USPTO") patent application for QuorumScore is currently pending (Serial No. 97/482,116).
QuorumScore is integral to Quorum's underwriting competitive advantage and represents a planned business-to-business ("B2B") licensing revenue line, with projected revenues of $40 million to $50 million by fiscal year 2027. The unrestricted right to commercialize Derived Data — including QuorumScore outputs, model weights, and derived risk scores — is a fundamental commercial requirement for Quorum and a non-negotiable element of the proposed transaction.
9.4 No License-Back
Quorum does not accept any provision in the MDLA granting Meridian a license-back to Derived Data, whether perpetual, royalty-free, irrevocable, or otherwise. Quorum does not consent to Meridian's access to, use of, or benefit from Derived Data in any form.
Quorum further does not accept any revenue-sharing arrangement with respect to the commercialization of Derived Data. Quorum notes that Meridian's Initial Term Sheet proposed a revenue-sharing mechanism under which Meridian would receive fifteen percent (15%) of net revenues derived from Quorum's commercialization of Derived Data to third parties. Quorum rejects this proposal in its entirety and considers any revenue-sharing obligation with respect to Derived Data to be incompatible with Quorum's ownership rights and business strategy.
9.5 No "Sufficient Transformation" Gatekeeping
Quorum does not accept any provision in the MDLA granting Meridian sole discretion, or any discretion, to determine whether Derived Data has been "sufficiently transformed" for purposes of third-party commercialization. Meridian's Initial Term Sheet proposed that Meridian would have the right to review and approve Derived Data prior to third-party distribution, based on Meridian's determination of whether the data had been sufficiently transformed so as not to constitute a redistribution of the raw Licensed Data Products. Quorum rejects this gatekeeping mechanism as inconsistent with Quorum's ownership rights and as creating an unacceptable risk of delay, commercial uncertainty, and competitive harm.
Quorum is open to discussing, in the context of the definitive MDLA, the inclusion of objective, mutually agreed, technically measurable standards for de-identification and transformation of the Licensed Data Products within Derived Data. Such standards might include, for example, minimum levels of aggregation, anonymization thresholds, or technical benchmarks for irreversibility of transformation. However, Quorum insists that any such standards:
(a) Must be objective and technically measurable, not subjective;
(b) Must be mutually agreed upon by both parties, not imposed unilaterally by Meridian;
(c) Must not grant Meridian the right to review, approve, or reject specific Derived Data products prior to their distribution; and
(d) Must not create a practical veto right for Meridian over Quorum's commercialization activities.
9.6 Machine-Learning Model Outputs
Quorum's position is that the outputs of Quorum's machine-learning models — including models that are trained, in whole or in part, on Meridian data — do not constitute "derivative works" under copyright law and should not be classified as "derived data" for purposes of any restrictions or limitations in the MDLA that might be applied to data that directly incorporates or is traceable to the raw Licensed Data Products.
Specifically, Quorum takes the position that:
(a) Trained model weights, parameters, hyperparameters, and architecture — once training is complete — represent the independent intellectual property of Quorum, reflecting the application of Quorum's proprietary algorithms, engineering effort, and computational resources;
(b) Live predictions, inferences, and scoring outputs generated by trained models using new, non-Meridian input data are the independent intellectual property of Quorum and do not implicate Meridian's rights in the training data; and
(c) The use of the Licensed Data Products as training data for machine-learning models does not create a continuing interest or right for Meridian in the trained model or its outputs, any more than the use of a textbook as a reference creates an authorship interest for the textbook publisher in the student's subsequent original work.
Quorum acknowledges that the legal landscape regarding the intellectual property status of machine-learning model outputs and training data is evolving, and that this position is subject to further legal analysis by both parties' counsel and to negotiation in the definitive MDLA. Quorum is prepared to engage in a detailed, good-faith discussion of these issues with Meridian and its counsel.
SECTION 10: SERVICE LEVEL AGREEMENT
10.1 Uptime and Availability
Meridian shall maintain the following uptime and availability commitments for the Licensed Data Products:
Real-Time API (MCI Consumer Credit File™): Monthly uptime of 99.9%, calculated as the percentage of total minutes in each calendar month during which the API is available and responsive, exclusive of scheduled maintenance windows. Scheduled maintenance windows shall be mutually agreed upon by the parties and shall occur during off-peak hours (between 12:00 a.m. and 6:00 a.m. Eastern Time on weekends), with at least seventy-two (72) hours' prior written notice to Quorum.
SFTP Batch Delivery (all Licensed Data Products): All batch files shall be delivered within the delivery windows specified in Technical Schedule A. Delivery shall be deemed complete upon Meridian's successful upload of a complete, uncorrupted data file to the designated SFTP endpoint and the posting of a corresponding delivery confirmation file.
10.2 Service Credits
Meridian shall provide service credits to Quorum for any failure to meet the uptime or delivery commitments set forth in Section 10.1 above. Service credits shall be structured as credits against future quarterly license fee invoices and shall represent Quorum's sole and exclusive remedy for SLA failures (excluding Quorum's termination rights under Section 10.4 below).
The detailed service credit schedule, including tiered credit percentages based on the severity and duration of the SLA failure, the maximum credit available in any calendar quarter, and the methodology for calculating service credits, shall be negotiated and set forth in the SLA attached to the MDLA.
10.3 Data Quality
Meridian shall provide commercially reasonable representations and warranties regarding the accuracy, completeness, and timeliness of the Licensed Data Products. Quorum expects that the data-quality standards will include, at a minimum:
(a) Minimum data-accuracy thresholds for key data fields (e.g., consumer identifying information, tradeline balances, payment status indicators);
(b) Maximum permissible rates for missing, incomplete, or malformed records;
(c) Timeliness standards ensuring that the Licensed Data Products reflect the most current available information, consistent with Meridian's stated refresh frequencies; and
(d) Data-quality acceptance criteria and a structured dispute resolution process for data-quality issues.
Detailed data-quality standards and acceptance criteria shall be documented in Technical Schedule A.
10.4 Escalation and Remediation
The SLA shall include a defined escalation framework for service incidents, with response-time commitments organized by severity level (e.g., Severity 1 — Critical, Severity 2 — High, Severity 3 — Medium, Severity 4 — Low). Quorum expects that the escalation framework will include designated escalation contacts at both Quorum and Meridian, maximum response and resolution times for each severity level, and regular status-update cadences for open incidents.
Chronic Failure. If Meridian fails to meet the uptime or delivery commitments specified in the SLA for any three (3) or more consecutive calendar months, or for any four (4) or more calendar months within any rolling twelve (12)-month period (each, a "Chronic Failure"), such Chronic Failure shall constitute a material breach of the MDLA giving rise to Quorum's termination right under Section 5.3(a), subject to the cure period specified therein.
10.5 Most Favored Terms (SLA)
Quorum notes Meridian's willingness, as expressed in the Initial Term Sheet, to offer a "most favored terms" commitment limited to data-delivery SLAs and uptime commitments — i.e., a commitment that the service levels provided to Quorum will be at least as favorable as those provided to any other Meridian enterprise licensee for comparable data products and volumes.
Quorum accepts this concept and proposes that the "most favored terms" SLA commitment be included in the definitive MDLA as a complement to, and not a substitute for, the most favored nation pricing commitment set forth in Section 7 above. The "most favored terms" SLA commitment and the MFN pricing commitment address different aspects of the commercial relationship and should operate independently.
SECTION 11: REPRESENTATIONS AND WARRANTIES
11.1 Mutual Representations and Warranties
Each party shall represent and warrant to the other as of the Effective Date and throughout the term of the MDLA that:
(a) It is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization;
(b) It has all necessary corporate power and authority to enter into the MDLA and to perform its obligations thereunder;
(c) The execution, delivery, and performance of the MDLA have been duly authorized by all necessary corporate action and do not conflict with or violate (i) its certificate of incorporation, bylaws, or other organizational documents, (ii) any material agreement or contract to which it is a party or by which it is bound, or (iii) any applicable law, rule, or regulation;
(d) The MDLA constitutes a legal, valid, and binding obligation, enforceable against it in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally, and to general principles of equity); and
(e) There is no pending or, to its knowledge, threatened litigation, arbitration, governmental investigation, or administrative proceeding that would materially impair its ability to perform its obligations under the MDLA.
11.2 Meridian Representations and Warranties
Meridian shall represent and warrant to Quorum as of the Effective Date and throughout the term of the MDLA that:
(a) Meridian has all necessary rights, licenses, permissions, and authorizations to license the Licensed Data Products to Quorum as contemplated by the MDLA, including all rights obtained from third-party data furnishers and sources;
(b) The Licensed Data Products, and Quorum's use thereof in accordance with the terms of the MDLA, do not and will not infringe upon, misappropriate, or otherwise violate the intellectual property rights (including patents, copyrights, trade secrets, and trademarks) of any third party;
(c) Meridian's collection, compilation, processing, and distribution of the Licensed Data Products complies with all applicable federal, state, and local laws, rules, and regulations, including without limitation the FCRA, GLBA, and applicable state privacy and data-security laws; and
(d) Meridian maintains current SOC 2 Type II and ISO/IEC 27001 certifications, and will maintain such certifications throughout the term of the MDLA.
11.3 Quorum Representations and Warranties
Quorum shall represent and warrant to Meridian as of the Effective Date and throughout the term of the MDLA that:
(a) Quorum will use the Licensed Data Products solely for purposes that are lawful and within the scope of the license grant set forth in the MDLA;
(b) Quorum will obtain and maintain appropriate FCRA permissible purpose certifications for each use of consumer credit data constituting a "consumer report" under the FCRA, and will provide such certifications to Meridian as required; and
(c) Quorum maintains a current SOC 2 Type II certification and will maintain such certification throughout the term of the MDLA.
SECTION 12: INDEMNIFICATION
12.1 Meridian Indemnification of Quorum
Meridian shall indemnify, defend, and hold harmless Quorum and its affiliates, and their respective officers, directors, employees, agents, successors, and assigns (collectively, "Quorum Indemnitees"), from and against any and all third-party claims, demands, actions, suits, proceedings, losses, damages, liabilities, judgments, settlements, costs, and expenses (including reasonable attorneys' fees and costs) (collectively, "Losses") arising out of or relating to:
(a) Any claim that the Licensed Data Products, or Quorum's use thereof in accordance with the terms of the MDLA, infringe upon, misappropriate, or otherwise violate the intellectual property rights of any third party;
(b) Any breach by Meridian of its data-security obligations under the MDLA or the DSA, including any data breach or security incident attributable to Meridian's systems, processes, or personnel; and
(c) Any violation by Meridian of applicable law (including the FCRA, GLBA, and applicable privacy regulations) in its collection, compilation, processing, or provision of the Licensed Data Products.
12.2 Quorum Indemnification of Meridian
Quorum shall indemnify, defend, and hold harmless Meridian and its affiliates, and their respective officers, directors, employees, agents, successors, and assigns (collectively, "Meridian Indemnitees"), from and against any and all Losses arising out of or relating to:
(a) Any misuse by Quorum of the Licensed Data Products beyond the scope of the license grant set forth in the MDLA, including any unauthorized resale, redistribution, or disclosure of the Licensed Data Products in raw, unmodified form;
(b) Any breach by Quorum of its data-security obligations under the MDLA or the DSA, including any data breach or security incident attributable to Quorum's systems, processes, or personnel; and
(c) Any violation by Quorum of applicable law (including the FCRA, GLBA, and applicable privacy regulations) in its use of the Licensed Data Products.
12.3 Limitation of Liability
The parties acknowledge that the limitation of liability provisions of the MDLA are subject to further negotiation. Quorum proposes the following framework:
(a) General cap. Neither party's aggregate liability under the MDLA (excluding the carve-outs set forth in clause (b) below) shall exceed two times (2x) the annual license fee payable for the then-current contract year at the time the claim arises.
(b) Carve-outs. The general liability cap shall not apply to: (i) indemnification obligations under Sections 12.1 and 12.2; (ii) breaches of confidentiality obligations; (iii) willful misconduct or fraud; and (iv) infringement of intellectual property rights.
(c) Consequential damages. Neither party shall be liable to the other for indirect, incidental, consequential, special, or punitive damages, including lost profits and lost business opportunities, except (i) to the extent arising from a party's breach of confidentiality obligations, willful misconduct, or fraud, or (ii) to the extent such damages are recovered by a third party in connection with a claim subject to the indemnification obligations set forth in Sections 12.1 or 12.2.
SECTION 13: CONFIDENTIALITY
The confidentiality obligations of the parties shall be governed by the terms of the Mutual Non-Disclosure Agreement between the parties, dated August 15, 2022 (NDA Reference No. NDA-QIH-MCI-2022-001) (the "Mutual NDA"), which shall be incorporated by reference into the MDLA. The Mutual NDA, as so incorporated, shall survive for a period of five (5) years following the termination or expiration of the MDLA.
In addition to the terms of the Mutual NDA, the MDLA shall include supplemental confidentiality provisions specifically addressing the following:
(a) The confidential treatment of the Licensed Data Products and all data derived therefrom;
(b) The confidential treatment of Derived Data (to the extent Quorum elects to treat specific Derived Data as confidential);
(c) Restrictions on the disclosure of pricing terms, fee structures, and other commercial terms of the MDLA;
(d) Permissible disclosures to regulators, auditors, and as required by applicable law or legal process; and
(e) Remedies for breach of confidentiality obligations, including the availability of injunctive and equitable relief.
SECTION 14: POST-TERMINATION OBLIGATIONS
14.1 Return or Destruction of Raw Data
Upon termination or expiration of the MDLA (for any reason), Quorum shall, at Meridian's election, either return or destroy all copies of the Licensed Data Products in their raw, unmodified form (including any copies maintained in backup or archival systems) within ninety (90) days following the effective date of termination or expiration. Within ten (10) business days following completion of such return or destruction, an authorized officer of Quorum shall provide Meridian with a written certification confirming that all such raw data has been returned or destroyed, as applicable, in accordance with this provision.
For the avoidance of doubt, the obligation to return or destroy raw data under this Section 14.1 applies only to the Licensed Data Products in their raw, unmodified form as received from Meridian. This obligation does not apply to Derived Data, which is addressed in Section 14.2 below.
14.2 Derived Data Post-Termination
Quorum's Position. Quorum shall retain all Derived Data in perpetuity following termination or expiration of the MDLA, and shall continue to have all rights to use, reproduce, distribute, sublicense, sell, license, and otherwise commercially exploit Derived Data notwithstanding such termination or expiration, on the same unrestricted basis as during the term of the MDLA.
Rationale. Quorum's position is grounded in the following considerations:
(a) Derived Data is Quorum's proprietary intellectual property, created through the application of Quorum's own engineering resources, computational infrastructure, proprietary algorithms, and first-party data;
(b) Derived Data, by its nature, cannot be "returned" or "destroyed" without destroying Quorum's own proprietary models, analytics infrastructure, and operational systems — including the QuorumScore™ platform and all models trained on data that includes Meridian inputs;
(c) Requiring the destruction of Derived Data upon termination would impose catastrophic and irreversible harm on Quorum's business, far exceeding any legitimate interest of Meridian in the underlying raw data; and
(d) Quorum's perpetual retention of Derived Data is consistent with market practice for enterprise data-licensing arrangements in which the licensee creates substantial independent intellectual property using licensed data inputs.
Quorum acknowledges that Meridian may object to the perpetual retention and commercialization of Derived Data following termination and anticipates that this provision will be a significant point of negotiation in the definitive MDLA. Quorum is prepared to engage in good-faith discussions regarding appropriate safeguards, including the reinforcement of the restriction on redistribution of raw data in unmodified form, but Quorum's fundamental position — that Quorum owns and retains all Derived Data in perpetuity — is a core commercial term that Quorum considers essential to the transaction.
14.3 Survival.  The following provisions of the MDLA shall survive the termination or expiration of the MDLA and shall continue in full force and effect in accordance with their respective terms:
(a) Confidentiality (Section 13);
(b) Indemnification (Section 12);
(c) Limitation of Liability (Section 12.3);
(d) Derived Data ownership and commercialization rights (Section 9);
(e) Post-termination obligations (Section 14);
(f) Governing law and dispute resolution (Section 15); and
(g) Any other provisions that by their nature are intended to survive termination or expiration.
SECTION 15: GOVERNING LAW AND DISPUTE RESOLUTION
15.1 Governing Law
The MDLA and all ancillary agreements shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts-of-law principles that would require the application of the laws of another jurisdiction.
15.2 Dispute Resolution (Quorum's Proposed Framework)
All disputes, claims, controversies, and causes of action arising out of or relating to the MDLA, including disputes regarding its validity, interpretation, breach, or termination, shall be subject to the exclusive jurisdiction of:
(a) The United States District Court for the Southern District of New York (including the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, New York, NY 10007); or
(b) If subject matter jurisdiction is not available in the federal courts, the Commercial Division of the New York Supreme Court, New York County (60 Centre Street, New York, NY 10007).
Each party irrevocably and unconditionally: (i) consents to the personal jurisdiction of the courts identified above; (ii) waives any objection to the laying of venue in such courts; and (iii) waives any claim that any action or proceeding brought in such courts has been brought in an inconvenient forum.
Quorum does not accept binding arbitration as the dispute resolution mechanism for the MDLA. Meridian's Initial Term Sheet proposed mandatory binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). Quorum respectfully declines this proposal and instead proposes judicial resolution in the courts identified above. Quorum's preference for judicial resolution is based on the following considerations: (a) the complexity and value