PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP
INTERNAL MEMORANDUM
TO: Leonard Cross, Partner
FROM: Wendy Schultz, Associate, intellectual Property Practice Group Patricia Heng, Senior Counsel, Technology Transactions Practice Group
DATE: December 15, 2022
RE: Negotiation Strategy — Master Data License Agreement Between Quorum Insurance Holdings Corp. ("Quorum") and Meridian Credit intelligence, Inc. ("Meridian")
MATTER NO.: C&H Matter No. 1025-00008
Purpose: This memorandum sets forth our recommended negotiation strategy for the Master Data License Agreement ("MDLA"), prioritizes open issues across three tiers, identifies tradeable concessions, assesses Meridian's likely positions — including the influence of its majority owner, Breckenridge Capital Partners Fund IV, L.P. ("Breckenridge"), and its IPO advisor, Whitmore Zanthor & Co. ("Whitmore Zanthor") — and proposes calibrated fallback positions on the two principal impasse issues: most favored nation ("MFN") pricing and derived-data rights. This memorandum is intended solely for use in formulating Calderwood & Harkness's legal strategy on behalf of our client and is protected by the attorney-client privilege and work product doctrine.
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I. EXECUTIVE SUMMARY
On December 2, 2022, Calderwood & Harkness LLP ("C&H") delivered Quorum Insurance Holdings Corp.'s ("Quorum") comprehensive redline of the proposed Master Data License Agreement ("MDLA") to Kessler Pruitt & Ashe LLP ("KP&A"), counsel to Meridian Credit intelligence, Inc. ("Meridian"). The redline marked up Meridian's form MDLA, which KP&A had delivered on November 4, 2022. Quorum's redline introduced substantial revisions across virtually every article of the MDLA; however, two issues dominate the negotiation landscape and present the most significant risk of impasse:
(1) Most Favored Nation Pricing — Quorum's demand for a contractual MFN clause ensuring that Quorum receives pricing at least as favorable as any comparable insurance-industry licensee of Meridian's data products; and
(2) Derived-Data Ownership and Commercialization Rights — Quorum's insistence on outright ownership of, and unrestricted rights to commercialize, all data, models, scores, indices, and analytics outputs created by Quorum using licensed Meridian data as an input — including, critically, the protection and enablement of the QuorumScore™ predictive underwriting model.
The aggregate deal value is approximately $60,000,000 over a five-year initial term, structured as follows: Year 1 fees of $10,800,000 (reflecting a discounted ramp period), Year 2 through Year 5 fees of $12,300,000 per annum, plus a one-time implementation fee of $1,500,000. The licensed data products encompass three core Meridian product suites: the MCI Consumer Credit File™ (approximately 310 million consumer records), MCI CommercialView™ (approximately 42 million business records), and MCI AltSignal™ (approximately 85 million consumer alternative-data records).
The strategic imperative driving this transaction for Quorum is the fueling of its next-generation automated underwriting models, claims-fraud detection algorithms, and customer propensity scoring capabilities across its property and casualty, life, and specialty insurance lines. Most critically, the MDLA must protect and enable Quorum's QuorumScore™ predictive underwriting model (USPTO application pending, Serial No. 97/482,116), which Quorum's Chief Data Officer, Rajesh Anand, projects will generate $40–50 million in annual B2B licensing revenue by 2027.
On the counterparty side, Meridian's negotiating posture is significantly shaped by two external stakeholders. Breckenridge Capital Partners Fund IV, L.P. — the general partner of which is Breckenridge Capital Management LLC, managed by Elaine Drummond, with Caleb Rourke overseeing the Meridian portfolio investment — holds a 62.5% majority ownership stake in Meridian. In addition, Whitmore Zanthor & Co., through Managing Director Rachel Ng-Castillo, is advising Meridian on a planned initial public offering targeted for the 2025–2026 timeframe. Both Breckenridge and Whitmore Zanthor are exerting substantial pressure on Meridian's management to resist granting MFN pricing protections and broad derived-data commercialization rights, as both are perceived as threats to Meridian's IPO valuation narrative.
Our recommendation is to pursue MFN and derived-data rights as Quorum's two highest-priority items — presenting full opening positions at the first in-person negotiation session scheduled for January 18, 2023 — but to prepare calibrated, internally authorized fallback positions on each issue for deployment in subsequent negotiation rounds. Secondary and tertiary issues, including dispute resolution mechanics, post-termination data treatment, indemnification scope, and data security audit rights, should be used as negotiating currency to extract concessions on the Tier 1 priorities.
II. BACKGROUND AND PROCEDURAL POSTURE
A. Engagement and Timeline to Date
Calderwood & Harkness was engaged to represent Quorum in connection with the MDLA negotiations on August 8, 2022. The engagement letter was executed with Carolyn Whitford, General Counsel and Executive Vice President of Quorum, and established C&H's role as lead outside counsel for the negotiation and documentation of the MDLA and all related ancillary agreements.
The following timeline summarizes the key milestones in the transaction to date:
KP&A's lead partner on the matter, Graham Whitley, is a well-known technology transactions practitioner with a reputation for aggressive initial positions but a demonstrated willingness to find pragmatic solutions when under commercial pressure from his clients. His associates, Nina Chastain and Derek Fontaine, have been responsive on procedural matters and appear to be handling much of the drafting work. We anticipate that Whitley will lead Meridian's legal arguments at the January 18 session, with support from Meridian's in-house team.
B. Quorum's Internal Stakeholders and Interests
A clear understanding of Quorum's internal stakeholder landscape is essential to calibrating our negotiation strategy. The following individuals constitute the key decision-makers and influencers within Quorum, each with distinct interests bearing on the MDLA negotiations:
Margaret "Meg" Tierney, Chief Executive Officer. Tierney has made a strategic corporate commitment to data-driven underwriting transformation, positioning it as a central pillar of Quorum's five-year strategic plan announced at the September 2022 investor day. She views the Meridian data license as a foundational element of this strategy. Tierney is likely to support a pragmatic resolution of the MFN and derived-data issues provided that QuorumScore™ commercialization rights are fully protected.
Carolyn Whitford, General Counsel and Executive Vice President. Whitford is the ultimate decision-maker on legal terms within Quorum's management team and the primary client contact for C&H. Her priorities center on rigorous IP protection and regulatory compliance. Whitford has expressed particular concern about the derived-data ownership question and its implications for Quorum's broader IP portfolio. She has been consistently clear that any formulation granting Meridian a license-back on Quorum's proprietary models is unacceptable.
Rajesh Anand, Chief Data Officer. Anand is the architect of QuorumScore™ and the champion of Quorum's derived-data commercial strategy. He is strongly — and vocally — opposed to any license-back, revenue share, or other mechanism by which Meridian would capture value from Quorum's analytics outputs. Anand's technical team has developed the machine learning models underlying QuorumScore™ and possesses deep expertise in the distinction between trained model weights, inference outputs, and raw training data — expertise we should leverage in presenting Quorum's derived-data position.
Diane Lowell, Senior Vice President, Underwriting Analytics. Lowell is the business sponsor of the Meridian data integration. Her underwriting models are dependent on the breadth and accuracy of Meridian's data feeds, making her acutely focused on data quality, delivery timelines, and service level commitments. Lowell has less direct interest in the MFN and derived-data legal frameworks but is an important voice on the commercial necessity of completing the deal on a reasonable timeline.
Thomas Ng, Vice President, Enterprise Procurement. Ng is focused on cost containment and pricing protections and has been the primary internal advocate for the MFN clause. He has emphasized that Quorum's $60 million commitment should guarantee best-in-class pricing and that Quorum should not subsidize more favorable pricing to Meridian's other licensees.
Gregory Stahl, Vice President, Legal Affairs. Stahl serves as the day-to-day coordinating contact between Quorum's legal department and C&H. He has been efficient and responsive in facilitating internal approvals and ensuring alignment among Quorum's stakeholders. All substantive questions and draft-review requests are routed through Stahl.
Priya Nair, Director, Data Engineering. Nair is leading the technical integration workstream on Quorum's side. Her primary concerns relate to data-delivery specifications, API performance and reliability, batch-file formatting, and system interoperability. Her input will be critical in evaluating and responding to the Data Security Addendum and technical schedules.
Claudia Reeves, Vice President, Regulatory & Compliance. Reeves is monitoring compliance with the Fair Credit Reporting Act ("FCRA"), the Gramm-Leach-Bliley Act ("GLBA"), the California Consumer Privacy Act / California Privacy Rights Act ("CCPA/CPRA"), and applicable state insurance regulatory requirements. Her team has flagged several provisions in Meridian's form MDLA that require enhanced compliance language, particularly in the areas of consumer data permissible purpose limitations, adverse action notice obligations, and data security standards.
External IP Counsel — Caldwell & Strauss LLP. Quorum has coordinated with its longstanding outside intellectual property counsel, Angela Firth (partner, Caldwell & Strauss LLP), who is providing background guidance on the implications of the MDLA for Quorum's existing IP portfolio and on derived-data ownership positions. Firth's firm prosecuted the QuorumScore™ patent application and possesses institutional knowledge of Quorum's trade secret protections. We are working to ensure alignment between C&H's MDLA negotiation positions and Firth's guidance on IP strategy.
C. Pinnacle Ridge Advisory Engagement
Quorum has retained Pinnacle Ridge Advisory LLC ("Pinnacle Ridge"), through its Managing Director Franklin Osei, to perform two critical advisory functions in support of the MDLA negotiations:
(i) Independent Data-Quality Assessment. Pinnacle Ridge is conducting an independent evaluation of Meridian's data products — including completeness, accuracy, recency, and coverage metrics for each of the three licensed product suites — to validate the commercial representations Meridian has made regarding the data.
(ii) Pricing Benchmark Study. Pinnacle Ridge is benchmarking Quorum's proposed pricing under the MDLA against comparable credit-data licenses in the insurance industry. The study will analyze publicly available pricing data, confidential comparables from Pinnacle Ridge's proprietary database of data-licensing transactions, and market intelligence gathered through interviews with industry participants.
The pricing benchmark study is expected to be delivered on February 14, 2023. This study will be a critical input for our MFN negotiating position: if the study demonstrates that Quorum's effective per-record pricing exceeds the median or lower quartile for comparable insurance-industry credit-data licenses, it will substantially bolster Quorum's economic justification for MFN protection. Pinnacle Ridge is also advising Quorum on derived-data commercial strategies, including market comparables for derived-data pricing in B2B licensing contexts.
We recommend that C&H coordinate closely with Franklin Osei and his team to ensure that the benchmark study is structured to address the specific comparator-class parameters relevant to our MFN proposal.
D. Standish National Bank Covenant
A critical parallel workstream involves Quorum's compliance with the negative covenants contained in its primary credit facility. Quorum maintains a $1.2 billion revolving credit facility with Standish National Bank, N.A. ("Standish"), governed by the Amended and Restated Credit Agreement dated June 15, 2021, as amended (the "Credit Agreement"). Section 7.12(b) of the Credit Agreement contains a negative covenant requiring the prior written consent of Required Lenders (as defined in the Credit Agreement) for any intellectual property license pursuant to which Quorum commits to aggregate payments exceeding $25,000,000.
The MDLA's aggregate five-year value of $60,000,000 exceeds this threshold by $35,000,000, or approximately 240% of the covenant ceiling. Accordingly, lender consent is a condition precedent to Quorum's execution and performance of the MDLA. Marcus Weill (C&H, Banking & Finance Practice Group) is currently preparing the lender consent request letter and a draft consent and waiver instrument for submission to Philip Yardley, Quorum's Relationship Manager at Standish. Marcus is also analyzing structuring alternatives that might mitigate the covenant impact, including whether annual license fee payments (rather than aggregate five-year commitments) could be characterized in a manner that brings the obligation below the covenant threshold. A separate memorandum on these structuring alternatives is in preparation.
The lender consent process introduces a timing dependency: the consent must be obtained before Quorum can execute the MDLA, but it should not delay the substantive negotiation. We recommend advancing the lender consent process in parallel with MDLA negotiations, with the goal of having consent in hand by the time the MDLA is otherwise agreed. Gregory Stahl and Carolyn Whitford should be kept apprised of the consent timeline so that any delays can be escalated promptly.
III. ISSUE PRIORITIZATION FRAMEWORK
Based on our analysis of Quorum's business objectives, the legal and commercial positions reflected in the competing MDLA drafts, and our assessment of Meridian's likely negotiating posture, we recommend organizing the open issues into three priority tiers. This framework will guide our allocation of negotiating time and attention, inform our sequencing strategy, and identify the issues available for use as concession currency.
A. Tier 1 Issues (Must-Win / Deal-Breakers for Quorum)
The following issues are the highest priority for Quorum. Failure to achieve an acceptable resolution on either of these issues would, in our assessment, undermine the fundamental commercial rationale for the transaction and may justify Quorum's decision to decline to proceed:
1. Most Favored Nation Pricing Clause. Quorum must obtain meaningful pricing protection ensuring that it is not commercially disadvantaged relative to comparable insurance-industry licensees of Meridian's data products. The full MFN clause is the preferred outcome; a calibrated pricing audit right is the prepared fallback.
2. Derived-Data Ownership and Commercialization Rights (Including QuorumScore™ Protection). Quorum must retain full ownership of all Derived Data (as defined below) and the unrestricted right to commercialize such Derived Data — including QuorumScore™ — without license-back obligations, revenue-sharing arrangements, or Meridian consent or veto rights. This issue is existential for Quorum's data-monetization strategy.
B. Tier 2 Issues (Strongly Preferred but Negotiable)
The following issues are of significant importance to Quorum and should be pursued vigorously, but Quorum has authorized flexibility to make concessions on these matters if doing so yields meaningful progress on the Tier 1 issues:
1. Dispute Resolution. Quorum's preference for exclusive jurisdiction in the U.S. District Court for the Southern District of New York or the Commercial Division of the New York State Supreme Court, New York County, versus Meridian's demand for AAA binding arbitration with a three-arbitrator panel.
2. Post-Termination Treatment of Derived Data. The treatment of Derived Data upon expiration or termination of the MDLA remains disputed. Meridian's form MDLA requires the return or destruction of all Meridian raw data within 90 days of termination; however, the treatment of Derived Data created by Quorum during the term is unresolved. This issue is closely linked to the Tier 1 derived-data ownership question.
3. Limitation of Liability and Indemnification Scope. Standard commercial terms apply, but the specific structure of liability caps, indemnification obligations, and carve-outs remains under discussion.
4. Data Security Audit Rights and Sub-Processor Oversight. Quorum requires robust audit rights over Meridian's data-handling practices and timely breach notification obligations. The scope, frequency, and mechanics of these rights are still being negotiated.
C. Tier 3 Issues (Tradeable Concessions)
The following issues are of lower priority for Quorum and can be conceded or resolved on terms closer to Meridian's positions in exchange for movement on Tier 1 or Tier 2 matters:
1. Late Payment Interest Rate. Currently set at 1.5% per month / 18% per annum. Quorum could concede maintaining this rate at Meridian's proposed level.
2. Insurance Minimums. The parties are largely aligned: Meridian CGL at $5 million per occurrence, cyber/tech E&O at $25 million aggregate; Quorum CGL at $5 million per occurrence, cyber liability at $50 million aggregate. Minor adjustments to these thresholds can serve as concession material.
3. Force Majeure Provisions and SLA Service Credit Caps. Standard commercial terms where Quorum can demonstrate flexibility.
4. Specific Technical Delivery Details. Batch file naming conventions, API rate limits, data-refresh frequencies, and similar technical specifications can be resolved at the operational level without significant legal controversy.
5. Governing Law. Both parties appear aligned on New York law without giving effect to its conflicts-of-law principles. This item should require minimal, if any, negotiation.
IV. DETAILED ANALYSIS: MOST FAVORED NATION PRICING
A. Quorum's Opening Position
Quorum's redline of Article IV (Fees and Payment) introduced a comprehensive MFN pricing clause (proposed Section 4.06) that would require an automatic downward adjustment to Quorum's per-record pricing, volume discount tiers, and fee terms if Meridian, at any time during the term of the MDLA, offers any other insurance-industry licensee more favorable pricing on any of these dimensions.
Specifically, the proposed MFN clause provides that:
(a) If Meridian enters into, amends, or renews any data license agreement with any U.S.-domiciled insurance carrier, managing general agent ("MGA"), or insurtech firm with annual premiums written of $500 million or more (the "MFN Comparator Class"), and such agreement provides for per-record pricing, volume discount structures, or aggregate fee terms that are, in any respect, more favorable than the corresponding terms of the MDLA, Meridian shall promptly notify Quorum and shall automatically amend the pricing terms of the MDLA to match such more favorable terms, effective retroactively to the date on which the more favorable terms were first offered to the comparator licensee.
(b) The MFN obligation applies across all three licensed data product suites — MCI Consumer Credit File™, MCI CommercialView™, and MCI AltSignal™ — and encompasses any pricing metric, including per-record rates, volume tiers, implementation fees, and annual escalators.
(c) Meridian shall certify compliance with the MFN clause on an annual basis, through a written officer's certificate delivered to Quorum within 30 days of each anniversary of the effective date.
The commercial rationale underpinning Quorum's MFN demand is straightforward and compelling: Quorum is committing $60 million over five years and is, by Thomas Ng's assessment, among the three to five largest insurance-industry data licensees in the United States. A commitment of this magnitude warrants contractual assurance that Quorum will receive best-in-class or at minimum parity pricing relative to its peers. Quorum should not be placed in a position where it is effectively subsidizing more favorable pricing extended to competitors or smaller licensees.
The narrowing of the MFN comparator class to U.S.-domiciled insurance-industry participants with annual premiums written of $500 million or more is a deliberate design choice. It limits the scope of the MFN to Quorum's true competitive peer set, avoids comparisons to fundamentally dissimilar licensees (e.g., retail banks, fintech companies, non-insurance users of credit data), and reduces the administrative burden of compliance. This narrowing also serves an important antitrust function discussed in Section IV.D below.
B. Assessment of Meridian's Likely Position
Based on positions expressed by Meridian during the term sheet phase, statements attributed to Keith Marlow (SVP, Data Licensing) in the October working sessions, and the absence of any MFN-like provision in Meridian's November 4 form MDLA, we anticipate that Meridian will categorically refuse any full MFN clause. Meridian's refusal is likely to rest on four principal grounds:
1. Confidentiality Obligations to Other Licensees. Meridian will argue that the MFN clause, particularly the automatic-adjustment and annual-certification mechanisms, would effectively require Meridian to disclose (directly or indirectly) the pricing terms of its other data license agreements, in violation of confidentiality obligations owed to those counterparties. Meridian maintains hundreds of active data-licensing relationships, many of which contain strict confidentiality provisions covering commercial terms. Meridian will characterize the MFN as an impossible-to-satisfy obligation that would place it in default of other contractual commitments.
2. Impracticability of Cross-Licensee Price Comparisons. Meridian will argue that no two data licenses are truly comparable, given that each license is bespoke — varying in the scope of data products covered, the volume of records accessed, the data-delivery mechanisms employed, the permitted uses and use restrictions, the geographic scope, the term length, and the ancillary services provided (such as custom data overlays, dedicated account support, and enhanced API functionality). Meridian will contend that attempting to distill these multifaceted agreements into a single "per-record rate" for comparison purposes is commercially impracticable and would produce misleading results.
3. IPO-Related Margin Concerns. This ground will not be articulated explicitly at the negotiating table, but we assess it to be the most significant driver of Meridian's resistance. Breckenridge Capital Partners and Whitmore Zanthor are acutely focused on preserving Meridian's ability to present itself to potential IPO investors as a company with strong and defensible "pricing power" — i.e., the ability to command premium pricing and resist downward pressure from customers. An MFN clause in a major customer agreement, visible in IPO due diligence, would be flagged as a material margin-compression risk. Whitmore Zanthor' underwriters would be expected to raise the MFN clause in the risk-factor analysis and potentially adjust the indicative valuation range downward. This concern likely represents the most politically entrenched obstacle to any MFN-like mechanism.
4. Antitrust Sensitivities. Meridian may also invoke antitrust concerns, arguing that MFN clauses in concentrated data markets have drawn scrutiny from the U.S. Department of Justice and the Federal Trade Commission. Meridian may cite the FTC's investigations into MFN clauses in health insurance data markets and platform economics as analogues. While we believe this argument is ultimately unpersuasive in the specific context of the MDLA (as discussed in Section IV.D), Meridian will deploy it defensively to add weight to its refusal.
We anticipate that Graham Whitley (KP&A lead partner) has been specifically instructed by Arthur Pennington (Meridian General Counsel) and Keith Marlow (SVP, Data Licensing) to hold firm on the MFN refusal, with reinforcement from Caleb Rourke (Breckenridge board representative on Meridian's board of directors). Whitley may have some latitude to negotiate the mechanics of a modified pricing protection, but he is unlikely to have authority to agree to any full MFN at the January session without escalation to Meridian's board — and, by extension, to Breckenridge.
C. Strategic Recommendations on MFN
We recommend the following multi-phase strategy for the MFN negotiation:
Step 1: Negotiate the full MFN aggressively at the January 18 session. At the first in-person session, we should present Quorum's full MFN position as a firm, non-negotiable demand and articulate the full commercial justification for the clause. The purpose of this initial presentation is threefold: (i) to establish Quorum's conviction and seriousness on the issue, (ii) to create maximum negotiating room for a subsequent retreat to our fallback position, and (iii) to elicit a detailed articulation of Meridian's objections, which will inform our refinement of the fallback proposal. Leonard Cross should present the MFN position personally to signal its priority level. Thomas Ng's participation in this discussion will reinforce the commercial dimension of the argument.
Step 2: Deploy the Pinnacle Ridge benchmark study. Upon receipt of the Pinnacle Ridge pricing benchmark study (expected February 14, 2023), we should analyze the results and incorporate them into our MFN arguments. If the study demonstrates — as we anticipate based on Franklin Osei's preliminary observations — that Quorum's effective per-record pricing under the MDLA exceeds the market median for comparable insurance-industry credit-data licenses, this finding will substantially bolster Quorum's economic justification for pricing protection. The benchmark data should be presented to Meridian at or in advance of the second negotiation session to demonstrate that Quorum's demand is grounded in market reality rather than speculative concern.
Step 3: Prepare and reserve the fallback — Limited "Pricing Audit Right." If Meridian formally rejects the full MFN (as anticipated), we recommend deploying the following fallback position at a subsequent session (March 2023 or later):
Quorum proposes an annual "Pricing Audit Right" pursuant to which Quorum would have the right, exercisable once per calendar year, to engage an independent third-party auditor — mutually approved by both parties, with approval not to be unreasonably withheld — to verify that Quorum's effective per-record rate under the MDLA does not exceed 110% of the lowest effective per-record rate charged by Meridian to any licensee within the MFN Comparator Class (U.S.-domiciled insurance carriers, MGAs, and insurtech firms with annual premiums written of $500 million or more) during the preceding twelve-month period.
The auditor would be bound by strict confidentiality obligations to both parties and would report to Quorum only a binary finding (compliant or non-compliant) and, in the event of non-compliance, the magnitude of the pricing differential. The auditor would not disclose the identity, specific pricing terms, or other commercial details of any comparator licensee. If the auditor determines that Quorum's effective per-record rate exceeds the 110% ceiling, Meridian would be required to adjust Quorum's pricing downward to the 110% threshold, effective retroactively to the beginning of the measurement period.
This fallback addresses each of Meridian's anticipated objections:
•  It addresses the confidentiality objection by channeling the comparison through a neutral, bound-by-NDA auditor who never discloses comparator licensee identities or pricing to Quorum.
•  It addresses the impracticability objection by tasking a qualified independent professional with making the comparison, applying a methodology jointly agreed upon by the parties.
•  It addresses the IPO concerns by substituting a narrowly scoped, confidential audit mechanism for a blanket MFN clause — a pricing audit right is significantly less likely to be characterized as a margin-compression mechanism in IPO risk disclosures.
•  It addresses the antitrust concerns by limiting the scope to insurance-industry peers, using a ceiling (110% rather than matching), and interposing a neutral auditor rather than requiring direct price disclosure.
Step 4: Decline Meridian's anticipated counter-proposal. Based on the pattern of Meridian's prior negotiations (as reported by Pinnacle Ridge's market intelligence), we anticipate that Meridian may offer a "most favored terms" clause limited to data-delivery SLAs and system uptime commitments only — explicitly excluding all pricing terms. This would provide Quorum with assurance that it receives the best service levels but would be commercially meaningless as a pricing protection. We should reject this counter as a standalone resolution of the MFN issue. However, we could accept it as a supplementary provision layered on top of the pricing audit right, which would provide Quorum with protection on both the pricing and service-quality dimensions.
Step 5: Sequencing discipline. It is critical that we present the full MFN first and reserve the pricing audit right fallback for a later session — ideally March 2023 or beyond — after Meridian has formally rejected the full MFN in writing or at the negotiating table. This two-step approach maximizes the perceived concession value when we ultimately present the fallback. If we lead with the pricing audit right, Meridian will treat it as Quorum's opening position and seek to negotiate it downward — potentially to a level that provides inadequate protection.
D. Antitrust Risk Mitigation
A separate antitrust analysis memorandum addressing the legality and risk profile of MFN clauses in credit-data licensing markets is currently in preparation by Wendy Schultz, with input from C&H's Antitrust Practice Group. The full analysis will be circulated to the deal team in January 2023. For present purposes, we highlight the following key points relevant to our negotiation strategy:
(a) Narrowed comparator class. The limitation of the MFN comparator class to insurance-industry licensees with annual premiums written of $500 million or more substantially limits any potential anticompetitive effects. Unlike a blanket MFN that could dampen price competition across Meridian's entire customer base, the narrowed comparator class affects only a small subset of Meridian's licensees operating in a single vertical.
(b) Pricing audit right structure. The fallback pricing audit right further mitigates antitrust risk by using a confidential third-party verification mechanism rather than direct price-matching. The interposition of the auditor, the binary reporting format, and the 110% ceiling (rather than price-matching) all reduce the risk that the mechanism could serve as a vehicle for coordinated pricing in the credit-data market.
(c) Buyer-side MFN. The proposed MFN is a buyer-side (most-favored-customer) clause rather than a seller-side clause. Buyer-side MFNs are generally subject to less rigorous antitrust scrutiny than seller-side MFNs, though they are not immune from challenge in concentrated markets.
(d) Pre-session coordination. We recommend discussing the antitrust positioning of our MFN proposal with Quorum's in-house team — specifically Gregory Stahl and Claudia Reeves — in a pre-session preparation call prior to January 18. This will ensure that Quorum's internal compliance perspective is aligned with our negotiation posture and that Quorum is comfortable with the risk profile.
V. DETAILED ANALYSIS: DERIVED-DATA RIGHTS
A. Quorum's Opening Position
Quorum's redline of Article VII (Intellectual Property) of the MDLA introduced a comprehensive derived-data provision (proposed Section 7.03) establishing the following framework:
(a) Definition of Derived Data. "Derived Data" means any and all data, databases, data compilations, models, algorithms, scores, indices, insights, analytics outputs, and other intellectual property created, developed, generated, or produced by or on behalf of Quorum, its affiliates, or its authorized agents, using licensed Meridian data as an input, training data source, reference, or component, whether alone or in combination with other data or information.
(b) Ownership. Quorum shall exclusively own all right, title, and interest in and to all Derived Data, including all intellectual property rights therein and thereto. Meridian hereby assigns, and agrees to assign, to Quorum any and all rights Meridian may have or claim in any Derived Data to the extent necessary to effectuate the foregoing ownership provision.
(c) Commercialization. Quorum shall have the unrestricted right to use, reproduce, modify, create derivative works of, distribute, display, perform, sublicense, and otherwise exploit Derived Data for any lawful purpose, including commercial exploitation through licensing, sale, or other disposition to third parties outside Quorum's corporate group, without the payment of any additional fees to Meridian and without any requirement for Meridian's prior consent, approval, or notification.
(d) No License-Back. Nothing in the MDLA shall be construed to grant Meridian any license, right, or interest in or to any Derived Data, whether express, implied, or by estoppel.
(e) No Revenue Share. Quorum shall have no obligation to pay, share, or otherwise remit to Meridian any portion of revenues, profits, or other economic benefits derived from Quorum's use or commercialization of Derived Data.
This position reflects Quorum's core commercial objective: to ensure that its substantial investment in developing proprietary analytics capabilities — most importantly, the QuorumScore™ predictive model — is fully protected and that Quorum retains exclusive economic benefit from its innovations.
B. Meridian's Known Position (Per November 4, 2022 MDLA Draft)
Meridian's form MDLA, as delivered by KP&A on November 4, 2022, takes a fundamentally different approach to derived data. Section 7.04 of the Meridian draft characterizes any data, model, score, or output that is "incorporating, based on, derived from, or traceable to" Meridian's licensed data as a "derivative work" under copyright law, subject to and encumbered by Meridian's underlying intellectual property rights in the licensed data.
Building on this characterization, Meridian's form MDLA imposes three specific requirements:
1. Perpetual Royalty-Free License-Back. Section 7.04(a) grants Meridian a "perpetual, irrevocable, worldwide, royalty-free, fully paid-up, non-exclusive license to use, reproduce, modify, distribute, and create derivative works of all Derived Data for any purpose, including Meridian's internal business operations and the improvement, development, and commercialization of Meridian's data products and services." This provision would give Meridian free and unrestricted access to the outputs of Quorum's proprietary analytics — effectively allowing Meridian to benefit from Quorum's intellectual investment without compensation.
2. Third-Party Commercialization Restriction. Section 7.04(b) prohibits Quorum from selling, licensing, sublicensing, or otherwise making Derived Data available to any third party unless such Derived Data is "sufficiently transformed" such that "no Meridian Licensed Data can be reverse-engineered, reconstructed, or identified from the Derived Data." Critically, Section 7.04(b) grants Meridian sole discretion to determine whether any particular Derived Data satisfies the "sufficient transformation" standard. This provision effectively gives Meridian veto power over any Quorum effort to commercialize Derived Data, regardless of the degree of transformation or the independence of Quorum's analytical contribution.
3. Revenue-Sharing Arrangement. Section 7.04(c) requires Quorum to pay Meridian 15% of "net revenues" (defined as gross revenues less documented direct costs of sale) attributable to any Derived Data that is commercially exploited by Quorum to third parties. The revenue-sharing obligation continues in perpetuity, surviving termination or expiration of the MDLA, and applies regardless of the degree to which the Derived Data has been transformed beyond the underlying Meridian data.
We understand that Meridian's aggressive position on derived data is heavily influenced by Breckenridge Capital Partners' concern that unfettered derived-data rights granted to a major licensee would threaten Meridian's "proprietary data moat" — a concept that Whitmore Zanthor has identified as a key element of Meridian's IPO valuation narrative. If potential investors perceive that Meridian's licensees can freely extract, transform, and commercialize Meridian's data in competition with Meridian's own products, the perceived value of Meridian's data assets could be significantly diminished. From Breckenridge's perspective, derived-data restrictions are a defensive measure to protect Meridian's enterprise value.
C. Assessment of Legal Merits
A separate memorandum analyzing derived-data IP ownership under copyright law is in preparation by Wendy Schultz and Omar Siddiqui and will be completed in January 2023. The full memorandum will address the applicable statutory and case-law framework in detail. For purposes of the negotiation strategy, we summarize the preliminary legal assessment as follows:
Meridian's "derivative work" characterization is overbroad and legally unsupported in the context of the MDLA. Under copyright law, a "derivative work" is "a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted." 17 U.S.C. § 101. However, the threshold question is whether Meridian's underlying data compilations are entitled to the level of copyright protection that would support derivative-work claims over downstream analytical outputs.
The Supreme Court's landmark decision in Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991), established that factual data compilations receive only "thin" copyright protection, limited to the original selection, coordination, and arrangement of the data — not to the underlying facts themselves. Credit data — consisting of factual information about individuals' and businesses' credit histories, payment records, and financial obligations — is quintessentially factual. Meridian cannot claim copyright in the underlying facts; it can, at most, claim protection in its original selection and arrangement of those facts. Quorum's analytical outputs, which apply proprietary machine learning models to extract patterns and generate predictions from factual inputs, are several steps removed from Meridian's original selection and arrangement and are unlikely to qualify as "derivative works" of the Meridian data compilation.
A key technical distinction must be pressed in negotiations. There is a critical difference between:
(a) Trained model weights and parameters. When Quorum trains a machine learning model using Meridian data as part of the training dataset, the resulting model weights and parameters bear some statistical relationship to the training data, including the Meridian data. However, the model weights are not a "copy" or "recasting" of the training data — they are mathematical abstractions derived from patterns across potentially billions of data points, including substantial non-Meridian data.
(b) Inference outputs. When Quorum runs new, non-Meridian inputs through an already-trained model to generate predictions (e.g., a QuorumScore™ score for a new insurance applicant), the resulting output is generated by applying the model's learned parameters to entirely new data. The inference output does not contain, reproduce, or incorporate any Meridian data. It is the product of Quorum's proprietary model architecture, training methodology, and the new input data.
Category (b) — inference outputs — should not be treated as "Derived Data" at all under any reasonable definition, and certainly should not be characterized as a derivative work of Meridian's data. Even category (a) — trained model weights — presents a weak derivative-work claim given the attenuated and non-literal relationship between the weights and the training data.
Meridian's "sole discretion" standard is legally and commercially untenable. Granting Meridian sole discretion to determine whether Derived Data satisfies the "sufficient transformation" standard gives Meridian an unreviewable veto over Quorum's commercialization activities. This is functionally equivalent to a prohibition on Derived Data commercialization, as Meridian has obvious competitive incentives to withhold approval. No commercially reasonable licensee would — or should — accept this structure.
We are coordinating with Angela Firth (Caldwell & Strauss LLP) on the implications of the derived-data framework for Quorum's existing IP portfolio and, in particular, for the QuorumScore™ patent application (Serial No. 97/482,116). Firth's assessment of the patent-law implications will inform our position on the precise boundaries of the Derived Data definition and the scope of any transformation standard.
D. QuorumScore™ Protection
The protection of QuorumScore™ is the single most important sub-issue within the derived-data framework. QuorumScore™ is Quorum's proprietary predictive underwriting model, developed under Rajesh Anand's leadership, that blends Meridian credit data with Quorum's own extensive first-party data assets — including historical claims data, policy data, and telematics data — to generate automated underwriting scores and risk assessments.
QuorumScore™ is central to two elements of Quorum's corporate strategy:
(i) Internal underwriting competitive advantage. QuorumScore™ enables Quorum to make faster, more accurate, and more granular underwriting decisions than competitors relying on traditional actuarial methods, translating directly into improved loss ratios and profitability.
(ii) B2B licensing revenue. Quorum plans to license QuorumScore™ to other insurance carriers, MGAs, and financial institutions as a standalone B2B product. Rajesh Anand's projections forecast that QuorumScore™ licensing will generate $40–50 million in annual revenue by 2027 — a material new revenue line for Quorum.
If Meridian's form MDLA provisions were adopted, the consequences for QuorumScore™ would be severe:
•  The license-back would give Meridian free access to QuorumScore™ outputs, which Meridian could incorporate into its own competing data products or offer to Quorum's competitors.
•  The commercialization restriction with Meridian's "sole discretion" standard would give Meridian an effective veto over Quorum's B2B licensing of QuorumScore™, since QuorumScore™ incorporates Meridian data as an input.
•  The 15% revenue share would transfer a substantial portion of QuorumScore™ licensing revenue to Meridian, directly undermining the business case for the B2B licensing strategy.
For these reasons, QuorumScore™ must be explicitly carved out or protected by the derived-data framework — this is a non-negotiable for Quorum. Any resolution of the derived-data issue that does not fully protect QuorumScore™ is unacceptable.
E. Strategic Recommendations on Derived Data
We recommend the following multi-phase strategy:
Phase 1: January 18 Session — Present Full Opening Position. At the first in-person session, we should present Quorum's position that it owns all Derived Data intellectual property with unrestricted commercialization rights, and should challenge Meridian's "derivative work" characterization on the legal merits. The following arguments should be advanced:
(1) Copyright law does not support Meridian's position. Factual data compilations receive only thin copyright protection under Feist. Outputs of Quorum's proprietary machine learning models — particularly inference outputs generated using new non-Meridian inputs — do not constitute derivative works of Meridian's underlying data.
(2) The "sole discretion" transformation standard is commercially unprecedented and unworkable. It grants Meridian an unreviewable veto over Quorum's core business activities and creates a conflict of interest, as Meridian has competitive incentives to withhold approval.
(3) The license-back provision is a competitive subsidy. Granting Meridian free access to Quorum's proprietary analytics outputs is commercially unreasonable and would effectively require Quorum to fund the improvement of Meridian's competing products.
(4) The 15% revenue share is disproportionate and unsupported by market practice. Omar Siddiqui is preparing a market survey of license-back and revenue-sharing provisions in comparable data-licensing agreements; preliminary indications are that such provisions are rare in arm's-length data licenses and, where they exist, typically apply only to narrow categories of outputs that directly reproduce the licensor's data.
Leonard Cross should present the legal arguments, with Rajesh Anand (if present) available to explain the technical distinction between trained model weights and inference outputs. Wendy Schultz should be prepared to address detailed copyright-law questions from KP&A.
Phase 2: Second or Third Session — Deploy Compromise Framework. If Meridian formally rejects Quorum's full opening position on derived data (as anticipated), we should deploy the following compromise framework at a subsequent session:
(a) Quorum retains full ownership of all Derived Data. No change from the opening position on the ownership question.
(b) No license-back to Meridian. Meridian receives no rights in or to any Derived Data.
(c) No revenue share to Meridian. Quorum has no obligation to share revenues from Derived Data commercialization.
(d) Objective transformation standard for third-party commercialization. Quorum may commercialize Derived Data to third parties, provided that the outputs satisfy an objective, jointly agreed "de-identification and transformation" standard. This standard would be defined in a Derived Data Commercialization Protocol to be appended to Article VII of the MDLA as a technical exhibit. The Protocol would establish quantitative and qualitative criteria — such as minimum aggregation thresholds, re-identification risk ceilings (measured by established statistical techniques), and input-data dilution ratios — that, if satisfied, would automatically qualify the Derived Data for unrestricted commercialization. Critically, the determination of whether specific Derived Data meets the transformation standard would not be within Meridian's sole discretion.
(e) Explicit QuorumScore™ carve-out. The MDLA would include an explicit provision confirming that QuorumScore™ outputs, QuorumScore™ model weights and parameters, and any blended models or analytics incorporating Quorum's first-party data (claims data, policy data, telematics data, or any other Quorum-owned data) are Quorum's exclusive property regardless of the inclusion of Meridian data as an input. QuorumScore™ would be exempt from the transformation standard and the Derived Data Commercialization Protocol, on the ground that it constitutes Quorum's independently developed intellectual property.
(f) Independent technical expert dispute resolution. For any disagreement over whether specific Derived Data meets the transformation standard, the MDLA would provide for resolution by an independent technical expert — jointly selected by the parties, or in the absence of agreement, appointed by a neutral body such as the American Arbitration Association or JAMS — whose determination would be binding on both parties.
Red Lines. The following elements are non-negotiable for Quorum and should not be conceded under any circumstances:
•  No license-back — under any formulation, whether perpetual, limited-term, royalty-free, or royalty-bearing.
•  No revenue share — under any percentage, threshold, or structure.
•  No Meridian sole discretion over any transformation determination, commercialization approval, or similar gatekeeping function.
VI. ASSESSMENT OF MERIDIAN'S NEGOTIATING DYNAMICS AND LEVERAGE
A successful negotiation strategy requires a clear-eyed assessment of the counterparty's internal dynamics, institutional pressures, commercial incentives, and alternatives. The following analysis addresses each of these dimensions.
A. Breckenridge Capital Partners' Influence
Breckenridge Capital Partners Fund IV, L.P. ("Breckenridge Fund IV") holds a 62.5% majority ownership stake in Meridian, making it the controlling shareholder. The general partner of Breckenridge Fund IV is Breckenridge Capital Management LLC, managed by Elaine Drummond, Managing Partner. Caleb Rourke, a Partner at Breckenridge Capital Management, sits on Meridian's board of directors and oversees the Meridian investment within the Breckenridge portfolio.
Breckenridge's dominant influence over Meridian's strategic decisions cannot be overstated. Breckenridge is singularly focused on maximizing Meridian's valuation ahead of a planned initial public offering in the 2025–2026 timeframe. Two specific concerns are driving Breckenridge's positions on the MFN and derived-data issues:
1. MFN and Margin Compression. MFN clauses visible in IPO due diligence — particularly in agreements with major licensees — could signal to potential investors that Meridian faces structural constraints on its ability to optimize pricing. In a growth-stage data company, "pricing power" is a critical valuation input. An MFN clause in the Quorum MDLA, which represents approximately 4.2% of Meridian's total revenue, could be cited by prospective investors or underwriters as evidence of margin-compression risk, potentially reducing the IPO valuation multiple.
2. Derived-Data Rights and the "Data Moat" Narrative. Breckenridge and Whitmore Zanthor have constructed Meridian's equity story around the concept of a "proprietary data moat" — the idea that Meridian's data assets are unique, difficult to replicate, and sustainably defensible. If a major licensee like Quorum can freely extract value from Meridian's data, transform it into competing analytics products, and commercialize those products to third parties, the perceived defensibility of Meridian's data moat diminishes. Breckenridge is concerned that broad derived-data rights could undermine this narrative and reduce investor appetite.
Implication for our strategy: We should anticipate that Elaine Drummond is the ultimate decision-maker on both MFN and derived-data issues, operating through Caleb Rourke and Meridian's management team. Meridian's front-line negotiators — Arthur Pennington (General Counsel) and Keith Marlow (SVP, Data Licensing) — may have limited flexibility to agree to compromise positions without obtaining explicit Breckenridge board-level approval. This means that any meaningful concession from Meridian will likely require a multi-step internal approval process, which could extend negotiation timelines. We should build this dynamic into our sequencing expectations.
B. Whitmore Zanthor & Co.'s Role
Rachel Ng-Castillo, Managing Director at Whitmore Zanthor & Co., is advising Meridian on the planned IPO and has reportedly raised specific concerns about the impact of the Quorum MDLA terms on Meridian's IPO positioning. Based on our understanding (derived from indirect market intelligence and discussions with Franklin Osei of Pinnacle Ridge), Ng-Castillo has specifically flagged that:
•  A broad MFN clause in the Quorum MDLA could be highlighted as a pricing-risk factor in the S-1 risk disclosures.
•  Unrestricted derived-data commercialization rights could undermine the "proprietary data asset" narrative in the prospectus.
•  The combination of both provisions in a single agreement with a major licensee could be characterized as a material contractual risk in underwriter due diligence.
Whitmore Zanthor' influence reinforces Meridian's resistance on both Tier 1 issues and adds an additional layer of institutional inertia that we must overcome. However, Whitmore Zanthor' concerns are ultimately pragmatic rather than principled: if Quorum can demonstrate that its proposed terms are standard for major data-licensing transactions — using the Pinnacle Ridge benchmark data and Omar Siddiqui's market survey — this may help neutralize the concern that the Quorum MDLA is an outlier that signals broader pricing vulnerability.
C. Meridian's Commercial Incentives
Despite the institutional pressures from Breckenridge and Whitmore Zanthor, Meridian has powerful commercial incentives to complete the Quorum transaction:
•  Deal size. The $60 million five-year MDLA represents approximately 4.2% of Meridian's projected FY 2023 revenue of $1.42 billion. This is a material contract that would contribute meaningfully to Meridian's top line and — given the high-margin nature of data-licensing revenue — to its EBITDA of approximately $438 million.
•  Marquee client. Quorum, with $4.18 billion in FY 2023 revenue and an approximately $8.9 billion market capitalization, is a marquee insurance-industry client. Securing Quorum as a long-term data licensee would validate Meridian's positioning in the insurance vertical and could serve as a reference in sales conversations with other insurance-industry prospects.
•  Competitive signaling. Losing the Quorum deal — or failing to close it within a reasonable timeframe — would be commercially significant for Meridian. A failed deal could signal to other potential licensees that Meridian's terms are commercially unreasonable, potentially chilling demand.
•  Ramp investment. The Year 1 fee structure ($10.8 million, discounted from the $12.3 million annualized run rate) reflects the implementation and ramp period during which Quorum will be investing in data integration, system configuration, and model development. This front-end investment further demonstrates Quorum's commitment and deepens the switching costs that will anchor the relationship over time.
These commercial incentives give Quorum meaningful leverage. Meridian is unlikely to walk away from a $60 million deal solely over MFN and derived-data terms. The question is not whether Meridian will ultimately make concessions, but rather what form those concessions will take and how much negotiating time will be required to extract them.
D. Quorum's Leverage and Alternatives
Quorum's negotiating leverage derives from several sources:
•  Alternative data sources. While Meridian's data products are differentiated (particularly MCI AltSignal™), Quorum has alternatives for credit data sourcing. Other major credit bureaus maintain comparable consumer and commercial credit databases, and Quorum could, in principle, restructure its data-sourcing strategy around a different primary vendor. However, switching costs are significant — both in terms of implementation investment and model-retraining effort — and the transition would delay Quorum's data-integration roadmap by an estimated 12–18 months.
•  Scale and desirability. Quorum's scale ($4.18 billion FY 2023 revenue, approximately $8.9 billion market capitalization, operations across P&C, life, and specialty lines) makes it one of the most desirable licensees in the insurance industry for any credit-data provider. Meridian's sales team recognizes Quorum's strategic importance.
•  Pinnacle Ridge benchmarks. The forthcoming Pinnacle Ridge benchmark study will provide Quorum with objective, third-party pricing data that can be deployed to demonstrate that Quorum's pricing under the MDLA is above-market, strengthening the case for pricing protection.
•  Patience. Quorum can afford to negotiate patiently. While delay has real costs (principally the postponement of QuorumScore™ development and data-integration milestones), Quorum is not under time pressure comparable to Meridian's IPO preparation timeline. In a prolonged negotiation, the approaching IPO deadline may pressure Meridian to close major customer agreements — including the Quorum MDLA — before commencing the IPO process.
Risk factor: The principal risk associated with extended negotiations is the delay to Quorum's data-integration roadmap and QuorumScore™ development timeline. Rajesh Anand has communicated that each quarter of delay costs Quorum an estimated $3–5 million in deferred QuorumScore™ revenue, based on the projected B2B licensing timeline. This cost must be weighed against the long-term value of securing favorable MFN and derived-data terms.
VII. SECONDARY ISSUES: RECOMMENDED POSITIONS AND CONCESSION STRATEGY
A. Dispute Resolution
Quorum's position: Exclusive jurisdiction in the United States District Court for the Southern District of New York, or, for state-law claims, the Commercial Division of the New York State Supreme Court, New York County. Quorum's preference for litigation reflects its general institutional comfort with the federal courts, the predictability and transparency of judicial proceedings, and the availability of appellate review.
Meridian's position: Binding arbitration under the American Arbitration Association ("AAA") Commercial Arbitration Rules, seated in New York City, with a three-arbitrator panel. Meridian's preference for arbitration reflects the confidentiality of arbitral proceedings (which aligns with Meridian's sensitivity about public disclosure of data-licensing terms), the perceived speed of arbitration relative to federal court litigation, and the finality of arbitral awards (limited judicial review).
Recommendation: This is a Tier 2 issue that can serve as valuable negotiating currency. Quorum could concede to binding arbitration — three-arbitrator panel, AAA Commercial Arbitration Rules, New York seat — in exchange for meaningful movement by Meridian on one or both of the Tier 1 issues. Dispute resolution is an issue on which Quorum has preferences but no firm conviction, whereas Meridian (influenced by Breckenridge's confidentiality concerns) may place significant value on obtaining arbitration.
If Quorum concedes arbitration, we recommend adding the following carve-outs preserving court jurisdiction:
(i) Injunctive relief. Either party may seek temporary restraining orders, preliminary injunctions, or other emergency equitable relief from any court of competent jurisdiction in connection with claims involving intellectual property infringement, data breach, or confidentiality violations, without the requirement of posting bond, and without waiving the right to arbitrate the underlying dispute.
(ii) Provisional measures. Either party may seek provisional measures from a court pending constitution of the arbitral tribunal.
(iii) Confirmation and enforcement. Any court of competent jurisdiction may enter judgment on the arbitral award.
The strategic deployment of this concession is discussed in Section VIII below.
B. Post-Termination Treatment of Derived Data
Section 12.04 of Meridian's form MDLA requires th