PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
PRICING AUDIT RIGHT RIDER
PROPOSED SECTION [__] OF THE MASTER DATA LICENSE AGREEMENT
Fallback Alternative to Most Favored Nation Pricing Clause
September 15, 2023
Prepared by: Wendy Schultz, Associate, intellectual Property Practice Group, Calderwood & Harkness LLP
On behalf of: Quorum Insurance Holdings Corp.
Matter Reference: C&H Matter No. 1025-00008
Document Status: DRAFT — For Discussion Purposes Only / Subject to Further Negotiation
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT. This document is protected by the attorney-client privilege and the work product doctrine. It has been prepared by counsel for Quorum Insurance Holdings Corp. in connection with the negotiation of the Master Data License Agreement described herein. This document is not intended for distribution to, or use by, any person or entity other than Quorum Insurance Holdings Corp. and its authorized representatives. Any unauthorized disclosure, copying, or distribution of this document or its contents is strictly prohibited.
Context Note: This rider (the "Rider") is proposed for attachment to and incorporation in the Master Data License Agreement (the "MDLA") between Quorum Insurance Holdings Corp. ("Licensee") and Meridian Credit intelligence, Inc. ("Licensor"), and is offered as an alternative to Licensee's previously proposed most favored nation pricing clause, which Licensor rejected on April 21, 2023, and which Licensor's board of directors formally resolved against on August 22, 2023. This Rider is intended to provide Licensee with a commercially reasonable mechanism for pricing transparency and protection against discriminatory pricing, without requiring Licensor to disclose specific terms of third-party agreements or to automatically adjust pricing to match or equal the lowest rate offered to any other licensee.
PRICING AUDIT RIGHT RIDER
TO THE MASTER DATA LICENSE AGREEMENT
BY AND BETWEEN
QUORUM INSURANCE HOLDINGS CORP.
AND
MERIDIAN CREDIT INTELLIGENCE, INC.
RECITALS
A. Quorum Insurance Holdings Corp., a Delaware corporation with its principal place of business at 1200 Atlantic Street, Suite 3400, Stamford, Connecticut 06901 ("Licensee"), and Meridian Credit intelligence, Inc., a Georgia corporation with its principal place of business at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326 ("Licensor"), are currently negotiating the Master Data License Agreement (the "MDLA"), pursuant to which Licensor will grant to Licensee an enterprise-wide license to access, use, and process certain proprietary data products owned and maintained by Licensor, subject to the terms and conditions set forth therein.
B. The MDLA contemplates a five (5)-year enterprise data-licensing arrangement with aggregate license fees of Sixty Million Dollars ($60,000,000) over the initial term, structured as follows: Ten Million Eight Hundred Thousand Dollars ($10,800,000) for Year 1 and Twelve Million Three Hundred Thousand Dollars ($12,300,000) for each of Years 2 through 5. The data products licensed under the MDLA include: (i) the MCI Consumer Credit File™, comprising approximately three hundred ten million (310,000,000) consumer credit records; (ii) MCI CommercialView™, comprising approximately forty-two million (42,000,000) business records; and (iii) MCI AltSignal™, comprising approximately eighty-five million (85,000,000) consumer alternative-data records (collectively, the "Licensed Data Products"). The foregoing data products are essential to Licensee's underwriting, pricing, and risk-assessment operations across its portfolio of property-and-casualty and specialty insurance lines.
C. In connection with the negotiation of the MDLA, Licensee originally proposed a most favored nation pricing clause (the "MFN Clause") that would have been applicable to all United States-domiciled insurance carriers, managing general agents, and insurance-technology companies ("insurtech firms") with annual premiums written of Five Hundred Million Dollars ($500,000,000) or more, and would have required Licensor to automatically adjust Licensee's pricing to match the lowest effective per-record rate offered to any such comparable licensee. Licensor rejected the MFN Clause on April 21, 2023, citing, among other things, concerns regarding confidentiality obligations to existing licensees, the impracticability of cross-licensee pricing comparisons given the bespoke nature of data packages, potential adverse implications for Licensor's planned initial public offering process, and antitrust sensitivities. On August 22, 2023, Licensor's board of directors formally adopted a resolution declining to accept any most favored nation pricing obligation in connection with the MDLA or any other data-licensing agreement. This Pricing Audit Right Rider is proposed as a narrower, commercially reasonable alternative designed to provide Licensee with pricing transparency without requiring Licensor to disclose specific terms of third-party agreements or to automatically adjust pricing to match any particular rate.
D. The parties intend that the terms and conditions of this Rider, upon execution of the MDLA, shall be incorporated into and form a part of the MDLA as if fully set forth therein. Capitalized terms used but not otherwise defined in this Rider shall have the meanings ascribed to such terms in the MDLA. In the event of any conflict between the terms of this Rider and the terms of the MDLA, the terms of this Rider shall govern with respect to the subject matter hereof.
SECTION 1: DEFINITIONS
For purposes of this Rider, the following terms shall have the meanings set forth below:
1.1 "Audit Period"
"Audit Period" means each twelve (12)-month period during the Term of the MDLA, commencing on the first anniversary of the Effective Date of the MDLA and ending on each subsequent anniversary thereof. For the avoidance of doubt, the first Audit Period shall begin on the first anniversary of the Effective Date and end on the second anniversary of the Effective Date, and each subsequent Audit Period shall follow consecutively thereafter. Licensee shall have one (1) Pricing Audit Right per Audit Period, exercisable in accordance with Section 2.1 of this Rider. No unused Pricing Audit Rights shall carry forward to subsequent Audit Periods.
1.2 "Comparable Insurance-Industry Licensee"
"Comparable Insurance-Industry Licensee" means any entity that meets all of the following criteria:
(a) the entity is domiciled in the United States of America;
(b) the entity is an insurance carrier (including admitted and surplus lines carriers), a managing general agent ("MGA"), or an insurance-technology company ("insurtech firm");
(c) the entity has annual gross written premiums of Five Hundred Million Dollars ($500,000,000) or more for its most recently completed fiscal year or, in the case of an insurtech firm that does not underwrite insurance on its own paper, annual revenues of Five Hundred Million Dollars ($500,000,000) or more for its most recently completed fiscal year; and
(d) the entity is a party to a data-licensing agreement with Licensor (whether denominated as a master agreement, subscription agreement, enterprise license agreement, or otherwise) that includes access to one or more of the following Licensor data products: MCI Consumer Credit File™, MCI CommercialView™, or MCI AltSignal™.
The determination of whether an entity qualifies as a Comparable Insurance-Industry Licensee shall be based on publicly available information (including, without limitation, filings with state departments of insurance, annual statements filed with the National Association of Insurance Commissioners, and public financial disclosures) or information verified by the Independent Auditor during the audit process in accordance with Section 2. In the event of any uncertainty as to whether a particular entity meets the criteria set forth above, the Independent Auditor shall make such determination in its reasonable professional judgment, and such determination shall be binding on the parties absent manifest error.
1.3 "Effective Per-Record Rate"
"Effective Per-Record Rate" means the total annual license fees payable by a licensee to Licensor under its applicable data-licensing agreement, excluding:
(i) one-time implementation, integration, or onboarding fees;
(ii) overage charges for data record volumes exceeding the applicable base-tier volume commitment;
(iii) charges for bespoke professional services, custom development, or dedicated technical support beyond standard support obligations; and
(iv) taxes, duties, or regulatory surcharges imposed by governmental authorities,
divided by the total number of data records included in the applicable base-tier volume commitment under such agreement, calculated on an annualized basis. For purposes of this calculation, "data records" shall include all records across all Licensed Data Products to which the applicable licensee has access under its agreement, without duplication.
For purposes of Licensee's MDLA, the Effective Per-Record Rate shall be calculated as follows:
(a) Years 2 through 5: The annual license fee of Twelve Million Three Hundred Thousand Dollars ($12,300,000) divided by the annual base-tier record volume of six billion (6,000,000,000) records (calculated as five hundred million (500,000,000) records per month multiplied by twelve (12) months), yielding an approximate Effective Per-Record Rate of $0.00205 per record.
(b) Year 1 (Ramp Period): The annual license fee of Ten Million Eight Hundred Thousand Dollars ($10,800,000) divided by the annual base-tier record volume of six billion (6,000,000,000) records, yielding an approximate Effective Per-Record Rate of $0.0018 per record. The lower Year 1 fee reflects the ramp period discount negotiated to account for Licensee's integration timeline and the phased deployment of Licensed Data Products across Licensee's operating subsidiaries.
Where a Comparable Insurance-Industry Licensee's agreement provides for different fee structures across multiple contract years, the Effective Per-Record Rate shall be calculated using the fees and base-tier volumes applicable to the contract year that falls within the relevant Audit Period. If more than one contract year of a Comparable Insurance-Industry Licensee's agreement falls within the relevant Audit Period, the Effective Per-Record Rate shall be calculated using a weighted-average methodology based on the portion of the Audit Period covered by each contract year.
1.4 "Independent Auditor"
"Independent Auditor" means a nationally recognized independent accounting firm or data-licensing consulting firm mutually agreed upon by Licensee and Licensor in accordance with Section 2.1 of this Rider. The Independent Auditor shall not be any of the following:
(a) the external auditor of either party — for the avoidance of doubt, as of the date of this Rider, this excludes Felton Thorpe & Co. LLP (Licensee's external auditor) and Galloway Nash LLP (Licensor's external auditor);
(b) any entity that has provided consulting, advisory, or valuation services to either party with respect to the subject matter of the MDLA, or with respect to data-licensing pricing, strategy, or benchmarking, during the twenty-four (24)-month period preceding the date of Licensee's audit notice under Section 2.1 — for the avoidance of doubt, this exclusion applies to Pinnacle Ridge Advisory LLC during any period in which it is engaged by or providing services to either party; or
(c) any Affiliate (as defined in the MDLA) of either party, or any entity in which either party or any Affiliate thereof holds, directly or indirectly, a five percent (5%) or greater equity interest.
If the parties are unable to agree on the selection of an Independent Auditor within thirty (30) days of Licensee's initial written request delivered pursuant to Section 2.1, either party may petition the American Arbitration Association (the "AAA"), acting through its New York office, to appoint a qualified firm meeting the independence criteria set forth above. The AAA's appointment shall be final and binding on both parties. The cost of the AAA appointment process shall be shared equally by the parties.
1.5 "Lowest Comparable Rate"
"Lowest Comparable Rate" means the lowest Effective Per-Record Rate charged by Licensor to any Comparable Insurance-Industry Licensee under a data-licensing agreement that was in effect at any time during the applicable Audit Period. For purposes of this definition, a data-licensing agreement shall be deemed to have been "in effect" during an Audit Period if any portion of the term of such agreement overlapped with any portion of the Audit Period, regardless of whether the agreement was entered into before, during, or after the Audit Period, and regardless of whether the agreement was subsequently terminated, expired, or amended during the Audit Period.
In the event that no Comparable Insurance-Industry Licensee exists during a given Audit Period, no Lowest Comparable Rate shall be established for such Audit Period, and no Pricing Audit may be conducted for such Audit Period. Notwithstanding the foregoing, the Independent Auditor shall certify in writing that no Comparable Insurance-Industry Licensee exists, and Licensee's unused Pricing Audit Right for such Audit Period shall not carry forward.
1.6 "Pricing Audit Right"
"Pricing Audit Right" means Licensee's right, exercisable no more than once per Audit Period in accordance with the procedures set forth in Section 2 of this Rider, to engage the Independent Auditor to conduct a Pricing Audit to determine the Lowest Comparable Rate and to assess whether Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling. The Pricing Audit Right is personal to Licensee and may not be assigned, transferred, or delegated to any third party (including any successor or assign of Licensee under the MDLA) without the prior written consent of Licensor, which consent shall not be unreasonably withheld, conditioned, or delayed.
1.7 "Pricing Ceiling"
"Pricing Ceiling" means one hundred ten percent (110%) of the Lowest Comparable Rate, as determined by the Independent Auditor for the applicable Audit Period. If the Independent Auditor determines that Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling, Licensor shall be obligated to make the price adjustment set forth in Section 3 of this Rider. The ten percent (10%) margin above the Lowest Comparable Rate is intended to reflect the parties' acknowledgment that variations in pricing among licensees may result from legitimate differences in data volumes, contract duration, creditworthiness, implementation complexity, and other commercially relevant factors, and that a degree of pricing variation above the lowest available rate should be tolerated before any adjustment obligation is triggered.
SECTION 2: PRICING AUDIT PROCEDURES
2.1 Exercise of Pricing Audit Right
Licensee may exercise its Pricing Audit Right for a given Audit Period by delivering written notice (the "Audit Notice") to Licensor in accordance with the notice provisions of the MDLA. The Audit Notice shall be delivered no earlier than thirty (30) days before the end of the applicable Audit Period and no later than sixty (60) days after the end of the applicable Audit Period. Any Audit Notice delivered outside this window shall be void and of no effect, and Licensee's Pricing Audit Right for the applicable Audit Period shall be deemed waived; provided, however, that the waiver of a Pricing Audit Right for any Audit Period shall not affect Licensee's right to exercise the Pricing Audit Right in any subsequent Audit Period.
The Audit Notice shall include the following:
(a) identification of the Audit Period to which the audit relates, including the start and end dates thereof;
(b) a statement that Licensee is exercising its Pricing Audit Right pursuant to this Rider; and
(c) a list of three (3) proposed candidates for Independent Auditor, together with a brief description of each candidate's qualifications and a certification that each proposed candidate satisfies the independence criteria set forth in Section 1.4.
Within fifteen (15) business days of receipt of the Audit Notice, Licensor shall respond in writing, either:
(i) approving one of the three proposed candidates; or
(ii) objecting to all three proposed candidates (stating the basis for each objection with reasonable specificity) and proposing up to three (3) alternative candidates that satisfy the independence criteria set forth in Section 1.4.
If Licensor proposes alternative candidates, Licensee shall respond within ten (10) business days, either approving one of Licensor's proposed candidates or providing a reasoned objection. The parties shall use commercially reasonable efforts to agree on the selection of an Independent Auditor within thirty (30) days of Licensee's initial Audit Notice. Neither party shall unreasonably withhold, condition, or delay its consent to any proposed candidate that satisfies the independence criteria set forth in Section 1.4. If the parties are unable to agree within such thirty (30)-day period, either party may invoke the AAA appointment process described in Section 1.4.
2.2 Scope of Audit
Upon selection and engagement of the Independent Auditor, the Independent Auditor shall be engaged to determine the following, and only the following:
(a) the identity of all Comparable Insurance-Industry Licensees during the applicable Audit Period, applying the criteria set forth in Section 1.2;
(b) the Effective Per-Record Rate applicable to each such Comparable Insurance-Industry Licensee, calculated in accordance with Section 1.3; and
(c) the Lowest Comparable Rate for the applicable Audit Period, determined in accordance with Section 1.5.
Based on the foregoing determinations, the Independent Auditor shall calculate the Pricing Ceiling and assess whether Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling. If the Pricing Ceiling is exceeded, the Independent Auditor shall calculate the recommended adjusted annual license fee in accordance with Section 3.2.
To enable the Independent Auditor to perform the foregoing analysis, the Independent Auditor shall have access to Licensor's books, records, and data-licensing agreements solely to the extent reasonably necessary to calculate the Effective Per-Record Rate for each Comparable Insurance-Industry Licensee. Such access shall include, without limitation, the right to review:
(i) executed data-licensing agreements (including all amendments, supplements, riders, schedules, and side letters) between Licensor and each Comparable Insurance-Industry Licensee;
(ii) invoices, payment records, and fee schedules relating to such agreements;
(iii) records of data volumes delivered or made available to each Comparable Insurance-Industry Licensee, including base-tier volume commitments and actual usage data; and
(iv) any records necessary to determine whether an entity qualifies as a Comparable Insurance-Industry Licensee, including publicly available financial data, premium volume reports, and corporate domicile information.
Access to the foregoing records shall be provided at Licensor's offices located at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326, or, at Licensor's sole election, via a secure virtual data room maintained by a reputable third-party data room provider (e.g., Thackeray Solutions, Crestline Solutions, or equivalent). If Licensor elects to provide access via virtual data room, the virtual data room shall be established and populated with the relevant records within fifteen (15) business days of the engagement of the Independent Auditor. All costs associated with the virtual data room shall be borne by Licensor.
Licensor shall cooperate in good faith with the Independent Auditor and provide reasonable access to the records described above within twenty (20) business days of the Independent Auditor's formal engagement. Licensor shall designate a knowledgeable representative to respond to the Independent Auditor's reasonable inquiries and to facilitate the audit process. Licensor's failure to cooperate in good faith or to provide access within the timeframes specified herein shall constitute a material breach of this Rider and of the MDLA.
2.3 Confidentiality of Audit
Prior to commencing the audit, the Independent Auditor shall execute a confidentiality agreement in a form reasonably satisfactory to both Licensee and Licensor (the "Auditor Confidentiality Agreement"). The Auditor Confidentiality Agreement shall, at a minimum, obligate the Independent Auditor to:
(a) maintain the strict confidentiality of all Licensor proprietary and commercial information accessed during the audit, including, without limitation, the identity of Licensor's other licensees, the terms and conditions of their agreements (including pricing, volume commitments, service levels, and all other commercial terms), and all financial, operational, and strategic information of Licensor;
(b) use the information accessed during the audit solely for the purpose of conducting the Pricing Audit and preparing the report described below, and for no other purpose whatsoever;
(c) not disclose any information accessed during the audit to any person or entity other than the Independent Auditor's personnel who are directly involved in the conduct of the audit and who are themselves bound by confidentiality obligations no less restrictive than those set forth in the Auditor Confidentiality Agreement;
(d) return or destroy all copies of Licensor's records and information within thirty (30) days of delivery of the audit report; and
(e) certify in writing to Licensor that all such records and information have been returned or destroyed.
The Independent Auditor's report to Licensee (the "Audit Report") shall disclose only the following information:
(a) whether Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling for the applicable Audit Period;
(b) the amount, if any, by which Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling, expressed both as a dollar amount per record and as a percentage of the Pricing Ceiling; and
(c) if the Pricing Ceiling has been exceeded, the recommended adjusted annual license fee calculated in accordance with Section 3.2 of this Rider.
The Audit Report shall not disclose, and the Independent Auditor shall not communicate to Licensee (or to any representative, advisor, or agent of Licensee, including Calderwood & Harkness LLP or any other counsel) any of the following:
(i) the identity of any Comparable Insurance-Industry Licensee;
(ii) the specific pricing, fee structure, volume commitments, or other contract terms applicable to any Comparable Insurance-Industry Licensee;
(iii) the number of Comparable Insurance-Industry Licensees identified during the audit;
(iv) the Lowest Comparable Rate or the Pricing Ceiling expressed as a specific dollar amount (the Audit Report shall express the exceedance, if any, only in relative terms as set forth above); or
(v) any other commercially sensitive, proprietary, or confidential information of Licensor.
This confidentiality structure is specifically designed to address Licensor's previously stated objection — raised by Arthur Pennington, Esq. and Graham Whitley, Esq. of Kessler Pruitt & Ashe LLP on behalf of Licensor — that a most favored nation clause would require the disclosure of confidential terms of Licensor's agreements with other licensees and would expose Licensor to claims by such other licensees for breach of confidentiality. By limiting the Audit Report to a binary determination (exceedance or no exceedance) and a remedial calculation, this Rider preserves the confidentiality of Licensor's third-party commercial relationships while providing Licensee with meaningful pricing protection.
2.4 Audit Timeline
The Independent Auditor shall use commercially reasonable efforts to deliver the Audit Report within sixty (60) calendar days of the date of the Independent Auditor's formal engagement (the "Engagement Date"). The Engagement Date shall be the date on which the Independent Auditor executes the engagement letter and the Auditor Confidentiality Agreement.
Either party may request a thirty (30)-day extension of the sixty (60)-day audit period, provided that the Independent Auditor certifies in writing to both parties that additional time is reasonably necessary due to the volume or complexity of the records to be reviewed, the number of Comparable Insurance-Industry Licensees to be analyzed, or other circumstances beyond the Independent Auditor's reasonable control. Any such extension request shall be delivered in writing to both parties no later than ten (10) business days before the expiration of the initial sixty (60)-day period.
In no event shall the total audit process exceed one hundred twenty (120) calendar days from the Engagement Date. If the Independent Auditor fails to deliver the Audit Report within one hundred twenty (120) days of the Engagement Date, Licensee may, at its option, either (a) extend the deadline by an additional thirty (30) days upon written notice to Licensor, or (b) terminate the engagement and exercise its Pricing Audit Right for the applicable Audit Period by engaging a new Independent Auditor in accordance with Section 2.1 (and the timelines set forth in this Section 2.4 shall reset from the new Engagement Date).
2.5 Cost of Audit
The costs and expenses of the Pricing Audit shall be allocated as follows:
(a) Pricing Ceiling Exceeded: If the Audit Report concludes that Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling, the cost of the audit shall be borne entirely by Licensor. Licensor shall pay the Independent Auditor's fees and reasonable out-of-pocket expenses directly, or reimburse Licensee for such amounts within thirty (30) days of receipt of an invoice from the Independent Auditor or Licensee, as applicable.
(b) Pricing Ceiling Not Exceeded: If the Audit Report concludes that Licensee's Effective Per-Record Rate does not exceed the Pricing Ceiling, the cost of the audit shall be borne entirely by Licensee. Licensee shall pay the Independent Auditor's fees and reasonable out-of-pocket expenses directly within thirty (30) days of receipt of an invoice from the Independent Auditor.
For purposes of this Section 2.5, "cost of the audit" includes the Independent Auditor's professional fees, travel expenses, data room access fees, and other reasonable out-of-pocket expenses incurred in connection with the conduct of the Pricing Audit and the preparation and delivery of the Audit Report. "Cost of the audit" does not include either party's internal costs, personnel time, or legal fees incurred in connection with the audit process or any dispute arising therefrom.
SECTION 3: PRICE ADJUSTMENT MECHANISM
3.1 Triggering Event
A price adjustment under this Rider shall be triggered if, and only if, the Independent Auditor's Audit Report concludes that Licensee's Effective Per-Record Rate for the applicable Audit Period exceeds the Pricing Ceiling — that is, one hundred ten percent (110%) of the Lowest Comparable Rate for such Audit Period (the "Triggering Event"). No price adjustment shall be made, and no obligation of Licensor shall arise, in the absence of a Triggering Event.
3.2 Adjustment Calculation
Upon the occurrence of a Triggering Event, Licensor shall, within thirty (30) days of receipt of the Audit Report, reduce Licensee's annual license fee for the then-current contract year and all subsequent contract years remaining in the Term of the MDLA (unless further adjusted pursuant to a subsequent Pricing Audit) such that Licensee's Effective Per-Record Rate equals the Pricing Ceiling (i.e., 110% of the Lowest Comparable Rate for the applicable Audit Period).
The adjusted annual license fee shall be calculated by multiplying the Pricing Ceiling (expressed as a per-record rate) by the annual base-tier record volume under the MDLA (six billion (6,000,000,000) records per year, calculated as five hundred million (500,000,000) records per month multiplied by twelve (12) months), with the resulting amount constituting the adjusted annual license fee. The corresponding quarterly installment amount shall be one-quarter (1/4) of the adjusted annual license fee.
Illustrative Example: If the Independent Auditor determines that the Lowest Comparable Rate for a given Audit Period is $0.0017 per record, the Pricing Ceiling would be calculated as follows:
Pricing Ceiling = 110% × $0.0017 = $0.00187 per record
Licensee's Effective Per-Record Rate of approximately $0.00205 per record (based on the $12,300,000 annual license fee for Years 2–5) would exceed the Pricing Ceiling by $0.00018 per record (approximately 9.6%). The adjusted annual license fee would be calculated as:
Adjusted Annual Fee = $0.00187 × 6,000,000,000 = $11,220,000
This would represent a reduction of $1,080,000 from the stated annual license fee of $12,300,000 for Years 2–5. The corresponding adjusted quarterly installment would be $2,805,000 (compared to the unadjusted quarterly installment of $3,075,000).
The price adjustment shall take effect as of the first day of the quarterly billing period immediately following the expiration of the thirty (30)-day period referenced above, and Licensor shall deliver to Licensee an amended fee schedule reflecting the adjusted amounts within such thirty (30)-day period.
3.3 Retroactive Credit
If the Pricing Audit relates to an Audit Period that has already ended at the time the Audit Report is delivered, or if any portion of the Audit Period has elapsed by the time the price adjustment takes effect, Licensor shall issue a credit to Licensee (the "Retroactive Credit") equal to the difference between:
(a) the aggregate license fees actually paid by Licensee during the applicable Audit Period (or the elapsed portion thereof); and
(b) the aggregate license fees that would have been payable by Licensee during the applicable Audit Period (or the elapsed portion thereof) had the adjusted annual license fee been in effect for the entirety of the Audit Period.
The Retroactive Credit shall be applied against the next quarterly installment(s) due under the MDLA, with any unapplied balance carried forward to subsequent quarterly installments until the Retroactive Credit is fully exhausted. Licensor shall provide Licensee with a written statement setting forth the calculation of the Retroactive Credit within fifteen (15) business days of issuance.
If the remaining quarterly installments under the MDLA are insufficient to absorb the full Retroactive Credit (for example, if the Pricing Audit is conducted during the final year of the Term and the remaining installments due are less than the total Retroactive Credit), Licensor shall pay the remaining balance of the Retroactive Credit to Licensee in cash by wire transfer of immediately available funds within sixty (60) days of the date on which the insufficiency is determined. Such payment shall be made to the account designated by Licensee in writing.
3.4 No Upward Adjustment
For the avoidance of doubt, this Rider provides only for downward adjustments to Licensee's annual license fee. If the Audit Report reveals that Licensee's Effective Per-Record Rate is at or below the Pricing Ceiling for the applicable Audit Period, no adjustment shall be made, and the annual license fees, quarterly installments, and all other payment obligations set forth in the MDLA shall continue to apply without modification. Under no circumstances shall this Rider be construed to permit Licensor to increase Licensee's annual license fee, quarterly installments, or any other fees or charges under the MDLA.
3.5 Dispute Regarding Audit Findings
If either party disputes the Independent Auditor's findings as set forth in the Audit Report, the disputing party shall deliver a written objection (the "Audit Objection") to the other party and to the Independent Auditor within fifteen (15) business days of receipt of the Audit Report. The Audit Objection shall specify in reasonable detail the basis for the dispute, including identification of the specific findings or calculations that are contested and the grounds on which the disputing party believes the findings are incorrect or incomplete.
Upon receipt of an Audit Objection, the parties shall attempt to resolve the dispute through good-faith discussions for a period of thirty (30) calendar days (the "Discussion Period"). During the Discussion Period, each party shall make available its relevant personnel and advisors to participate in discussions, and the Independent Auditor shall cooperate with the parties' reasonable requests for clarification regarding its methodology and findings (subject to the confidentiality restrictions set forth in Section 2.3).
If the dispute is not resolved within the Discussion Period, the dispute shall be resolved in accordance with the dispute resolution provisions of the MDLA.
Note: The dispute resolution mechanism for the MDLA itself remains an open negotiation point. Licensee has proposed exclusive jurisdiction in the United States District Court for the Southern District of New York or, alternatively, the Commercial Division of the Supreme Court of the State of New York, New York County. Licensor has proposed binding arbitration under the American Arbitration Association Commercial Arbitration Rules, seated in New York, New York, with a three (3)-arbitrator panel. Resolution of this issue is expected to occur in connection with the finalization of the MDLA.
Pending resolution of any dispute under this Section 3.5, Licensee shall continue to pay the unadjusted annual license fee and quarterly installments as set forth in the MDLA, without prejudice to Licensee's right to receive a Retroactive Credit if the dispute is ultimately resolved in Licensee's favor.
SECTION 4: LICENSOR'S RECORDKEEPING OBLIGATIONS
4.1 Maintenance of Records
Licensor shall maintain complete, accurate, and organized books and records sufficient to permit the Independent Auditor to calculate the Effective Per-Record Rate for each Comparable Insurance-Industry Licensee during each Audit Period. Such books and records shall include, without limitation, executed data-licensing agreements (including all amendments, riders, schedules, side letters, and ancillary documents), fee schedules, invoices, payment records, volume reports, and any other documentation necessary to determine the total annual license fees and base-tier record volumes applicable to each Comparable Insurance-Industry Licensee.
Records required to be maintained under this Section 4.1 shall be retained for at least three (3) years following the end of each Audit Period, or such longer period as may be required by applicable law, regulation, or legal hold obligation. In the event of any conflict between the three (3)-year retention period specified herein and any longer retention period required by applicable law, the longer retention period shall govern. Licensor shall maintain such records in a manner that is readily accessible and reasonably organized to facilitate the audit process.
4.2 No Structuring to Circumvent
Licensor covenants that it shall not structure, restructure, amend, or otherwise modify any data-licensing agreement with a Comparable Insurance-Industry Licensee for the primary purpose of circumventing, defeating, or reducing the effectiveness of the Pricing Audit Right or any other right of Licensee under this Rider. Any such structuring, if identified by the Independent Auditor, shall be disregarded by the Independent Auditor, who shall calculate the Effective Per-Record Rate on a substance-over-form basis, taking into account the economic substance and commercial effect of the relevant arrangement rather than its formal structure or documentation.
Without limiting the generality of the foregoing, the following are examples of structuring that shall be considered impermissible under this Section 4.2 and shall be disregarded by the Independent Auditor:
(a) Below-Market Bundling: Bundling Licensed Data Products with non-data services (such as consulting, analytics, or software) at below-market rates for the data component, such that the apparent per-record license fee for the Licensed Data Products is artificially reduced;
(b) Off-Agreement discounts: Granting volume discounts, rebates, credits, signing bonuses, or other financial concessions to a Comparable Insurance-Industry Licensee that are not reflected in the stated license fee under the formal data-licensing agreement;
(c) Side Arrangements: Providing free or discounted access to Licensed Data Products, derivative data products, or data analytics tools outside the formal data-licensing agreement, whether through separate agreements, informal arrangements, pilot programs, proof-of-concept programs, or otherwise, where such access has the effect of reducing the Comparable Insurance-Industry Licensee's effective cost of accessing Licensed Data Products;
(d) Fee Recharacterization: Recharacterizing data-licensing fees as implementation fees, professional services fees, or other categories of charges that are excluded from the calculation of Effective Per-Record Rate under Section 1.3, where the economic substance of the fees is compensation for access to Licensed Data Products; and
(e) Volume Inflation: Artificially inflating the base-tier volume commitment in a Comparable Insurance-Industry Licensee's agreement without a corresponding increase in fees, such that the apparent per-record rate is reduced even though the licensee does not actually access or use the inflated volume.
The Independent Auditor shall have the authority, in its reasonable professional judgment, to identify and disregard any arrangement, structure, or modification that the Independent Auditor determines was undertaken primarily for the purpose of circumventing the Pricing Audit Right, and the Independent Auditor's determination on such matters shall be binding on the parties absent manifest error.
SECTION 5: INTERACTION WITH OTHER MDLA PROVISIONS
5.1 Relationship to Fee Schedule
This Rider supplements, and does not replace, the fee schedule set forth in [Article/Section __] of the MDLA. The annual license fees of Ten Million Eight Hundred Thousand Dollars ($10,800,000) for Year 1 and Twelve Million Three Hundred Thousand Dollars ($12,300,000) for each of Years 2 through 5, the corresponding quarterly installment amounts of Two Million Seven Hundred Thousand Dollars ($2,700,000) for Year 1 and Three Million Seventy-Five Thousand Dollars ($3,075,000) for each of Years 2 through 5, and the payment terms (quarterly in advance, due on the first business day of each calendar quarter) shall remain in full force and effect unless and until adjusted pursuant to Section 3 of this Rider.
The following fees, charges, and payment obligations under the MDLA are not subject to adjustment under this Rider and shall remain in full force and effect regardless of any price adjustment made pursuant to Section 3:
(a) the one-time implementation and integration fee of One Million Five Hundred Thousand Dollars ($1,500,000), payable in accordance with the implementation milestone schedule set forth in Technical Schedule A of the MDLA;
(b) overage charges of $0.003 per record for data record volumes exceeding the five hundred million (500,000,000) records per month base-tier volume commitment;
(c) late payment interest at the rate of one and one-half percent (1.5%) per month (eighteen percent (18%) per annum) on any amounts not paid when due; and
(d) all other fees, charges, and expenses set forth in the MDLA that are not annual license fees, including, without limitation, fees for professional services, custom development, dedicated support, training, and data-delivery format conversion.
5.2 Relationship to Derived Data Provisions
This Rider addresses pricing of the Licensed Data Products only and does not affect, modify, or limit the rights and obligations of the parties with respect to Derived Data (as defined in the MDLA), intellectual property ownership, data usage restrictions, or commercialization rights, all of which are governed exclusively by Article VII of the MDLA.
Note: The terms and conditions of Article VII of the MDLA, including the allocation of ownership rights in Derived Data and the permissible scope of Licensee's commercialization of Derived Data, remain subject to separate ongoing negotiation between the parties and are not addressed in this Rider.
5.3 Survival. The Pricing Audit Right granted to Licensee under this Rider, including the right to conduct a Pricing Audit for the final Audit Period of the Term, shall survive expiration or termination of the MDLA (whether by expiration of the initial term, non-renewal, termination for cause, termination for convenience, or otherwise) for a period of one (1) year following the effective date of such expiration or termination (the "Post-Termination Audit Period"). During the Post-Termination Audit Period, Licensee may exercise one (1) Pricing Audit Right with respect to the final Audit Period, subject to and in accordance with the procedures set forth in Section 2.
Licensor's recordkeeping obligations under Section 4 shall survive expiration or termination of the MDLA to the extent necessary to support any post-termination Pricing Audit.
Any price adjustment or Retroactive Credit resulting from a Pricing Audit conducted during the Post-Termination Audit Period shall be settled exclusively in cash. Licensor shall pay any Retroactive Credit or adjustment amount to Licensee by wire transfer of immediately available funds within sixty (60) days of delivery of the Audit Report, without setoff, deduction, or counterclaim.
5.4 No Most Favored Nation Obligation
For the avoidance of doubt, this Rider does not constitute, and shall not be construed as, a most favored nation pricing obligation. Nothing in this Rider requires Licensor to:
(a) automatically match, equal, or adjust Licensee's pricing to equal the Lowest Comparable Rate or any other rate charged to any other licensee;
(b) notify Licensee of the pricing terms applicable to any other licensee;
(c) provide Licensee with preferential pricing treatment relative to any other class or category of licensee; or
(d) refrain from offering discounts, credits, or other pricing concessions to other licensees, whether or not such licensees are Comparable Insurance-Industry Licensees.
The sole and exclusive remedy available to Licensee in the event that Licensee's Effective Per-Record Rate exceeds the Pricing Ceiling is the price adjustment mechanism set forth in Section 3 of this Rider. Licensee acknowledges that the Pricing Audit Right and the price adjustment mechanism are the product of arm's-length negotiation and represent a commercially reasonable alternative to the most favored nation pricing clause originally proposed by Licensee.
SECTION 6: REPRESENTATIONS AND ACKNOWLEDGMENTS
6.1 Licensor's Representation
Licensor represents and warrants to Licensee that, as of the date of execution of this Rider, Licensor is not subject to any contractual obligation, legal restriction, or order of any court or governmental authority that would prohibit or materially restrict the Independent Auditor's access to Licensor's books and records as contemplated by Section 2 of this Rider. Licensor further represents that it has not entered into any agreement with any Comparable Insurance-Industry Licensee or other third party that contains a provision purporting to prohibit Licensor from granting audit rights of the type contemplated by this Rider or from permitting an independent third party to review the pricing terms of Licensor's data-licensing agreements for purposes of a pricing comparison exercise. If, at any time during the Term, Licensor becomes aware of any contractual obligation or legal restriction that would prohibit or materially restrict the Independent Auditor's access as contemplated herein, Licensor shall promptly notify Licensee in writing and shall use commercially reasonable efforts to remove or mitigate such restriction.
6.2 Licensee's Acknowledgment
Licensee acknowledges and agrees that the Pricing Audit Right granted under this Rider is accepted as an alternative to, and in full satisfaction of, any most favored nation pricing provision or similar pricing-protection mechanism, and that Licensee shall not assert any right to most favored nation pricing treatment, automatic price matching, or pricing parity with any other licensee of Licensor, except as expressly set forth in this Rider. Licensee further acknowledges that the information disclosed in the Audit Report will be limited to the items specified in Section 2.3, that Licensee will not have access to the identity, pricing, or contract terms of any Comparable Insurance-Industry Licensee, and that such limitations are a material and essential term of this Rider.
6.3 Antitrust Compliance
Both parties acknowledge that this Rider has been drafted with the express intention of avoiding the direct or indirect exchange of competitively sensitive pricing information between competitors in the credit-data, insurance, and related markets. The confidentiality provisions of Section 2.3, including the limitations on the content of the Audit Report and the restrictions on the Independent Auditor's disclosures, are specifically intended to mitigate antitrust risks associated with pricing transparency mechanisms in credit-data markets. The parties acknowledge that the structure of this Rider is consistent with applicable federal antitrust law, including Section 1 of the Sherman Act (15 U.S.C. § 1), Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45), and applicable guidance issued by the Federal Trade Commission and the Antitrust Division of the United States Department of Justice regarding information exchanges among competitors. Each party shall comply with all applicable antitrust and competition laws in connection with the exercise of rights and performance of obligations under this Rider.
SECTION 7: MISCELLANEOUS
7.1 Governing Law
This Rider shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to any choice-of-law or conflicts-of-law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
7.2 Amendment. This Rider may not be amended, modified, supplemented, or waived except by a written instrument duly executed by authorized representatives of both Licensee and Licensor. No course of dealing, course of performance, or usage of trade shall be deemed to amend or modify this Rider. Any waiver of a provision of this Rider shall be effective only if made in writing and shall not constitute a waiver of such provision on any future occasion.
7.3 Severability. If any provision of this Rider is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction or arbitral tribunal, the validity, legality, and enforceability of the remaining provisions of this Rider shall not in any way be affected or impaired thereby. In the event that any provision is held to be invalid, illegal, or unenforceable, the parties shall negotiate in good faith to replace such provision with a valid, legal, and enforceable provision that achieves, to the greatest extent possible, the economic, business, and other purposes of the original provision.
7.4 Entire Agreement
This Rider, together with the MDLA and all schedules, exhibits, addenda, and riders thereto — including the Data Security Addendum, the Data Processing Agreement, the Service Level Agreement, and Technical Schedule A — constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, representations, warranties, understandings, and agreements, whether written or oral, relating to the subject matter hereof. For the avoidance of doubt, this Rider supersedes and replaces in its entirety Licensee's proposed most favored nation pricing clause previously submitted to Licensor, and upon execution of this Rider, Licensee shall have no further right to propose, negotiate, or assert any most favored nation pricing clause in connection with the MDLA.
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Pricing Audit Right Rider to be executed by their duly authorized representatives as of the date set forth below.
Note: Signature pages to be finalized upon agreement of the MDLA in its entirety. This Rider shall be executed contemporaneously with the MDLA and shall be deemed effective as of the Effective Date of the MDLA.
QUORUM INSURANCE HOLDINGS CORP.
By: ________
Name: ________
Title: ________
Date: ________
MERIDIAN CREDIT INTELLIGENCE, INC.
By: ________
Name: ________
Title: ________
Date: ________
APPENDIX A
ILLUSTRATIVE PRICING AUDIT CALCULATION
(For Discussion Purposes Only)
The following table illustrates the mechanics of the Pricing Audit Right and the price adjustment mechanism set forth in Sections 2 and 3 of this Rider, using hypothetical figures. This appendix is provided solely for the purpose of facilitating the parties' understanding of the Rider and does not constitute a representation, warranty, or acknowledgment regarding the actual pricing applicable to any Comparable Insurance-Industry Licensee or regarding the existence of any Comparable Insurance-Industry Licensee.
Illustrative Calculation — Price Adjustment Triggered