CONFIDENTIAL — DRAFT — NOT FOR EXECUTION
OFFICER'S CERTIFICATE OF QUORUM RECEIVABLES FUNDING 2022-1 LLC
Delivered Pursuant to Section [●] of the Indenture and Section [●] of the Note Purchase Agreement
DRAFT — EXECUTION COPY — DATED OCTOBER 12, 2022
DOCUMENT STATUS NOTATION: This certificate was never executed. The transaction was shelved on November 14, 2022, and placed in dormant status on November 18, 2022. This draft is preserved for documentation and record-keeping purposes only and does not constitute a binding obligation of any party referenced herein.
RECITALS
Reference is hereby made to that certain Indenture (the "Indenture"), dated as of [●], 2022, by and between Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (the "Issuer"), and Calvoneth Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, as indenture trustee (in such capacity, the "Trustee"), acting through its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, Texas 77002.
Reference is also made to that certain Note Purchase Agreement (the "Note Purchase Agreement"), dated as of [●], 2022, among (i) the Issuer, (ii) Quorum Insurance Holdings Corp., a Delaware corporation (the "Sponsor" or "QIH"), and (iii) Ridgeline Capital Markets LLC, a Delaware limited liability company (the "Initial Purchaser"), with its principal office located at 383 Madison Avenue, 14th Floor, New York, New York 10179.
This Officer's Certificate (this "Certificate") is being delivered by the undersigned, in his or her capacity as an Authorized Person of the Issuer, pursuant to Section [●] of the Indenture and Section [●] of the Note Purchase Agreement, as a condition precedent to the issuance and sale of the Issuer's Class A Notes, Class B Notes, and Class C Notes (collectively, the "Notes") on the Closing Date (as defined in the Note Purchase Agreement). The delivery of this Certificate is required in order to satisfy certain conditions to the obligations of the Initial Purchaser to consummate the purchase of the Notes on the Closing Date and certain conditions to the Trustee's obligation to authenticate and deliver the Notes.
The undersigned is an Authorized Person of the Issuer (acting in such capacity pursuant to the Issuer's Limited Liability Company Agreement or, alternatively, in the capacity of Manager or authorized representative thereof, as further described in Section 1 hereof), and is duly authorized to execute and deliver this Certificate on behalf of the Issuer in accordance with the terms and provisions of the Issuer's organizational documents and the Transaction Documents.
All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Indenture or the Note Purchase Agreement, as applicable. In the event of any conflict between the definitions set forth in the Indenture and those set forth in the Note Purchase Agreement, the definitions in the Indenture shall control for purposes of this Certificate. The underlying agreements referenced herein are governed by, and shall be construed in accordance with, the laws of the State of New York (without giving effect to any choice-of-law or conflict-of-laws provision or rule that would cause the application of the laws of any other jurisdiction), except to the extent that certain matters relating to the formation, internal affairs, and limited liability company governance of the Issuer are governed by the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq.
The undersigned hereby certifies to the Trustee and the Initial Purchaser as follows:
SECTION 1: IDENTIFICATION OF THE CERTIFYING OFFICER
The undersigned, [●] (the "Certifying Officer"), hereby certifies that he or she is an Authorized Person of Quorum Receivables Funding 2022-1 LLC. Upon execution of this Certificate, the name of the Certifying Officer is expected to be either Sandra Ling-Hwang, in her capacity as Manager of QPF (Quorum Premium Finance LLC), the indirect controller of the Issuer, or Timothy R. Callan, in his capacity as Independent Manager of QRF 2022-1, acting as an Authorized Person of the Issuer pursuant to the organizational documents described below.
The Certifying Officer holds the title of Authorized Person of Quorum Receivables Funding 2022-1 LLC and has been duly authorized to execute and deliver this Certificate on behalf of the Issuer. Such authorization has been granted in accordance with, and subject to the terms and conditions of, the Amended and Restated Limited Liability Company Agreement of Quorum Receivables Funding 2022-1 LLC, dated as of August 3, 2022 (the "LLC Agreement"), by and among the members and managers identified therein.
The sole member of the Issuer is Quorum Receivables Holding LLC, a Delaware limited liability company, having Delaware Secretary of State File Number 7894228, with its principal office located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. Quorum Receivables Holding LLC holds 100% of the membership interests in the Issuer and has authorized the execution and delivery of this Certificate and each of the Transaction Documents to which the Issuer is a party, in each case through duly adopted written consents and resolutions of its members.
The Independent Manager of the Issuer is Timothy R. Callan, who was duly appointed in accordance with the LLC Agreement and the requirements of the Indenture relating to special purpose entity governance. Mr. Callan's services are provided by Fortbridge Corporate Services LLC, a Delaware limited liability company, with its principal office located at 1209 Orange Street, Wilmington, Delaware 19801. Mr. Callan is not an employee, officer, director, or affiliate of the Issuer, the Sponsor, or any of their respective affiliates (other than in his capacity as Independent Manager), and meets each of the independence criteria set forth in the LLC Agreement and the Indenture with respect to the qualification of an independent manager of a special purpose entity. Mr. Callan's appointment as Independent Manager is effective as of August 3, 2022, the date of the LLC Agreement, and shall continue in accordance with the terms of the LLC Agreement.
The Certifying Officer has personal knowledge of the matters certified herein or has made due inquiry of persons having knowledge of such matters, and the certifications set forth herein are made after such due inquiry and investigation as the Certifying Officer has deemed necessary and appropriate under the circumstances.
SECTION 2: FORMATION, GOOD STANDING, AND AUTHORIZATION
The undersigned hereby certifies, on behalf of the Issuer, as follows:
(a) Formation and Good Standing. The Issuer is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of Delaware. The Issuer's Certificate of Formation was filed with the office of the Secretary of State of the State of Delaware on August 3, 2022, and the Issuer has been assigned Delaware Secretary of State File Number 7894231. The Issuer's federal employer identification number (EIN) is 88-1247653. The Issuer's registered agent for service of process in the State of Delaware is Ashgrove Services Inc., located at 28 Liberty Street, New York, New York 10005 (alternatively, 1209 Orange Street, Wilmington, Delaware 19801 for Delaware registered office purposes). The Issuer has not been dissolved, merged, or consolidated with any other entity, and no proceedings for the dissolution or winding up of the Issuer have been commenced or are pending or, to the knowledge of the Issuer, threatened.
(b) Power and Authority. The Issuer has the limited liability company power and authority to own, lease, and operate its properties and to conduct its business as described in the Preliminary Offering Memorandum, dated October 12, 2022 (v3) (the "Offering Memorandum"), and as contemplated by the Transaction Documents. The Issuer's purpose, as set forth in the LLC Agreement and the Certificate of Formation, is limited to the following: (i) to acquire and hold insurance premium finance receivables originated by Quorum Premium Finance LLC, a Delaware limited liability company ("QPF"); (ii) to issue notes backed by such receivables; (iii) to enter into and perform its obligations under the Transaction Documents; (iv) to take all actions incidental to and necessary or appropriate to accomplish the foregoing purposes; and (v) to engage in no other business or activity. The Issuer has not engaged in any business or activity other than the foregoing since its formation.
(c) Authorization. The Issuer has been duly authorized to execute, deliver, and perform its obligations under each Transaction Document to which it is a party, including, without limitation, the following:
(i) the Indenture, dated as of [●], 2022, between the Issuer and the Trustee;
(ii) the Class A Notes (preliminary CUSIP: 74892TAA3) in an aggregate principal amount of $375,000,000 (Three Hundred Seventy-Five Million Dollars), bearing interest at a rate to be determined on the pricing date and having such other terms and conditions as set forth in the Indenture;
(iii) the Class B Notes (preliminary CUSIP: 74892TAB1) in an aggregate principal amount of $75,000,000 (Seventy-Five Million Dollars), bearing interest at a rate to be determined on the pricing date and having such other terms and conditions as set forth in the Indenture;
(iv) the Class C Notes (preliminary CUSIP: 74892TAC9) in an aggregate principal amount of $35,000,000 (Thirty-Five Million Dollars), bearing interest at a rate to be determined on the pricing date and having such other terms and conditions as set forth in the Indenture;
(v) the Receivables Transfer Agreement, dated as of [●], 2022, between Quorum Receivables Holding LLC ("QRH"), as Transferor, and the Issuer, as Transferee, pursuant to which the Initial Receivables Pool and all subsequently acquired receivables will be transferred to the Issuer;
(vi) the Servicing Agreement, dated as of [●], 2022, among the Issuer, Quorum Premium Finance LLC ("QPF"), as Servicer, and the Trustee;
(vii) the Back-Up Servicing Agreement, dated as of [●], 2022, among the Issuer, QPF, Northvane Bank, N.A., as Back-Up Servicer, and the Trustee;
(viii) the Administration Agreement, dated as of [●], 2022, between the Issuer and Quorum Insurance Holdings Corp. ("QIH"), as Administrator;
(ix) the Liquidity Facility Agreement, dated as of [●], 2022, between the Issuer, as Borrower, and Northvane Bank, N.A., as Lender, providing for a liquidity commitment in the amount of $25,000,000;
(x) the Account Control Agreement, dated as of [●], 2022, between the Issuer and the Trustee, in its capacity as Securities Intermediary, with respect to certain accounts established pursuant to the Indenture;
(xi) the Custodian Agreement, dated as of [●], 2022, between the Issuer and the Trustee, in its capacity as Custodian, with respect to certain receivable files held in trust for the benefit of the Noteholders;
(xii) the Grant of Security Interest / Pledge Agreement, dated as of [●], 2022, by the Issuer in favor of the Trustee for the benefit of the Noteholders, pursuant to which the Issuer grants a first-priority perfected security interest in substantially all of its assets, including the receivables, the trust accounts, and all proceeds thereof; and
(xiii) the Note Purchase Agreement, dated as of [●], 2022, among the Issuer, the Sponsor, and the Initial Purchaser.
The foregoing documents, together with any amendments, supplements, exhibits, schedules, and ancillary documents related thereto, are collectively referred to herein as the "Transaction Documents."
(d) Resolutions. Such authorization to enter into the Transaction Documents described above was duly effected through and in accordance with the terms and provisions of the LLC Agreement and the applicable resolutions of the sole member of the Issuer, Quorum Receivables Holding LLC, as adopted by written consent in lieu of a meeting, dated on or about October [●], 2022. Copies of such resolutions have been provided to Calderwood & Harkness LLP, counsel to the Issuer, and to the Trustee and the Initial Purchaser. Such resolutions remain in full force and effect and have not been revoked, amended, or modified.
SECTION 3: DUE EXECUTION AND DELIVERY
The undersigned hereby certifies, on behalf of the Issuer, that each Transaction Document to which the Issuer is a party has been (or, on the Closing Date, will be) duly executed and delivered by the Issuer through one or more Authorized Persons duly authorized to act on the Issuer's behalf. Each such Transaction Document constitutes, or upon execution and delivery thereof will constitute, a legal, valid, and binding obligation of the Issuer, enforceable against the Issuer in accordance with its respective terms.
All Notes to be issued on the Closing Date — comprising the Class A Notes in the aggregate principal amount of $375,000,000, the Class B Notes in the aggregate principal amount of $75,000,000, and the Class C Notes in the aggregate principal amount of $35,000,000, for a total aggregate principal amount of $485,000,000 — have been (or, on the Closing Date, will be) duly executed by an Authorized Person of the Issuer and authenticated by the Trustee in accordance with the provisions of the Indenture, and constitute (or upon such execution and authentication will constitute) valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their respective terms, entitled to the benefits of the Indenture and secured by the trust estate as described therein.
The foregoing certifications regarding enforceability are subject, in each case, to the following customary exceptions and qualifications: (i) applicable bankruptcy, insolvency, receivership, conservatorship, reorganization, moratorium, fraudulent transfer, and other similar laws relating to or affecting the enforcement of creditors' rights generally; (ii) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith, and fair dealing (whether enforcement is sought in a proceeding in equity or at law); and (iii) the possible unenforceability of certain provisions relating to indemnification, contribution, or exculpation, or provisions that purport to waive rights that are not waivable as a matter of law or public policy.
SECTION 4: ACCURACY OF REPRESENTATIONS AND WARRANTIES
The undersigned hereby certifies, on behalf of the Issuer, that each representation and warranty of the Issuer contained in Article [●] of the Indenture and Section [●] of the Note Purchase Agreement is true and correct in all material respects as of the date hereof and, except to the extent that any such representation or warranty expressly relates to an earlier date (in which case such representation or warranty shall be true and correct in all material respects as of such earlier date), shall be true and correct in all material respects as of the Closing Date with the same effect as though made on and as of the Closing Date. Without limiting the generality of the foregoing, the undersigned specifically certifies the truth and accuracy of the following representations and warranties:
(a) Valid Formation, Existence, and Good Standing. The Issuer is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of Delaware. The Issuer has all limited liability company power and authority necessary to conduct its business as currently conducted and as proposed to be conducted in connection with the transactions contemplated by the Transaction Documents.
(b) Bankruptcy-Remote Status; Separateness Covenants. The Issuer has complied, and continues to comply, in all material respects with each of the separateness covenants set forth in the LLC Agreement, including, without limitation: (i) the Issuer maintains its own books and records and bank accounts separate from those of any other entity; (ii) the Issuer holds itself out to the public and all other persons as a legal entity separate and distinct from any other entity; (iii) the Issuer has not commingled its funds or assets with those of any other entity; (iv) the Issuer has conducted its business in its own name and has not identified itself as a division or department of any other entity; (v) the Issuer has maintained adequate capital for the conduct of its business; (vi) the Issuer has not incurred any indebtedness other than as contemplated by the Transaction Documents; and (vii) the Issuer has at all times maintained at least one Independent Manager, and the LLC Agreement requires the unanimous consent of all managers, including the Independent Manager, prior to the Issuer filing or consenting to the filing of any bankruptcy, insolvency, dissolution, liquidation, or similar petition.
(c) Limited Purpose. Since its formation, the Issuer has not engaged in any business or activities other than those related to the securitization transaction contemplated by the Transaction Documents, including the acquisition and holding of insurance premium finance receivables, the issuance of the Notes, and the performance of its obligations under the Transaction Documents.
(d) Ownership and Governance. The sole member of the Issuer is Quorum Receivables Holding LLC, a Delaware limited liability company. The Independent Manager of the Issuer is Timothy R. Callan, provided by Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. No change in the membership or independent manager of the Issuer has occurred since the date of the LLC Agreement.
(e) No Bankruptcy Filing or Consent. Neither the Issuer nor any Authorized Person or manager of the Issuer has filed, or consented to the filing of, any petition in bankruptcy, insolvency, or for relief under any similar debtor relief law or statute, whether federal or state, with respect to the Issuer. No such filing or consent is pending, contemplated, or, to the knowledge of the undersigned, threatened.
(f) Investment Company Act. The Issuer is not, and upon the issuance of the Notes and the consummation of the transactions contemplated by the Transaction Documents will not be, an "investment company" or a company "controlled by" an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"), and the Issuer is not required to be registered as such under the 1940 Act, in each case in reliance upon the exclusion from the definition of "investment company" set forth in Section 3(c)(5) of the 1940 Act or Rule 3a-7 promulgated thereunder, or such other exemption or exclusion as may be available.
(g) Compliance with Laws. The Issuer is in compliance in all material respects with all applicable laws, rules, regulations, orders, judgments, decrees, permits, licenses, and governmental authorizations applicable to the Issuer or its properties, assets, or business, including, without limitation, all applicable anti-money laundering laws and regulations, the USA PATRIOT Act, and sanctions programs administered by the U.S. Department of the Treasury's Office of Foreign Assets Control.
(h) No Material Litigation. There is no litigation, action, suit, proceeding, arbitration, or investigation pending or, to the knowledge of the Issuer, threatened in writing against or affecting the Issuer before any court, tribunal, governmental authority, arbitral body, or administrative agency that (i) would reasonably be expected to have a Material Adverse Effect on the Issuer or the transactions contemplated by the Transaction Documents, (ii) challenges the validity or enforceability of any Transaction Document or the Notes, or (iii) seeks to enjoin or prevent the consummation of the transactions contemplated by the Transaction Documents.
(i) Offering Memorandum Accuracy. The information in the Offering Memorandum relating to the Issuer, the receivables pool, and the Transaction Documents is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(j) Tax Status. The Issuer will be treated as a disregarded entity (or qualifying special purpose entity) for United States federal income tax purposes, and will not be classified as an association taxable as a corporation or a publicly traded partnership for such purposes. The Notes will be treated as indebtedness of the Issuer (or, if the Issuer is disregarded, as indebtedness of the Issuer's regarded owner) for United States federal income tax purposes. The Issuer will not elect to be classified as an entity taxable as a corporation under Treasury Regulation § 301.7701-3.
SECTION 5: NO MATERIAL ADVERSE CHANGE
The undersigned hereby certifies, on behalf of the Issuer, that since the Cut-Off Date, which is June 30, 2022, there has been no material adverse change in the business, financial condition, properties, assets, liabilities (whether absolute, accrued, contingent, or otherwise), or results of operations of the Issuer.
No event, circumstance, condition, or development has occurred since the Cut-Off Date that, individually or in the aggregate, has constituted or would reasonably be expected to constitute a "Material Adverse Effect" as such term is defined in the Indenture or the Note Purchase Agreement. Without limiting the generality of the foregoing, the undersigned confirms that (i) the Issuer has not incurred any material liabilities not disclosed in the Offering Memorandum or the Transaction Documents, (ii) no material changes have occurred in the quality, composition, or characteristics of the receivables pool since the Cut-Off Date other than those arising in the ordinary course of business, and (iii) the Issuer has not entered into any agreements, commitments, or transactions that are material to the Issuer or the transactions contemplated by the Transaction Documents other than the Transaction Documents themselves.
SECTION 6: NO EVENT OF DEFAULT OR EARLY AMORTIZATION EVENT
The undersigned hereby certifies, on behalf of the Issuer, that:
(a) No Event of Default (as defined in the Indenture) has occurred and is continuing as of the date hereof, and no event or condition has occurred that, with the giving of notice or the lapse of time, or both, would constitute an Event of Default under the Indenture.
(b) No Early Amortization Event (as defined in the Indenture) has occurred and is continuing as of the date hereof. Without limiting the generality of the foregoing, the undersigned confirms each of the following:
(i) Net Loss Rate Trigger. The three-month average net loss rate for the receivables pool has not exceeded 2.00%. The three-month average net loss rate as of the most recently reported determination date was 0.38%, which is below the 2.00% trigger threshold specified in the Indenture.
(ii) Delinquency Rate Trigger. The 60+ day delinquency rate for the receivables pool has not exceeded 3.50%. The 60+ day delinquency rate as of the Cut-Off Date was 0.87%, which is below the 3.50% trigger threshold specified in the Indenture.
(iii) Available Funds Cap. No available funds cap deficit has occurred for two or more consecutive Collection Periods. The available funds generated by the receivables pool have been sufficient to pay all amounts required to be paid under the priority of payments set forth in the Indenture during each applicable Collection Period since the Cut-Off Date.
(iv) Servicer Default. No Servicer Default (as defined in the Servicing Agreement) has occurred, and no rating downgrade of the Servicer below BB(cr) by Brindoval Ratings Inc. or Ba2(p) by Pinnacle Rating Services LLC has occurred. QPF, as Servicer, has maintained all required ratings and has continued to perform its obligations under the Servicing Agreement in all material respects.
(v) Minimum Pool Balance. The aggregate outstanding principal balance of the receivables pool is not less than the minimum required pool balance of $450,000,000 during the revolving period. As of the Cut-Off Date, the aggregate outstanding principal balance of the receivables pool was $612,000,000, which exceeds the minimum required pool balance.
SECTION 7: RECEIVABLES POOL COMPLIANCE
The undersigned hereby certifies, on behalf of the Issuer, that the Initial Receivables Pool, as constituted as of the Cut-Off Date (June 30, 2022), satisfies in all material respects the eligibility criteria set forth in the Receivables Sale Agreement (between QPF, as originator and initial seller, and QRH, as buyer) and the Receivables Transfer Agreement (between QRH, as transferor, and the Issuer, as transferee). Without limiting the generality of the foregoing, the undersigned confirms the following with respect to the receivables included in the Initial Receivables Pool:
Eligibility Criteria Compliance
(a) All receivables in the Initial Receivables Pool were originated by Quorum Premium Finance LLC in the ordinary course of its insurance premium finance lending business, in accordance with QPF's customary underwriting guidelines and credit policies, as described in the Offering Memorandum.
(b) All receivables in the Initial Receivables Pool are denominated in United States dollars.
(c) All receivables in the Initial Receivables Pool are secured by unearned premium refund rights held by the applicable insurance carriers, and in each case the related obligor has executed a valid and enforceable premium finance agreement containing an irrevocable power of attorney in favor of the lender (or its assignee) to cancel the financed insurance policy and collect the unearned premium refund in the event of default.
(d) No receivable in the Initial Receivables Pool has an original term exceeding twelve (12) months.
(e) Each obligor on a receivable in the Initial Receivables Pool is a commercial policyholder domiciled or conducting business in the United States of America.
(f) No receivable in the Initial Receivables Pool is in default. For purposes of this criterion, no payment on any receivable in the Initial Receivables Pool was more than sixty (60) days past due at the time of its transfer to the Issuer.
(g) All receivables in the Initial Receivables Pool comply with all applicable usury, licensing, and consumer protection laws and regulations in the jurisdictions in which they were originated and in which the related obligors are located. QPF holds all required state licenses to originate and service insurance premium finance receivables in each applicable jurisdiction.
Concentration Limits. The undersigned further certifies that the concentration limits specified in the Transaction Documents are satisfied as of the Cut-Off Date, as follows:
(a) Single Obligor Concentration. No single obligor represents more than 0.75% of the aggregate outstanding principal balance of the Initial Receivables Pool. The largest single obligor exposure as of the Cut-Off Date is 0.38% of the pool, representing an outstanding principal balance of approximately $2,325,600.
(b) Geographic Concentration. No single state represents more than 20% of the aggregate outstanding principal balance of the Initial Receivables Pool. The state with the highest concentration is Texas, representing 14.2% of the pool balance.
(c) Carrier Concentration. No single insurance carrier represents more than 15% of the aggregate outstanding principal balance of the Initial Receivables Pool.
Pool Statistics as of Cut-Off Date (June 30, 2022)
The following summary statistics describe the characteristics of the Initial Receivables Pool as of the Cut-Off Date:
The pool statistics set forth above are derived from data provided by QPF, as originator and initial servicer of the receivables, and have been subject to the verification procedures described in Section 8 hereof. The undersigned has no reason to believe that such statistics are materially inaccurate or misleading.
SECTION 8: COMPLIANCE WITH CONDITIONS PRECEDENT
The undersigned hereby certifies, on behalf of the Issuer, that all conditions precedent to the issuance of the Notes on the Closing Date, as set forth in Section [●] of the Indenture and Section [●] of the Note Purchase Agreement, that are within the Issuer's control or responsibility, have been satisfied or, to the extent that certain conditions relate to actions to be taken on or prior to the Closing Date, will be satisfied on or prior to the Closing Date. Without limiting the generality of the foregoing, the undersigned specifically confirms satisfaction (or expected satisfaction) of each of the following conditions precedent:
(a) Delivery of Executed Transaction Documents
All Transaction Documents to which the Issuer is a party, as identified in Section 2(c) of this Certificate, have been executed and delivered (or will be executed and delivered on the Closing Date) in accordance with the terms thereof. Copies of each such executed Transaction Document have been (or will be) delivered to the Trustee and the Initial Purchaser on or prior to the Closing Date.
(b) Delivery of Notes for Authentication
The Notes, comprising the Class A Notes, the Class B Notes, and the Class C Notes, have been (or will be) duly executed by an Authorized Person of the Issuer and delivered to the Trustee for authentication in accordance with the provisions of the Indenture. The Trustee is (or will be) authorized and directed to authenticate and deliver the Notes to or upon the order of the Initial Purchaser upon receipt of the purchase price therefor.
(c) Rating Agency Confirmations
The Issuer has received (or will receive on or prior to the Closing Date) preliminary credit ratings with respect to each class of Notes from two nationally recognized statistical rating organizations, as follows:
The Brindoval Ratings Inc. engagement is identified as Engagement No. CR-SF-2022-08812. The Pinnacle Rating Services LLC engagement is identified as Engagement No. PRS-2022-ABS-3347. The Issuer acknowledges that a rating is not a recommendation to buy, sell, or hold any security, and that each rating may be revised or withdrawn at any time by the applicable rating agency in its sole discretion.
(d) UCC Filings
UCC-1 financing statements have been prepared for filing (or will be filed on or prior to the Closing Date) with the office of the Secretary of State of the State of Delaware, naming Quorum Receivables Funding 2022-1 LLC as debtor and Calvoneth Trust Company, National Association as secured party, covering all receivables, all proceeds thereof, and all other collateral described in the Grant of Security Interest / Pledge Agreement. Additional UCC-1 financing statements have been (or will be) prepared to evidence the transfer of receivables from QPF to QRH and from QRH to the Issuer, as applicable.
(e) Legal Opinions
Legal opinions have been delivered (or will be delivered on the Closing Date) from Calderwood & Harkness LLP, counsel to the Issuer, having its office at 601 Lexington Avenue, New York, New York 10022, including, without limitation, the following opinions:
(i) a true sale opinion to the effect that the transfer of receivables from QPF to QRH and from QRH to the Issuer constitutes a true sale or true contribution and not a secured loan for purposes of the U.S. Bankruptcy Code;
(ii) an enforceability opinion to the effect that each Transaction Document to which the Issuer is a party constitutes a legal, valid, and binding obligation of the Issuer, enforceable in accordance with its terms (subject to customary exceptions and qualifications);
(iii) a security interest perfection opinion to the effect that the security interests granted by the Issuer under the Grant of Security Interest / Pledge Agreement have been duly created and, upon the filing of the applicable UCC-1 financing statements, will be perfected first-priority security interests under Article 9 of the Uniform Commercial Code as in effect in the State of Delaware;
(iv) a tax characterization opinion to the effect that the Notes will be treated as indebtedness for United States federal income tax purposes and that the Issuer will be treated as a disregarded entity (or qualifying special purpose entity) for United States federal income tax purposes;
(v) a no registration required opinion to the effect that the Notes may be offered and sold to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act of 1933, as amended, and to non-U.S. persons in offshore transactions in reliance on Regulation S promulgated thereunder, and that no registration of the Notes under the Securities Act of 1933, as amended, or qualification of the Indenture under the Trust Indenture Act of 1939, as amended, is required; and
(vi) Delaware LLC formation opinions to the effect that the Issuer has been duly formed as a limited liability company under the Delaware Limited Liability Company Act and is validly existing and in good standing under the laws of the State of Delaware.
(f) Officer's Certificates from Sponsor and Servicer
Officer's certificates from each of the Sponsor (Quorum Insurance Holdings Corp.) and the Seller/Servicer (Quorum Premium Finance LLC) have been delivered (or will be delivered on the Closing Date), in each case certifying to the matters required by the Indenture and the Note Purchase Agreement, including, without limitation, the accuracy of their respective representations and warranties and the satisfaction of conditions precedent within their respective responsibilities.
(g) Comfort Letter and Agreed-Upon Procedures Letter
A comfort letter and an agreed-upon procedures letter have been delivered (or will be delivered on or prior to the Closing Date) from Meridian Ledger LLP, the independent auditors of the Sponsor. The engagement partner for such letters is Robert Falcone, and the Meridian Ledger office is located at 1301 Avenue of the Americas, New York, New York 10019. Such letters address the financial data and statistical information included in the Offering Memorandum and confirm that certain procedures were performed with respect to such data and information in accordance with the standards of the American Institute of Certified Public Accountants.
(h) Verification Agent Report
A verification agent report has been delivered (or will be delivered on or prior to the Closing Date) from Veristead Analytics LLC, a nationally recognized verification and analytics firm. The managing director responsible for the engagement is Katharine Drummond, and the Veristead office is located at 100 Summer Street, Suite 1500, Boston, Massachusetts 02110. Such report confirms the accuracy of certain data tape information, pool stratification tables, and cash flow model inputs relating to the receivables pool.
(i) Establishment of Trust Accounts
Each of the following accounts has been established (or will be established on or prior to the Closing Date) at Calvoneth Trust Company, National Association, and will be funded in accordance with the terms of the Indenture and the Account Control Agreement:
(i) the Collection Account, into which all collections on the receivables will be deposited;
(ii) the Payment Account, from which payments on the Notes will be made in accordance with the priority of payments set forth in the Indenture;
(iii) the Reserve Account, which will be funded to the initial required reserve amount on the Closing Date; and
(iv) the Liquidity Reserve Account, which will be funded from draws under the Liquidity Facility Agreement, if and as required under the terms of the Indenture.
(j) Back-Up Servicer and Liquidity Facility
Northvane Bank, N.A., having its principal office at 200 Vesey Street, New York, New York 10281, has been duly appointed as the back-up servicer under the Back-Up Servicing Agreement. In addition, the Liquidity Facility Agreement, providing for a revolving liquidity commitment in the amount of $25,000,000 from Northvane Bank, N.A. as Lender, has been duly executed and delivered (or will be duly executed and delivered on the Closing Date). Northvane Bank, N.A. has confirmed its readiness to assume servicing responsibilities in accordance with the terms and timelines set forth in the Back-Up Servicing Agreement.
(k) Payment of Initial Fees and Expenses
All initial fees and expenses required to be paid on or prior to the Closing Date have been paid (or will be paid on the Closing Date from the proceeds of the offering), including, without limitation:
(i) the Trustee acceptance fee: $35,000 per annum (payable in advance on the Closing Date for the first annual period);
(ii) the back-up servicer fee: $50,000 per annum (payable in advance on the Closing Date for the first annual period);
(iii) placement fees to Ridgeline Capital Markets LLC, as Initial Purchaser, in an aggregate amount of $1,672,500 (representing the agreed-upon placement commission on the aggregate principal amount of the Notes); and
(iv) all other fees, costs, and expenses of counsel, rating agencies, accountants, verification agents, and filing agents as required under the Transaction Documents.
(l) Non-Consolidation Opinions
Non-consolidation opinions with respect to Quorum Receivables Funding 2022-1 LLC and Quorum Receivables Holding LLC have been delivered (or will be delivered on the Closing Date) from Calderwood & Harkness LLP. Such opinions address the separateness of the Issuer and QRH from the Sponsor and its affiliates and opine that a court applying applicable law would not, in a properly presented and reasoned case, substantively consolidate the assets and liabilities of the Issuer or QRH with those of the Sponsor or any of its affiliates in a bankruptcy or insolvency proceeding.
SECTION 9: OFFERING MEMORANDUM ACCURACY
The undersigned hereby certifies, on behalf of the Issuer, that the Preliminary Offering Memorandum, dated October 12, 2022 (v3), as it relates to the Issuer, the Notes, the receivables pool, and the Transaction Documents (the "Relevant Portions"), does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. This certification is made as of the date hereof and is expected to be confirmed as of the Closing Date.
The undersigned acknowledges that the Offering Memorandum contains forward-looking statements, projections, and estimates that are subject to risks and uncertainties, and that actual results may differ materially from those projected. The foregoing certification relates only to statements of fact and not to forward-looking statements, projections, or opinions.
The offering of the Notes is being conducted as a private placement exempt from registration under the Securities Act of 1933, as amended, pursuant to Rule 144A promulgated thereunder (with respect to offers and sales to qualified institutional buyers within the United States) and Regulation S promulgated thereunder (with respect to offers and sales to non-U.S. persons in offshore transactions). The Notes have not been and will not be registered under the Securities Act of 1933, as amended, or any state securities or "blue sky" laws, and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from registration.
SECTION 10: SOLVENCY
The undersigned hereby certifies, on behalf of the Issuer, that the Issuer, after giving effect to the transactions contemplated by the Transaction Documents, including, without limitation, the issuance of the Notes in the aggregate principal amount of $500,000,000 — comprising $375,000,000 in Class A Notes, $75,000,000 in Class B Notes, $35,000,000 in Class C Notes, and $15,000,000 in overcollateralization / retained interest held by the Sponsor or its affiliates — and the acquisition of the Initial Receivables Pool, is, and immediately after the consummation of such transactions will be, solvent and will not be rendered insolvent thereby.
In connection with the foregoing solvency certification, the undersigned confirms each of the following:
(a) Fair Value. The fair value of the Issuer's assets, including the receivables pool and the cash and eligible investments held in the trust accounts, exceeds the total amount of the Issuer's liabilities, including the aggregate outstanding principal amount of the Notes and all other liabilities of the Issuer (whether absolute, accrued, contingent, or otherwise, and whether matured or unmatured), as of the date hereof and after giving effect to the transactions contemplated by the Transaction Documents.
(b) Ability to Pay Debts. The Issuer is able to pay its debts and other obligations as they become due in the ordinary course of business. The cash flows generated by the receivables pool, together with any amounts available under the Liquidity Facility Agreement and the reserve account, are reasonably expected to be sufficient to enable the Issuer to pay all amounts owed under the Notes and the other Transaction Documents as they become due.
(c) Adequate Capital. The Issuer has, and upon the consummation of the transactions contemplated by the Transaction Documents will have, adequate capital to carry on its business as presently conducted and as proposed to be conducted, taking into account the Issuer's limited purpose and the nature and composition of its assets and liabilities.
The foregoing solvency certification is made based upon the undersigned's review of the Issuer's assets, liabilities, and financial projections, after due inquiry and investigation, and is made in good faith. For purposes of this Section 10, the term "solvency" is used in the sense customarily applied in asset-backed securities transactions and is not intended to constitute, and should not be construed as, an opinion as to the legal conclusion of solvency under any applicable bankruptcy or insolvency statute.
SECTION 11: NO CONFLICT OR VIOLATION
The undersigned hereby certifies, on behalf of the Issuer, that the execution, delivery, and performance by the Issuer of the Transaction Documents to which it is a party, and the issuance and sale of the Notes, do not and will not:
(a) violate, conflict with, result in a breach of any provision of, or constitute a default under, the Certificate of Formation or the Amended and Restated Limited Liability Company Agreement of the Issuer;
(b) violate, conflict with, or result in a breach of or default under any applicable law, statute, rule, regulation, ordinance, order, judgment, injunction, writ, or decree of any governmental authority or regulatory body applicable to the Issuer or any of its properties or assets;
(c) result in the creation or imposition of any lien, charge, encumbrance, pledge, mortgage, security interest, or other similar restriction upon any property or asset of the Issuer, other than the liens, security interests, and pledges created under the Transaction Documents in favor of the Trustee for the benefit of the Noteholders as contemplated by the Indenture and the Grant of Security Interest / Pledge Agreement; or
(d) conflict with, result in a breach or violation of, constitute a default (or any event that, with notice or lapse of time or both, would constitute a default) under, give rise to any right of termination, cancellation, amendment, or acceleration under, or result in the loss of any material benefit under, any agreement, contract, indenture, instrument, mortgage, lease, license, permit, or other arrangement to which the Issuer is a party or by which the Issuer or any of its properties or assets is bound or affected.
SECTION 12: CONSENTS AND APPROVALS
The undersigned hereby certifies, on behalf of the Issuer, that all governmental and regulatory consents, approvals, authorizations, orders, registrations, qualifications, and filings that are required for the Issuer's valid execution, delivery, and performance of the Transaction Documents to which the Issuer is a party, and for the valid issuance and sale of the Notes, have been obtained or made, or will be obtained or made on or prior to the Closing Date. Such consents, approvals, authorizations, registrations, and filings include, without limitation, the filing of the Certificate of Formation of the Issuer with the Secretary of State of the State of Delaware, the filing of UCC-1 financing statements as described in Section 8(d) hereof, and any filings required under applicable state securities laws in connection with the offering and sale of the Notes.
No other consent, approval, authorization, order, registration, or filing of or with any court, governmental authority, regulatory body, or administrative agency, or of or with any other person or entity, is required in connection with the Issuer's execution, delivery, or performance of any Transaction Document or the issuance of the Notes, that has not been obtained or made or that will not be obtained or made on or prior to the Closing Date.
SECTION 13: INSURANCE AND INDEMNIFICATION
The undersigned hereby certifies, on behalf of the Issuer, that the Performance Guaranty (the "Performance Guaranty") by Quorum Insurance Holdings Corp. in favor of the Trustee, for the benefit of the Noteholders, has been duly executed and delivered (or will be duly executed and delivered on the Closing Date). The Performance Guaranty provides certain credit support and performance guarantees in connection with the obligations of the Sponsor and its affiliates under the Transaction Documents.
Quorum Insurance Holdings Corp. is a Delaware corporation with its principal office located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. QIH's common stock is listed on the New York Stock Exchange under the ticker symbol "QIHC." QIH's current corporate credit ratings are as follows:
QIH reported consolidated revenue of approximately $3,800,000,000 for its fiscal year ended December 31, 2021, based on its most recent audited consolidated financial statements. QPF, a wholly-owned subsidiary of QIH, maintains a total insurance premium finance receivables portfolio of approximately $2,100,000,000 as of the most recently available reporting date, reflecting QPF's established position as a significant participant in the U.S. commercial insurance premium finance market.
The undersigned has no knowledge of any event, circumstance, or condition that has occurred since the date of QIH's most recent audited financial statements that would reasonably be expected to result in a material adverse change in the financial condition, business, or results of operations of QIH or that would materially impair QIH's ability to perform its obligations under the Performance Guaranty.
SECTION 14: NOTEHOLDER INFORMATION — CAPITAL STRUCTURE AND CREDIT ENHANCEMENT
The undersigned hereby certifies, on behalf of the Issuer, the following information regarding the capital structure of the transaction, the credit enhancement applicable to each class of Notes, and the payment waterfall, in each case as set forth in the Indenture:
Capital Structure and Credit Enhancement
The total credit enhancement available for each class of Notes consists of subordination (through the availability of junior tranches) and overcollateralization, as summarized below:
The overcollateralization target is 3.0% of the aggregate outstanding principal balance of the Notes, representing approximately $15,000,000 at closing (retained by the Sponsor or its affiliates as the residual interest in the Issuer).
Sequential Payment Waterfall
On each Payment Date, Available Funds will be distributed by the Trustee in accordance with the following sequential priority of payments, as specified in the Indenture:
1. First, to the payment of the Trustee's fees and expenses (including any amounts owed to the Trustee in its individual capacity under the Indenture);
2. Second, to the payment of the servicing fee to the Servicer (at an annual rate of 1.00% of the outstanding pool balance, payable monthly; estimated at approximately $510,000 per month based on the initial pool balance);
3. Third, to the payment of interest due and payable on the Class A Notes;
4. Fourth, to the payment of interest due and payable on the Class B Notes;
5. Fifth, to the payment of interest due and payable on the Class C Notes;
6. Sixth, to the payment of principal on the Class A Notes (until paid in full);
7. Seventh, to the payment of principal on the Class B Notes (until paid in full);
8. Eighth, to the payment of principal on the Class C Notes (until paid in full);
9. Ninth, to replenish the overcollateralization amount to the required target level, if applicable; and
10. Tenth, to the payment of any remaining amounts (the residual) to the Issuer (retained by the Sponsor or its affiliates).
Transaction Timeline.
Revolving Period: 24 months from the Closing Date. During the revolving period, the Issuer may use Available Funds (after payment of items higher in the waterfall) to acquire additional eligible receivables from QRH, provided that all concentration limits and eligibility criteria continue to be satisfied and no Early Amortization Event has occurred.
Amortization Period: 12 months following the end of the revolving period (or, if earlier, commencing upon the occurrence of an Early Amortization Event). During the amortization period, all Available Funds not required for payments higher in the waterfall will be applied to the sequential repayment of principal on the Notes.
Legal Final Maturity: 42 months from the Closing Date. The legal final maturity date represents the date by which all Notes must be repaid in full. Any Notes that remain outstanding on the legal final maturity date will constitute a default under the Indenture.
CERTIFICATION AND SIGNATURE
The undersigned has executed this Officer's Certificate as of the date first written above and confirms that all of the statements, certifications, and representations contained herein are true and correct in all material respects as of the date hereof. The undersigned acknowledges that the Trustee and the Initial Purchaser are relying on the certifications contained herein in connection with the issuance and purchase of the Notes and the consummation of the transactions contemplated by the Transaction Documents.
[DRAFT — NOT FOR EXECUTION]
QUORUM RECEIVABLES FUNDING 2022-1 LLC
By: ________
Name: [●]
Title: Authorized Person
Date: [●], 2022
[DRAFT — NOT FOR EXECUTION]
Calderwood & Harkness LLP Matter No. 1025-00007
EXHIBIT A
LIST OF TRANSACTION DOCUMENTS
The following is a complete list of the Transaction Documents entered into (or to be entered into on the Closing Date) in connection with the issuance of the Notes by Quorum Receivables Funding 2022-1 LLC:
EXHIBIT B
CERTIFICATE OF GOOD STANDING
Certificate of Good Standing of Quorum Receivables Funding 2022-1 LLC from the Secretary of State of the State of Delaware
[TO BE OBTAINED AND ATTACHED HERETO PRIOR TO THE CLOSING DATE]
Delaware Secretary of State File No.: 7894231
Note: A current Certificate of Good Standing, dated no earlier than five (5) business days prior to the Closing Date, is to be obtained from the Delaware Secretary of State and attached to this Exhibit B upon receipt.
EXHIBIT C
INCUMBENCY CERTIFICATE / AUTHORIZED PERSON DESIGNATION
The undersigned hereby certifies that the following person(s) have been duly designated as Authorized Persons of Quorum Receivables Funding 2022-1 LLC, in each case in accordance with the Amended and Restated Limited Liability Company Agreement of QRF 2022-1 dated August 3, 2022, and each is authorized to execute and deliver documents, instruments, and certificates on behalf of the Issuer, including this Officer's Certificate and the Transaction Documents:
[Additional Authorized Persons to be designated, if any, prior to the Closing Date.]
Certified by:
QUORUM RECEIVABLES HOLDING LLC (as Sole Member of Quorum Receivables Funding 2022-1 LLC)
By: ________
Name: [●]
Title: Authorized Person
Date: [●], 2022