Dear Working Group Members,
We are pleased to circulate first drafts of the four core transaction documents in connection with the proposed $500,000,000 asset-backed notes issuance by Quorum Receivables Funding 2022-1 LLC (the "Issuer"), backed by insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"). These drafts have been prepared by Calderwood & Harkness LLP, as issuer's counsel, on the basis of the Final Term Sheet (v3) dated September 2, 2022, and preliminary ratings received from Brindoval Ratings Inc. (dated August 22, 2022) and Pinnacle Rating Services LLC (dated August 29, 2022). We are circulating these documents to all deal parties for review and comment as described further below.
**Attached Documents**
Please find attached the following four documents:
1. **Indenture (Draft v1)** — between Quorum Receivables Funding 2022-1 LLC, as Issuer, and Calvoneth Trust Company, N.A., as Indenture Trustee. This draft governs the issuance of the Class A Notes ($375,000,000), Class B Notes ($75,000,000), and Class C Notes ($35,000,000). The Indenture reflects a sequential payment waterfall (trustee fees/expenses → servicing fee → Class A interest → Class B interest → Class C interest → Class A principal → Class B principal → Class C principal → OC replenishment → residual) and incorporates the following early amortization triggers: (a) 3-month average net loss rate exceeding 2.00%; (b) 60+ day delinquency rate exceeding 3.50%; (c) available funds cap deficit for two consecutive periods; (d) servicer default or servicer rating downgrade below BB(cr)/Ba2(p); and (e) pool balance falling below $450,000,000 during the revolving period. The structure reflects a 24-month revolving period, a 12-month amortization period, and a 42-month legal final maturity. New York law governs. We note that the events of default provisions and noteholder remedies are in substantially final form; however, a few open points remain flagged for discussion, including cure periods and voting thresholds, which we have bracketed in the draft.
2. **Receivables Sale Agreement (Draft v1)** — between Quorum Premium Finance LLC, as Seller, and Quorum Receivables Holding LLC ("QRH"), as Purchaser. This agreement governs the true sale of insurance premium finance receivables from QPF to QRH. The draft includes the following eligible receivables criteria: (i) originated by QPF in the ordinary course of business; (ii) USD-denominated; (iii) secured by unearned premium refund rights; (iv) original term not exceeding 12 months; (v) obligor is a U.S. commercial policyholder; (vi) not in default (no payment more than 60 days past due); and (vii) compliant with applicable usury and licensing laws. Concentration limits have been set at: single obligor ≤ 0.75% of pool balance, single state ≤ 20%, and single carrier ≤ 15%. The agreement also contains customary seller representations and warranties regarding the receivables and repurchase obligations upon breach thereof.
3. **Receivables Transfer Agreement (Draft v1)** — between Quorum Receivables Holding LLC, as Transferor, and Quorum Receivables Funding 2022-1 LLC, as Transferee. This agreement governs the transfer of receivables from QRH (as intermediate SPV/depositor) to the Issuer. The transfer is structured as a contribution/true sale with a back-up security interest grant. Representations and warranties mirror those contained in the Receivables Sale Agreement.
4. **Servicing Agreement (Draft v1)** — among Quorum Receivables Funding 2022-1 LLC, as Issuer, Quorum Premium Finance LLC, as Servicer, and Calvoneth Trust Company, N.A., as Indenture Trustee. This agreement appoints QPF as servicer of the receivables pool at a servicing fee of 1.00% per annum on the outstanding pool balance (payable monthly from collections). The draft covers collection procedures, monthly reporting obligations, delinquency management, and remittance mechanics. It also includes servicer default events and provisions for servicer termination and replacement. Northvane Bank, N.A. is referenced as the back-up servicer; please note that the Back-Up Servicing Agreement will be circulated separately (see below).
**Additional Documents in Preparation**
Drafts of the following ancillary transaction documents are currently in preparation and will be circulated in the coming days and weeks:
- Note Purchase Agreement (QRF 2022-1, Quorum Insurance Holdings, Inc. ("QIH"), and Ridgeline Capital Markets LLC) - Back-Up Servicing Agreement (with Northvane Bank, N.A.) - Liquidity Facility Agreement (with Northvane Bank, N.A. — $25,000,000 commitment) - Administration Agreement (QRF 2022-1 and QIH) - Account Control Agreement, Custodian Agreement, and Grant of Security Interest / Pledge Agreement (each with Calvoneth Trust Company, N.A.) - Performance Guaranty (QIH in favor of Calvoneth Trust Company, N.A.) - Offering Memorandum (first draft expected by September 14, 2022)
**Comment Period**
We ask that all parties submit comments and redlines to the four attached documents by **Tuesday, September 20, 2022** (two weeks from today). We would encourage each party to coordinate internally before submitting consolidated comments to help streamline the revision process. Our team plans to turn a second round of drafts incorporating all comments by approximately September 28, 2022, which aligns with the timeframe for scheduled rating agency Q&A sessions with Brindoval and Pinnacle.
**Specific Requests**
To help focus the review and ensure efficient use of the comment period, we have the following requests for individual parties:
- *Calloway & Brandt (Harrison / Megan):* As underwriter's counsel, we would appreciate your focused review of the Indenture, particularly the events of default provisions, early amortization triggers, and indemnification language. We will also look to you for a thorough review of the Note Purchase Agreement once circulated.
- *Ashfield & Greer (Vivian):* As trustee's counsel, we would ask that you review the Indenture and confirm Calvoneth Trust's acceptance of the trustee duties as drafted, the fee provisions (annual fee of $35,000 plus $5,000 per payment date), and the distribution calculation mechanics.
- *Northvane Bank (Diane):* We would appreciate your review of the back-up servicer provisions in the Servicing Agreement and ask that you confirm alignment with the terms you anticipate in the separate Back-Up Servicing Agreement, which we will circulate shortly.
- *QIH In-House Team (Nolan / Sandra):* We would ask that you confirm the business terms across all four documents align with the Final Term Sheet (v3) and flag any operational concerns regarding the servicing obligations as drafted in the Servicing Agreement.
**Questions and Next Steps**
Please do not hesitate to reach out with any questions. Substantive questions should be directed to me or to Douglas Carmichael (copied). If helpful after your initial review, we are happy to schedule a working group call to discuss any significant issues before the comment deadline.
Thank you for your time and attention to these materials. We look forward to your comments.
Best regards,
Yuki Nakamura Associate Calderwood & Harkness LLP One Liberty Plaza, 46th Floor New York, NY 10006 T: (212) 555-3184 E: ynakamura@calderwoodharkness.com
**Attachments:** 1. Indenture — QRF 2022-1 and Calvoneth Trust Company, N.A. (Draft v1).docx 2. Receivables Sale Agreement — QPF to QRH (Draft v1).docx 3. Receivables Transfer Agreement — QRH to QRF 2022-1 (Draft v1).docx 4. Servicing Agreement — QRF 2022-1, QPF, Calvoneth Trust (Draft v1).docx
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