Dear All,
On behalf of Calderwood & Harkness LLP, as issuer's counsel to Quorum Insurance Holdings Corp. ("QIH") and Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1" or the "Issuer"), I am writing to circulate the near-final (execution draft) documentation package for the proposed $500,000,000 asset-backed notes offering by QRF 2022-1 (C&H Matter No. 1025-00007). These drafts reflect all comments received to date and the negotiations conducted through the second-round comment period (September 6 and September 28 circulations).
The documents are being transmitted via the secure file-sharing link below given the volume and size of the package. Please let me know if you encounter any difficulty accessing the link.
**[SECURE FILE-SHARING LINK]**
The package is organized as follows:
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**A. Core Transaction Documents**
1. **Indenture** — QRF 2022-1 (Issuer) and Calvoneth Trust Company, N.A. (Trustee) — *Execution Draft v4* 2. **Receivables Sale Agreement** — Quorum Premium Finance LLC ("QPF") (Seller) to Quorum Receivables Holding LLC ("QRH") (Purchaser) — *Execution Draft v3* 3. **Receivables Transfer Agreement** — QRH (Transferor) to QRF 2022-1 (Transferee) — *Execution Draft v3* 4. **Servicing Agreement** — QRF 2022-1, QPF (Servicer), and Calvoneth Trust Company, N.A. (Trustee) — *Execution Draft v3* 5. **Note Purchase Agreement** — QRF 2022-1 (Issuer), QIH (Sponsor), and Ridgeline Capital Markets LLC (Initial Purchaser) — *Execution Draft v3*
**B. Ancillary Agreements**
6. **Back-Up Servicing Agreement** — QRF 2022-1, QPF, Northvane Bank, N.A., and Calvoneth Trust Company, N.A. — *Execution Draft v2* 7. **Administration Agreement** — QRF 2022-1 (Issuer) and QIH (Administrator) — *Execution Draft v2* 8. **Liquidity Facility Agreement** — QRF 2022-1 (Borrower) and Northvane Bank, N.A. (Lender) — *Execution Draft v2* 9. **Account Control Agreement** — QRF 2022-1 and Calvoneth Trust Company, N.A. (Securities Intermediary) — *Execution Draft v2* 10. **Custodian Agreement** — QRF 2022-1 (Owner) and Calvoneth Trust Company, N.A. (Custodian) — *Draft* 11. **Grant of Security Interest (Pledge Agreement)** — QRF 2022-1 to Calvoneth Trust Company, N.A. — *Execution Draft v2* 12. **Performance Guaranty** — QIH (Guarantor) in favor of Calvoneth Trust Company, N.A. (Trustee) — *Execution Draft v1*
**C. Offering Document**
13. **Preliminary Offering Memorandum** — QRF 2022-1 Notes — *v3* (including Pool Stratification Supplement)
In addition to the documents listed above, the file-sharing folder contains the **Master Closing Checklist (v4)** (Excel), the **Conditions Precedent Tracker** (Excel), and **blacklines of the core transaction documents** marked against the prior circulated drafts for ease of review.
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**SUMMARY OF KEY CHANGES SINCE LAST CIRCULATION**
For the working group's convenience, the principal changes incorporated since the September 6 and September 28 rounds are summarized below:
**Indenture (v4):** - Early amortization triggers revised to reflect agreed thresholds: (i) 3-month average net loss rate exceeding 2.00%; (ii) 60+ day delinquency rate exceeding 3.50%; and (iii) minimum pool balance of $450,000,000 during the revolving period. - Event of default provisions and indemnification language revised per Calloway & Brandt's comments transmitted on September 20. - Payment waterfall language updated to reflect the agreed sequential structure: Trustee Fees → Servicing Fee → Class A Interest → Class B Interest → Class C Interest → Class A Principal → Class B Principal → Class C Principal → OC Replenishment → Residual to Issuer.
**Receivables Sale Agreement / Transfer Agreement (v3):** - Eligible receivables criteria finalized: USD-denominated; secured by unearned premium refund rights; original term ≤ 12 months; U.S. commercial policyholder obligor; no payment more than 60 days past due; compliant with applicable usury and licensing laws. - Concentration limits confirmed: single obligor ≤ 0.75%; single state ≤ 20%; single carrier ≤ 15%.
**Servicing Agreement (v3):** - Servicing fee confirmed at 1.00% per annum on the outstanding pool balance, payable monthly. - Servicer default and termination provisions finalized.
**Note Purchase Agreement (v3):** - Placement fees confirmed: 0.30% on Class A ($1,125,000); 0.45% on Class B ($337,500); 0.60% on Class C ($210,000). - Rule 144A / Regulation S offering mechanics incorporated. - Representations and warranties of Issuer and Sponsor and closing conditions finalized.
**Back-Up Servicing Agreement (v2):** - Fee confirmed at $50,000 per annum ($12,500 per quarter). - Northvane warm standby and data transfer obligations specified.
**Liquidity Facility Agreement (v2):** - $25,000,000 commitment; commitment fee of 0.25% per annum on undrawn amounts ($62,500/year); drawn rate of SOFR + 150 bps.
**Performance Guaranty (v1) — New Document:** - QIH guaranty of certain QPF obligations as servicer and seller, added per request of Ridgeline and Calloway & Brandt.
**Preliminary Offering Memorandum (v3):** - Updated pool data as of cut-off date June 30, 2022: initial pool balance of $612,000,000; approximately 82,400 loans; WA APR of 7.85%; historical 3-year average net loss rate of 0.42%; 60+ day delinquency rate of 0.87%. - Reflects preliminary ratings from Brindoval (AAA(cr) / A(cr) / BBB(cr)) and Pinnacle (Aaa(p) / A1(p) / Baa2(p)). - Updated capital structure tables: $375M Class A, $75M Class B, $35M Class C, $15M overcollateralization. - Credit enhancement percentages: 25.0% for Class A; 10.0% for Class B; 3.0% for Class C. - Coupon guidance: Class A at SOFR + 125 bps; Class B at SOFR + 210 bps; Class C at SOFR + 375 bps. - Tax disclosure section reviewed by Sylvia Hartwell. - Risk factors updated throughout.
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**OUTSTANDING ITEMS / ACTION ITEMS**
We respectfully request that all parties provide any remaining comments on the near-final documentation by **Wednesday, October 19, 2022**. Specific requests are as follows:
- **Calloway & Brandt / Ridgeline:** We would appreciate confirmation that the revisions to the Indenture event of default and indemnification provisions (Sections 5.01 and 6.03) adequately address the comments transmitted on September 20. We also request your review of the Note Purchase Agreement execution draft v3 and the new Performance Guaranty (v1).
- **Ashfield & Greer / Calvoneth Trust:** We request your review of the Indenture v4, Account Control Agreement, Custodian Agreement, and Grant of Security Interest. We would also appreciate Calvoneth Trust's confirmation of the trustee fee terms as reflected in the documents ($35,000 per annum plus $5,000 per payment date).
- **Northvane Bank:** We request your review of the Back-Up Servicing Agreement and Liquidity Facility Agreement execution drafts and confirmation that the commercial terms are acceptable.
- **Quorum (Nolan / Sandra):** We request the client's sign-off on the near-final documentation package. As a reminder, the investor presentation deck is currently being prepared in connection with the roadshow commencing October 24.
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**OPINIONS AND CLOSING DELIVERABLES**
Draft legal opinions — including true sale, enforceability, security interest perfection, tax characterization, no-registration, Delaware formation, and non-consolidation opinions — are being finalized separately and will be circulated to the working group shortly. Draft UCC-1 financing statements are also under preparation for filing with the Delaware Secretary of State upon closing.
The Master Closing Checklist (v4) and Conditions Precedent Tracker attached to this circulation track all required closing deliverables and certificates, and we ask that each party review the items assigned to them.
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**ROADSHOW TIMING**
As a reminder, the investor roadshow is scheduled to commence on **October 24, 2022** in virtual format. The investor presentation materials are in preparation and will be circulated separately for working group review by **October 20, 2022**.
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Please do not hesitate to reach out with any questions or if you would like to schedule a working group call to discuss any of the documents. We appreciate everyone's continued efforts on this transaction.
Best regards,
Yuki Nakamura Associate Calderwood & Harkness LLP 601 Lexington Avenue New York, NY 10022 Direct: (212) 558-4892 Email: ynakamura@calderwoodharkness.com
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