1025-00007 · Quorum Insurance Holdings · Legal Opinions

draft-opinion-no-registration-required.docx DOCUMENT M&A / Corporate

28 / 83 ← → ✕

Contract analysis Extract to table

CALDERWOOD & HARKNESS LLP Attorneys at Law

601 Lexington Avenue New York, New York 10022

Telephone: (212) 558-4000 Facsimile: (212) 558-3588

DRAFT — October 8, 2022

DRAFT — FOR DISCUSSION PURPOSES ONLY — NOT FOR RELIANCE

October 8, 2022

Quorum Receivables Funding 2022-1 LLC c/o Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, Connecticut 06901

Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, Connecticut 06901

Ridgeline Capital Markets LLC 383 Madison Avenue, 14th Floor New York, New York 10179

Calvoneth Trust Company, N.A. 600 Travis Street, Suite 5800 Houston, Texas 77002

Re: Quorum Receivables Funding 2022-1 LLC — $485,000,000 Asset-Backed Notes Draft Opinion — No Registration Required (Rule 144A / Regulation S) Calderwood & Harkness Matter No. 1025-00007

Ladies and Gentlemen:

1. Introduction

We have acted as counsel to Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (the "Issuer" or "QRF 2022-1"), and Quorum Insurance Holdings Corp., a Delaware corporation (the "Sponsor" or "QIH"), in connection with the proposed issuance by the Issuer of asset-backed notes in three classes (collectively, the "Notes"), as follows:

(a) $375,000,000 aggregate principal amount of Class A Notes (preliminary CUSIP: 74892TAA3) (the "Class A Notes");

(b) $75,000,000 aggregate principal amount of Class B Notes (preliminary CUSIP: 74892TAB1) (the "Class B Notes"); and

(c) $35,000,000 aggregate principal amount of Class C Notes (preliminary CUSIP: 74892TAC9) (the "Class C Notes" and, together with the Class A Notes and the Class B Notes, the "Notes").

The Notes represent an aggregate principal amount of $485,000,000. When combined with $15,000,000 in overcollateralization constituting the retained interest of the Issuer, the total issuance size of the transaction is $500,000,000.

The Notes are to be issued pursuant to an Indenture dated as of [●], 2022 (the "Indenture"), between the Issuer and Calvoneth Trust Company, N.A., a national banking association, as trustee (the "Trustee"). The Notes are to be offered and sold to Ridgeline Capital Markets LLC (the "Initial Purchaser") pursuant to the Note Purchase Agreement dated as of [●], 2022 (the "Note Purchase Agreement"), among the Issuer, the Sponsor, and the Initial Purchaser.

The Notes are backed by a revolving pool of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a Delaware limited liability company and wholly owned subsidiary of the Sponsor. QPF originates insurance premium finance loans to commercial and personal lines policyholders and is responsible for servicing the receivables in its capacity as servicer under the Servicing Agreement (as defined below).

This opinion is being delivered pursuant to Section [●] of the Note Purchase Agreement, which requires that Calderwood & Harkness LLP deliver to each of the addressees hereof a legal opinion addressing the availability of exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), in connection with the offer, sale, and resale of the Notes as contemplated by the Note Purchase Agreement and the Indenture. This opinion is identified as Calderwood & Harkness Matter No. 1025-00007.

2. Documents Examined

In connection with rendering the opinions set forth herein, we have examined originals, or copies identified to our satisfaction as being true copies of originals, of the following documents (collectively, the "Transaction Documents"):

1. The Note Purchase Agreement (execution draft v3, dated October 12, 2022) among Quorum Receivables Funding 2022-1 LLC, Quorum Insurance Holdings Corp., and Ridgeline Capital Markets LLC (the "Note Purchase Agreement");

2. The Indenture (execution draft v4, dated October 12, 2022) between Quorum Receivables Funding 2022-1 LLC and Calvoneth Trust Company, N.A., as trustee (the "Indenture");

3. The Preliminary Offering Memorandum dated [●], 2022 (v3, dated October 12, 2022) (the "Offering Memorandum"), including the Issuer Supplement containing pool stratification tables, prepared in connection with the offer and sale of the Notes;

4. The forms of the Class A Notes, Class B Notes, and Class C Notes, each substantially in the form attached as an exhibit to the Indenture;

5. The Amended and Restated Limited Liability Company Agreement of Quorum Receivables Funding 2022-1 LLC, dated August 3, 2022 (the "LLC Agreement");

6. The Certificate of Formation of Quorum Receivables Funding 2022-1 LLC (Delaware Secretary of State File No. 7894231), filed August 3, 2022, together with any amendments thereto;

7. The Receivables Sale Agreement (execution draft v3) between Quorum Premium Finance LLC, as seller, and Quorum Receivables Holding LLC ("QRH"), as purchaser (the "Receivables Sale Agreement");

8. The Receivables Transfer Agreement (execution draft v3) between Quorum Receivables Holding LLC, as transferor, and Quorum Receivables Funding 2022-1 LLC, as transferee (the "Receivables Transfer Agreement");

9. The Servicing Agreement (execution draft v3) among Quorum Receivables Funding 2022-1 LLC, Quorum Premium Finance LLC, as servicer, and Calvoneth Trust Company, N.A., as trustee and backup servicer (the "Servicing Agreement");

10. The Secretary's Certificate of Quorum Insurance Holdings Corp. dated July 27, 2022, certifying copies of board resolutions authorizing the Sponsor's participation in the transactions contemplated by the Transaction Documents, including the authorization and direction of officers to negotiate, execute, and deliver all related documentation;

11. The Manager's Certificate of Quorum Premium Finance LLC dated July 27, 2022, certifying copies of the authorizing resolutions of the sole member and the manager of QPF approving QPF's entry into the Receivables Sale Agreement, the Servicing Agreement, and the other Transaction Documents to which QPF is a party;

12. The Investor Presentation Deck dated October 20, 2022, prepared by the Sponsor and the Initial Purchaser for distribution to prospective investors in connection with the offering of the Notes;

13. The Roadshow Script and Talking Points dated October 22, 2022, prepared by the Sponsor and the Initial Purchaser for use in one-on-one and small group investor presentations in connection with the offering of the Notes; and

14. Such other documents, certificates, records, and instruments as we have deemed necessary or appropriate for purposes of rendering the opinions expressed herein, including certificates of public officials and officers of the Issuer and the Sponsor.

In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the authenticity of the originals of such copies. We have also assumed the completeness and accuracy, as of the date hereof, of all corporate and organizational records and documents furnished to us by the Issuer, the Sponsor, and their respective affiliates and representatives.

3. Assumptions

In rendering the opinions set forth herein, we have relied upon the following assumptions, in addition to those stated elsewhere in this opinion, without independent investigation or verification:

(a) All signatures on the documents examined by us are genuine, all documents submitted to us as originals are authentic, and all documents submitted to us as copies conform in all material respects to their respective originals.

(b) Each party to the Note Purchase Agreement, the Indenture, and each other Transaction Document (other than the Issuer and the Sponsor, as to which we have made an independent analysis) has been duly organized, is validly existing and in good standing under the laws of its jurisdiction of organization, and has full power and authority to execute, deliver, and perform its obligations under each such document to which it is a party.

(c) The Note Purchase Agreement, the Indenture, and the Notes have been or will be duly authorized, executed, and delivered by all parties thereto, and constitute or will constitute the legal, valid, and binding obligations of each such party, enforceable against each such party in accordance with their respective terms, subject to applicable bankruptcy, insolvency, and similar laws affecting creditors' rights generally and to general principles of equity.

(d) The Offering Memorandum, at the time of delivery to prospective purchasers of the Notes, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. We have not undertaken any independent investigation or verification of the accuracy, completeness, or adequacy of the information contained in the Offering Memorandum, and we express no view thereon.

(e) The Initial Purchaser (Ridgeline Capital Markets LLC) will comply in all material respects with its representations, warranties, and agreements set forth in the Note Purchase Agreement regarding the manner of the offering and sale of the Notes, including its undertakings regarding the classes of persons to whom the Notes will be offered and sold, the jurisdictions in which offers and sales will be made, and the procedures to be followed in connection therewith.

(f) Each purchaser of the Notes in reliance on Rule 144A under the Securities Act is a "qualified institutional buyer" ("QIB") within the meaning of Rule 144A(a)(1) promulgated under the Securities Act, and each such purchaser is acquiring the Notes for its own account or for the account of one or more QIBs.

(g) Each purchaser of the Notes in reliance on Regulation S under the Securities Act is not a "U.S. person" as defined in Rule 902(k) of Regulation S, and the offer and sale of Notes to each such purchaser occurs in an "offshore transaction" as defined in Rule 902(h) of Regulation S.

(h) No "general solicitation" or "general advertising" (as those terms are used in Rule 502(c) of Regulation D under the Securities Act) and no "directed selling efforts" (as that term is defined in Rule 902(c) of Regulation S under the Securities Act) have been or will be made or conducted in connection with the offering and sale of the Notes by the Issuer, the Sponsor, the Initial Purchaser, or any person acting on their behalf.

(i) The Notes will not be offered or sold within the United States or to U.S. persons (in the case of the Regulation S offering) except in accordance with Rule 144A, and all applicable offering restrictions and distribution compliance period requirements under Regulation S will be observed.

(j) All factual representations and warranties made by the Issuer, the Sponsor, the Initial Purchaser, and each other party in the Transaction Documents are and will be true and correct in all material respects as of the dates made and as of the closing date of the offering.

4. Applicable Law and Regulatory Framework

4.1 Securities Act of 1933

Section 5 of the Securities Act generally provides that it shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell or offer to sell a security, unless a registration statement has been filed and is in effect with the Securities and Exchange Commission (the "SEC") with respect to such security, or unless an exemption from the registration requirements is available.

The Notes constitute "securities" within the meaning of Section 2(a)(1) of the Securities Act. The term "security" is defined broadly under the Securities Act and includes "any note," subject to certain judicially recognized exceptions that are not applicable here. The Notes are debt securities backed by a pool of self-liquidating financial assets (insurance premium finance receivables) and are of a type routinely classified as securities under the Securities Act. There is no basis to contend that the Notes fall outside the scope of Section 2(a)(1).

The Notes have not been and will not be registered under the Securities Act. No registration statement on any form (including Form SF-1 or Form SF-3 under Regulation AB II) has been filed or is contemplated to be filed with the SEC with respect to the Notes. Accordingly, the offer, sale, and resale of the Notes must be effected in reliance upon one or more available exemptions from the registration requirements of Section 5 of the Securities Act.

4.2 Rule 144A

Rule 144A, promulgated under the Securities Act (17 C.F.R. § 230.144A), provides a non-exclusive safe harbor exemption from the registration requirements of Section 5 of the Securities Act for resales of certain "restricted securities" (as defined in Rule 144(a)(3) under the Securities Act) to QIBs. Rule 144A was adopted by the SEC in 1990 and has become the principal mechanism through which unregistered debt securities, including asset-backed securities, are distributed to institutional investors in the United States.

The key conditions of Rule 144A, and their applicability to the contemplated offering, are as follows:

(i) QIB Purchaser Requirement (Rule 144A(d)(1)). Securities must be offered and sold only to a person whom the seller and any person acting on behalf of the seller reasonably believe to be a QIB, or to a person whom the seller and any person acting on behalf of the seller reasonably believe is purchasing for the account of a QIB. A QIB is generally defined as an entity that, in the aggregate, owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with such entity. Registered broker-dealers need only own and invest on a discretionary basis at least $10 million in securities of non-affiliated issuers to qualify as QIBs. The Note Purchase Agreement and the Indenture require that resales in the United States be made only to persons whom the seller reasonably believes to be QIBs.

(ii) Notice Requirement (Rule 144A(d)(2)). The seller and any person acting on behalf of the seller must take reasonable steps to ensure that the purchaser is aware that the seller may be relying on the exemption from the registration requirements of Section 5 of the Securities Act provided by Rule 144A. The Note Purchase Agreement requires the Initial Purchaser to take such reasonable steps, and the Notes bear legends to such effect.

(iii) Non-Fungibility Requirement (Rule 144A(d)(3)). At the time of issuance, the securities being offered must not be of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted in an automated inter-dealer quotation system. The Notes constitute a newly created class of securities and are not, and at the time of issuance will not be, listed on any national securities exchange or quoted in any automated inter-dealer quotation system. This condition is satisfied.

(iv) Information Requirement (Rule 144A(d)(4)). In the case of securities of an issuer that is not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the holder of such securities and a prospective purchaser designated by the holder must have the right to obtain from the issuer, upon request, certain reasonably current information, including a brief statement of the nature of the business of the issuer and the products and services it offers, and the issuer's most recent balance sheet and profit and loss and retained earnings statements. The Offering Memorandum provides comprehensive disclosure regarding the Issuer, the Sponsor, the Originator, the receivables pool, and the transaction structure, and is sufficient to satisfy this information requirement. Additionally, the Indenture contains covenants requiring the Issuer to make available, upon request by any holder or prospective purchaser of the Notes, the information described in Rule 144A(d)(4), including periodic reports containing financial information, pool performance data, and any other information reasonably necessary for a prospective purchaser to evaluate the Notes and the underlying receivables.

4.3 Regulation S

Regulation S, promulgated under the Securities Act (17 C.F.R. §§ 230.901–230.905), provides a safe harbor for offers and sales of securities that occur outside the United States. Regulation S is premised on the territorial principle underlying the Securities Act, as articulated in Rule 901, which provides that offers and sales of securities that occur outside the United States are not subject to the registration requirements of Section 5.

Regulation S establishes three categories of safe harbors with varying conditions depending on the characteristics of the issuer and the securities, the degree of U.S. market interest, and other factors. Category 2 of Regulation S (as set forth in Rule 903(b)(2)) is applicable to the Notes because QRF 2022-1 is not a "reporting issuer" (i.e., it is not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act), and the Notes are debt securities.

The key conditions of Regulation S, as applicable to the Notes under Category 2, are as follows:

(i) Offshore Transaction (Rule 903(a)(1)). The offer and sale must occur in an "offshore transaction" as defined in Rule 902(h). An offshore transaction is one in which (A) the offer is not made to a person in the United States, and (B) either (1) at the time the buy order is originated, the buyer is outside the United States or the seller and any person acting on its behalf reasonably believe that the buyer is outside the United States, or (2) the transaction is executed in, on, or through the facilities of a designated offshore securities market. The Note Purchase Agreement requires the Initial Purchaser to ensure that all offers and sales made in reliance on Regulation S are made in offshore transactions satisfying these requirements.

(ii) No Directed Selling Efforts (Rule 903(a)(2)). No "directed selling efforts" (as defined in Rule 902(c)) may be made in the United States by the seller, an affiliate, or any person acting on their behalf. Directed selling efforts include, among other things, advertising, articles, notices, or other communications published in the United States or in a U.S. edition of a publication that may reasonably be expected to condition the market for the securities. The Issuer, the Sponsor, and the Initial Purchaser have represented and agreed that no directed selling efforts have been or will be made in connection with the offering of the Notes. We note that the Investor Presentation Deck and the Roadshow Script referenced in Section 2 above were prepared for and delivered only to prospective investors in one-on-one or small group presentations and do not constitute directed selling efforts.

(iii) Category 2 Distribution Compliance Period and Offering Restrictions (Rule 903(b)(2)). Category 2 imposes a 40-day "distribution compliance period" during which certain additional restrictions apply. During the distribution compliance period, offers and sales of the Notes in reliance on Regulation S may not be made to U.S. persons or for the account or benefit of U.S. persons (other than a distributor). In addition, the following transactional restrictions apply during the distribution compliance period:

(A) The Notes offered and sold in reliance on Regulation S will initially be represented by a temporary global note, which will be exchangeable for interests in a permanent global note only upon certification by the beneficial owner that such owner is not a U.S. person and that the Notes are not being acquired for the account or benefit of a U.S. person, or in a transaction meeting the requirements of another exemption from registration under the Securities Act;

(B) The Notes will bear legends restricting transfer to U.S. persons during the distribution compliance period, except in transactions exempt from registration under the Securities Act;

(C) All offering materials and documents used in connection with offers and sales made in reliance on Regulation S will include statements to the effect that the Notes have not been registered under the Securities Act and may not be offered or sold in the United States or to U.S. persons unless registered or exempt from registration; and

(D) Purchasers of Notes in reliance on Regulation S will be required to certify, at the time of purchase, that they are not U.S. persons and are not acquiring the Notes for the account or benefit of a U.S. person.

The Note Purchase Agreement and the Indenture contain provisions implementing each of these Regulation S requirements, including the transfer restrictions, legending obligations, and certification requirements described above.

4.4 Section 4(a)(2) of the Securities Act

As a supplemental and independent basis for the exemption of the initial sale of the Notes from registration, we note that the initial sale of the Notes by the Issuer to the Initial Purchaser (Ridgeline Capital Markets LLC) constitutes a transaction "not involving any public offering" within the meaning of Section 4(a)(2) of the Securities Act.

Section 4(a)(2) exempts from the registration requirements of Section 5 "transactions by an issuer not involving any public offering." The Supreme Court, in SEC v. Ralston Purina Co., 346 U.S. 119 (1953), established that the availability of this exemption turns on whether the particular class of persons affected needs the protection of the Securities Act, which in turn depends on whether the offerees have access to the kind of information that registration would disclose. Subsequent judicial and SEC interpretive guidance has identified a number of factors relevant to the Section 4(a)(2) analysis, including the number and sophistication of the offerees, the size of the offering, the manner of the offering, and the availability of information.

The following factors support the availability of the Section 4(a)(2) exemption for the initial sale of the Notes:

(a) Single Sophisticated Purchaser. The Notes are being offered and sold to a single Initial Purchaser, Ridgeline Capital Markets LLC. Ridgeline is a sophisticated institutional investor and an SEC-registered broker-dealer. Ridgeline has substantial experience in the purchase and resale of asset-backed securities, including insurance premium finance receivables securitizations. There is no basis to conclude that Ridgeline requires the protections afforded by the registration requirements of the Securities Act.

(b) No General Solicitation or General Advertising. The Notes have not been and will not be offered through any form of general solicitation or general advertising. No public advertisements, articles, notices, or communications of any kind have been published or disseminated in connection with the offering. The Investor Presentation Deck and Roadshow Script referenced in Section 2 above were delivered only to pre-qualified institutional investors in connection with one-on-one and small group investor meetings, and do not constitute general solicitation or general advertising.

(c) Access to Information. The Initial Purchaser has had access to the type of information that would be contained in a registration statement, through the Offering Memorandum, the Transaction Documents, and direct contact with the Issuer, the Sponsor, and their respective management teams. The Offering Memorandum contains detailed information regarding the Issuer, the Sponsor, the Originator, the receivables pool, the transaction structure, risk factors, and other material information necessary for an informed investment decision.

(d) Investment Intent. The Note Purchase Agreement contains representations by the Initial Purchaser that it is acquiring the Notes for the purpose of resale in accordance with Rule 144A and Regulation S, and not with a view to any distribution thereof in violation of the Securities Act. The Initial Purchaser has represented that it will comply with the transfer restrictions and other conditions applicable to resales under Rule 144A and Regulation S.

(e) Transfer Restrictions. The Notes are subject to transfer restrictions set forth in the Indenture, including legending requirements, which ensure that subsequent resales will be made only in compliance with applicable exemptions from registration.

Based on the foregoing factors, we believe that the initial sale of the Notes by the Issuer to the Initial Purchaser qualifies for the exemption from registration provided by Section 4(a)(2) of the Securities Act.

4.5 Regulation D Considerations

Although the Issuer is not formally relying on the safe harbor provided by Regulation D under the Securities Act (17 C.F.R. §§ 230.501–230.508), we note for completeness that the offering and sale of the Notes is consistent with the requirements of Rule 506(b) of Regulation D, which would provide an additional supplemental basis for the exemption. In particular:

(a) No general solicitation or general advertising has been or will be used in connection with the offering;

(b) The offering is being made to a limited number of purchasers (a single Initial Purchaser), all of whom are "accredited investors" within the meaning of Rule 501(a) of Regulation D; and

We express no formal opinion regarding the availability of the Regulation D exemption, but note the foregoing as a matter of additional comfort.

4.6 Securities Exchange Act of 1934

The Issuer is not, and as a result of the issuance and sale of the Notes will not become, subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Issuer is a special-purpose Delaware limited liability company formed for the sole purpose of acquiring insurance premium finance receivables and issuing the Notes. The Issuer has no class of securities registered or required to be registered under Section 12 of the Exchange Act, and the issuance of the Notes will not trigger any registration obligation under the Exchange Act.

In addition, QRF 2022-1 is not required to register as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act"), based on the Issuer's reliance on Rule 3a-7 thereunder, as discussed in Section 6 below.

5. Analysis of the Offering Structure

5.1 The Initial Sale (Issuer to Initial Purchaser)

The offering structure contemplates that the Issuer (QRF 2022-1) will sell the Notes directly to Ridgeline Capital Markets LLC as the sole Initial Purchaser pursuant to the Note Purchase Agreement. This initial sale constitutes a private placement and is not a public offering of securities.

Ridgeline Capital Markets LLC is a sophisticated, SEC-registered broker-dealer with extensive experience in the structuring, placement, and distribution of asset-backed securities and structured finance products. Ridgeline is an "accredited investor" under Rule 501(a) of Regulation D by virtue of its status as a registered broker-dealer. Ridgeline is also a QIB within the meaning of Rule 144A.

Ridgeline has represented and warranted in the Note Purchase Agreement that it is acquiring the Notes for the purpose of resale to investors in accordance with Rule 144A and Regulation S under the Securities Act, and not with a view to any distribution thereof in violation of the Securities Act. Ridgeline has further represented that it will comply with the offering restrictions and transfer procedures set forth in the Note Purchase Agreement and the Indenture.

As discussed in Section 4.4 above, the initial sale of the Notes by the Issuer to the Initial Purchaser qualifies for the exemption from registration provided by Section 4(a)(2) of the Securities Act. The sale involves a single, highly sophisticated institutional purchaser with full access to the information that would be contained in a registration statement, in a transaction conducted without general solicitation or general advertising and subject to appropriate transfer restrictions.

5.2 Resales Under Rule 144A

Following the initial purchase of the Notes from the Issuer, Ridgeline will resell the Notes (or portions thereof) in the United States to QIBs in transactions designed to meet the requirements of Rule 144A under the Securities Act. The structure of these resales, as implemented by the Note Purchase Agreement and the Indenture, satisfies each of the conditions of Rule 144A as follows:

(a) QIB Purchaser Requirement. The Note Purchase Agreement contains representations and agreements by Ridgeline that it will offer and sell the Notes in the United States only to persons it reasonably believes to be QIBs, or to persons it reasonably believes are purchasing for the account of one or more QIBs. Ridgeline has agreed to implement reasonable procedures to verify the QIB status of each prospective purchaser, including reliance on representations from such purchasers and, where applicable, on publicly available information regarding the investment portfolios of such purchasers.

(b) Notice to Purchasers. Ridgeline has agreed in the Note Purchase Agreement that it will inform each prospective purchaser of the Notes in the United States that the seller may be relying on the exemption from registration provided by Rule 144A. This notice is provided both through the Offering Memorandum, which includes a prominent statement regarding the availability of the Rule 144A exemption, and through the restrictive legends borne by the Notes.

(c) Delivery of Offering Memorandum. The Note Purchase Agreement further requires Ridgeline to deliver or make available to each prospective purchaser a copy of the most recent version of the Offering Memorandum, including any supplements or amendments thereto, prior to the consummation of any sale.

(d) Non-Fungibility. The Notes are not of the same class as any securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in an automated inter-dealer quotation system. The Notes are a newly created class of asset-backed securities, and no other securities of the Issuer are so listed or quoted. The non-fungibility condition of Rule 144A(d)(3) is satisfied.

(e) Information Availability. The Indenture contains provisions requiring the Issuer to furnish, upon request of any holder or beneficial owner of the Notes (or any prospective purchaser designated by such holder or beneficial owner), the information described in Rule 144A(d)(4) under the Securities Act. This information includes a brief statement of the nature of the Issuer's business and the financial assets held by the Issuer, as well as the Issuer's most recent financial statements (or, to the extent applicable, servicer reports containing equivalent financial information regarding the receivables pool). The Issuer has agreed to make such information available at all times during which the Notes are outstanding.

(f) Restrictive Legends. The Notes bear restrictive legends substantially in the form set forth in the Indenture, which state that the Notes have not been registered under the Securities Act and may not be offered, sold, or transferred except in compliance with the transfer restrictions described therein.

Based on the foregoing, and subject to the assumptions set forth in Section 3 above (including the assumption that Ridgeline and subsequent sellers will comply with the applicable requirements of Rule 144A), resales of the Notes in the United States to QIBs in accordance with the terms of the Note Purchase Agreement and the Indenture will qualify for the Rule 144A safe harbor and will be exempt from the registration requirements of Section 5 of the Securities Act.

5.3 Sales Under Regulation S

In addition to domestic resales under Rule 144A, Ridgeline will offer and sell Notes outside the United States to non-U.S. persons in offshore transactions in compliance with Regulation S under the Securities Act. As discussed in Section 4.3 above, Category 2 of Regulation S is applicable because QRF 2022-1 is not a reporting company under the Exchange Act and the Notes are debt securities.

The 40-day distribution compliance period applicable to Category 2 offerings begins on the later of (i) the date on which the Notes are first offered to persons other than distributors in reliance on Regulation S, and (ii) the closing date of the offering. During the distribution compliance period, the following restrictions apply:

(a) No offers or sales of the Notes may be made to U.S. persons or for the account or benefit of U.S. persons, except in transactions meeting the requirements of Rule 144A or another available exemption from registration.

(b) The Regulation S Notes will initially be represented by a temporary global note (the "Temporary Regulation S Global Note"), which will be deposited with the Trustee (or its designated custodian). Beneficial interests in the Temporary Regulation S Global Note may not be exchanged for interests in a permanent global note (the "Permanent Regulation S Global Note") until the expiration of the distribution compliance period, and only upon delivery by the beneficial owner of a certification (in the form prescribed by the Indenture) that such beneficial owner is not a U.S. person and is not acquiring the Notes for the account or benefit of a U.S. person, or is acquiring the Notes in a transaction meeting the requirements of an applicable exemption from registration under the Securities Act.

(c) The Notes bear legends restricting transfer to U.S. persons during the distribution compliance period, as described in Section 5.5 below.

(d) Purchasers of Notes in reliance on Regulation S are required to execute and deliver purchaser certifications (in the form attached to the Indenture) confirming their non-U.S. person status and the offshore nature of the transaction.

The Note Purchase Agreement and the Indenture implement each of the applicable offering restrictions, including the transfer restrictions, certification requirements, and temporary global note mechanics described above. Following the expiration of the distribution compliance period, the restrictions applicable to the Regulation S Notes will be relaxed in accordance with the terms of the Indenture, and beneficial interests in the Temporary Regulation S Global Note will be exchangeable for interests in the Permanent Regulation S Global Note upon delivery of the required certifications.

Based on the foregoing, and subject to the assumptions set forth in Section 3 above (including the assumption that Ridgeline and subsequent sellers will comply with the applicable requirements of Regulation S), offers and sales of the Notes outside the United States to non-U.S. persons in offshore transactions in compliance with Regulation S will be exempt from the registration requirements of Section 5 of the Securities Act.

5.4 Offering Memorandum Disclosure

Although the offering of the Notes is not required to comply with the disclosure requirements of Regulation AB II (17 C.F.R. §§ 229.1100–229.1125) promulgated by the SEC — the offering being exempt from registration as a Rule 144A / Regulation S private placement — the Offering Memorandum prepared in connection with the offering contains disclosure that is substantially consistent with market practice for insurance premium finance asset-backed securities transactions and provides prospective purchasers with the information necessary for an informed investment decision. The Offering Memorandum includes, among other things, the following:

(a) Transaction Parties. Descriptions of the Issuer (QRF 2022-1), the Sponsor (Quorum Insurance Holdings Corp., NYSE: QIHC), the Originator (Quorum Premium Finance LLC), the Depositor (Quorum Receivables Holding LLC), and the Servicer (Quorum Premium Finance LLC), including their respective roles, organizational structures, experience, and track records.

(b) Receivables Pool Characteristics. Detailed description of the initial receivables pool, including an initial pool balance of approximately $612,000,000, representing approximately 82,400 individual insurance premium finance loans, with a weighted average annual percentage rate ("APR") of 7.85%, a weighted average remaining term of 5.7 months, a historical net loss rate of 0.42% (based on static pool data from 2019 through 2021), and a 60+ day delinquency rate of 0.87% as of the statistical cut-off date of June 30, 2022. The Offering Memorandum also includes pool stratification tables presenting the composition of the receivables pool by, among other things, loan balance, APR, remaining term, geographic concentration, insurer concentration, and policy type.

(c) Capital Structure. Description of the capital structure of the transaction, including the Class A Notes ($375,000,000), the Class B Notes ($75,000,000), the Class C Notes ($35,000,000), and the overcollateralization amount ($15,000,000), together with a description of the subordination levels, credit enhancement mechanisms, and the sequential payment waterfall.

(d) Preliminary Ratings. Disclosure of the preliminary ratings assigned to each class of Notes by two nationally recognized rating agencies: Brindoval Ratings (AAA(cr) for the Class A Notes, A(cr) for the Class B Notes, and BBB(cr) for the Class C Notes) and Pinnacle Rating Services (Aaa(p) for the Class A Notes, A1(p) for the Class B Notes, and Baa2(p) for the Class C Notes).

(e) Risk Factors. A comprehensive discussion of risk factors applicable to an investment in the Notes, including risks relating to the credit quality and performance of the receivables pool, the financial condition and performance of the Originator and Servicer, the revolving nature of the receivables pool, prepayment risk, reinvestment risk, interest rate risk, subordination and credit enhancement risks, regulatory risks, and other factors material to an investment decision.

(f) Transaction Structure and Waterfall. Description of the transaction structure, including the flow of funds from obligors through the collection account to the various payment priorities, the sequential payment waterfall applicable to principal and interest distributions, the early amortization triggers (including pool performance triggers, servicer default triggers, and insolvency triggers), and the eligible receivables criteria applicable to new receivables added to the revolving pool.

(g) Tax Considerations. A discussion of certain United States federal income tax considerations relevant to an investment in the Notes, prepared by Sylvia Hartwell of Calderwood & Harkness LLP, including a discussion of the treatment of the Notes as indebtedness of the Issuer for federal income tax purposes, the treatment of interest payments on the Notes, the applicability of withholding requirements to non-U.S. holders, and certain FATCA considerations.

(h) Transfer Restrictions and Legending. Description of the transfer restrictions applicable to the Notes, including the restrictions on resale under Rule 144A and Regulation S, the legending requirements, and the conditions under which the restrictive legends may be removed.

Based on our review, the Offering Memorandum provides prospective purchasers with comprehensive disclosure of the information material to an evaluation of the Notes and the underlying receivables pool, and is adequate for purposes of Rule 144A(d)(4) and for purposes of supporting the availability of the Section 4(a)(2) exemption.

5.5 Transfer Restrictions and Legending

The Notes will bear restrictive legends substantially in the form set forth in Exhibit [●] to the Indenture. Each such legend includes a statement that:

(a) The Notes have not been registered under the Securities Act or the securities laws of any state or other jurisdiction, and may not be offered, sold, pledged, or otherwise transferred except in compliance with the Securities Act and applicable state securities laws;

(b) The Notes may be resold only (i) to the Issuer, (ii) pursuant to Rule 144A to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of one or more QIBs, (iii) in an offshore transaction in compliance with Regulation S, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), or (v) pursuant to an effective registration statement under the Securities Act, and in each case in accordance with any applicable securities laws of any state of the United States; and

(c) The holder of the Notes, by accepting delivery thereof, agrees to the foregoing transfer restrictions and agrees not to offer, sell, pledge, or otherwise transfer the Notes except in compliance therewith.

The Indenture provides that the Trustee (Calvoneth Trust Company, N.A.) shall not register any transfer of Notes that does not comply with the applicable transfer restrictions set forth therein. In particular, the Trustee is required to verify that any proposed transferee has delivered the required certifications and representations regarding its QIB or non-U.S. person status, as applicable, prior to registering any transfer.

As noted in Section 5.3 above, Notes offered and sold in reliance on Regulation S will initially be represented by a Temporary Regulation S Global Note, which will be exchangeable for interests in a Permanent Regulation S Global Note after the expiration of the 40-day distribution compliance period, upon certification of non-U.S. beneficial ownership. Notes offered and sold in reliance on Rule 144A will be represented by a separate global note (the "Rule 144A Global Note") deposited with the Trustee as custodian and held through the book-entry facilities of The Depository Trust Company.

These transfer restriction and legending mechanisms are consistent with prevailing market practice for Rule 144A / Regulation S offerings of asset-backed securities and are designed to ensure ongoing compliance with the exemptions relied upon in connection with the offering.

6. Investment Company Act Analysis

For the avoidance of doubt, we note that QRF 2022-1, as the Issuer, is not required to register as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Issuer's exemption from registration under the Investment Company Act is based on Rule 3a-7 thereunder (17 C.F.R. § 270.3a-7), which provides an exemption for certain structured finance vehicles.

Rule 3a-7 provides that an issuer will not be deemed an investment company if, among other conditions:

(a) The issuer issues securities the payment of which is primarily serviced by the cash flows from a discrete pool of receivables or other financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period;

(b) A trustee (or its functional equivalent) is appointed, with specified duties, to act on behalf of the holders of such securities;

(c) The securities are structured in a manner designed to protect holders from losses on the underlying financial assets; and

(d) The issuer does not engage in business activities other than the ownership of the financial assets and the issuance of the securities.

QRF 2022-1 satisfies each of these conditions. The Notes are asset-backed securities the payment of which is primarily serviced by the cash flows from a revolving pool of insurance premium finance receivables that, by their terms, convert into cash within a finite time period (the weighted average remaining term of the receivables is approximately 5.7 months). Calvoneth Trust Company, N.A. has been appointed as trustee under the Indenture with specified duties to act on behalf of the Noteholders, including the enforcement of remedies upon an event of default. The Notes are structured with sequential subordination and overcollateralization designed to protect senior Noteholders from losses on the underlying receivables. QRF 2022-1 does not engage in any business activities other than the acquisition, ownership, and financing of the receivables and the issuance of the Notes.

We are not delivering a separate formal opinion on the Investment Company Act status of the Issuer in connection with this transaction; this analysis is provided for contextual purposes and to confirm the consistency of the Issuer's structure with the requirements of Rule 3a-7. The addressees should not place independent reliance on this section as a formal Investment Company Act opinion.

7. Opinions

Based on the foregoing, and subject to the assumptions, qualifications, and limitations set forth herein, we are of the opinion that:

Opinion 1 — Section 4(a)(2) Exemption for Initial Sale

The offer and sale of the Notes by the Issuer to the Initial Purchaser pursuant to the Note Purchase Agreement are exempt from the registration requirements of Section 5 of the Securities Act by reason of Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering. The initial sale involves a single, sophisticated institutional purchaser (Ridgeline Capital Markets LLC, an SEC-registered broker-dealer and QIB) with full access to the type of information that would be contained in a registration statement, conducted without general solicitation or general advertising and subject to appropriate investment intent representations and transfer restrictions.

Opinion 2 — Rule 144A Resale Exemption

Assuming compliance by the Initial Purchaser with its representations, warranties, and agreements set forth in the Note Purchase Agreement regarding the manner of the offering and sale of the Notes, the resale of the Notes (or interests therein) by the Initial Purchaser to QIBs (within the meaning of Rule 144A(a)(1) under the Securities Act) in transactions meeting the requirements of Rule 144A under the Securities Act will not require registration under Section 5 of the Securities Act and will be exempt from the registration requirements thereof by virtue of the safe harbor provided by Rule 144A.

Opinion 3 — Regulation S Exemption

Assuming compliance by the Initial Purchaser with its representations, warranties, and agreements set forth in the Note Purchase Agreement regarding the manner of the offering and sale of the Notes, the offer and sale of the Notes by the Initial Purchaser in offshore transactions to non-U.S. persons (as defined in Rule 902(k) of Regulation S) in compliance with the applicable provisions of Regulation S under the Securities Act (including the Category 2 offering restrictions, distribution compliance period requirements, and certification procedures set forth in the Note Purchase Agreement and the Indenture) will not require registration under Section 5 of the Securities Act and will be exempt from the registration requirements thereof by virtue of the safe harbor provided by Regulation S.

Opinion 4 — No Integration

The offering and sale of the Notes, as described herein, should not be integrated with any prior or subsequent offering of securities by the Issuer, the Sponsor, or any affiliate thereof for purposes of determining whether the registration requirements of Section 5 of the Securities Act apply to the offering of the Notes. This opinion is based on the fact that the offering of the Notes is a discrete financing transaction with a defined structure, offering participants, and investor base, and is not part of a single plan of financing that would require integration with any other offering. This opinion is subject to the condition that any other offerings by the Issuer, the Sponsor, or their affiliates are conducted in compliance with applicable exemptions from registration under the Securities Act and are not designed or conducted in a manner that would cause integration with the offering of the Notes.

Opinion 5 — No General Solicitation

Based on our review of the Transaction Documents, the Offering Memorandum, the Investor Presentation Deck, the Roadshow Script and Talking Points, and such other materials and information as we have deemed relevant, no form of "general solicitation" or "general advertising" (within the meaning of Rule 502(c) of Regulation D under the Securities Act) or "directed selling efforts" (within the meaning of Rule 902(c) of Regulation S under the Securities Act) has been used in connection with the offer and sale of the Notes. This opinion is subject to the assumptions stated herein regarding the conduct of the Initial Purchaser, the Issuer, the Sponsor, and their respective agents and representatives. We note that the Investor Presentation Deck and Roadshow Script were distributed only to pre-qualified institutional investors in one-on-one and small group settings and were not published, circulated, or otherwise disseminated in a manner constituting general solicitation, general advertising, or directed selling efforts.

8. Qualifications and Limitations

The opinions expressed herein are subject to the following qualifications and limitations:

(a) This opinion is limited to the federal securities laws of the United States, including the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder by the SEC. We do not opine on the laws of any other jurisdiction, including any state or territorial "blue sky" or securities laws, the laws of any foreign jurisdiction, or the rules or regulations of any self-regulatory organization.

(b) This opinion is based on facts in existence and laws in effect as of the date hereof. We assume no obligation to advise the addressees or any other person of any change in applicable law, regulation, or interpretive guidance, or of any change in the facts or circumstances upon which this opinion is based, that may occur after the date hereof, regardless of whether such change would affect the opinions expressed herein.

(c) This opinion assumes that all parties to the Transaction Documents will comply in all material respects with their respective obligations under the Note Purchase Agreement, the Indenture, and the other Transaction Documents, and that all applicable conditions precedent set forth therein will be duly satisfied or, where applicable, waived. To the extent that the opinions expressed herein are dependent upon the future conduct of any party, such opinions assume that such conduct will be in accordance with the representations, warranties, and agreements contained in the Transaction Documents.

(d) This opinion is rendered solely for the benefit of the addressees named herein and may not be relied upon by any other person or entity without the prior written consent of Calderwood & Harkness LLP. Subject to the provisions of Section 9 below regarding permitted reliance parties, this opinion may not be used, circulated, quoted, or referred to for any purpose other than in connection with the transactions contemplated by the Note Purchase Agreement.

(e) This opinion does not address the following matters:

(i) Any antifraud provisions of the Securities Act (including Section 17(a) thereof) or the Securities Exchange Act of 1934, as amended (including Section 10(b) and Rule 10b-5 thereunder), or any similar antifraud provisions of any state or foreign securities laws. We express no view as to whether the Offering Memorandum, the Transaction Documents, or any other materials used in connection with the offering contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;

(ii) The availability of any exemption from registration under the Securities Act in connection with any resale of the Notes other than the specific resales addressed in Opinions 2 and 3 above, including any resale by a subsequent holder of the Notes;

(iii) Compliance with the securities or "blue sky" laws of any state of the United States or any other jurisdiction, or the securities laws of any foreign jurisdiction;

(iv) The characterization of the Issuer or the Notes under the Investment Company Act of 1940, as amended, or the rules and regulations thereunder, which is addressed in the contextual analysis set forth in Section 6 above but is not the subject of a formal opinion delivered herein;

(v) Any federal, state, local, or foreign tax matters relating to the Issuer, the Notes, or the transactions contemplated by the Transaction Documents, which are addressed in the separate Draft Opinion — Tax Characterization dated October 10, 2022, prepared by Sylvia Hartwell of Calderwood & Harkness LLP; and

(vi) Any matters arising under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended, relating to the suitability of the Notes as investments for employee benefit plans or individual retirement accounts.

(f) This opinion is subject to the effect of applicable bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent transfer, and similar laws affecting creditors' rights and remedies generally, including the Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in effect.

(g) The availability of equitable remedies, including specific performance and injunctive relief, is subject to the discretion of the court before which any proceeding therefor may be brought, and we express no opinion as to the availability of any particular equitable remedy with respect to the Notes or the Transaction Documents.

9. Reliance and Benefit

This opinion is furnished to the addressees named herein solely in connection with the transactions contemplated by the Note Purchase Agreement and may not be used, circulated, quoted, or relied upon for any other purpose or in connection with any other transaction.

The parties entitled to rely on this opinion are limited to the following (collectively, the "Permitted Reliance Parties"):

(a) Quorum Receivables Funding 2022-1 LLC, as the Issuer;

(b) Quorum Insurance Holdings Corp., as the Sponsor;

(d) Calvoneth Trust Company, N.A., as the Trustee.

No other party may rely on this opinion without the prior written consent of Calderwood & Harkness LLP.

Notwithstanding the foregoing, Calloway & Brandt LLP, as counsel to the Initial Purchaser, and Ashfield & Greer LLP, as counsel to the Trustee, may rely on this opinion solely for purposes of confirming the availability of the securities law exemptions described herein in connection with such firms' delivery of their respective closing opinions and due diligence assessments in connection with the transactions contemplated by the Note Purchase Agreement. Such reliance shall not extend to any other matter addressed or referenced in this opinion, and neither Calloway & Brandt LLP nor Ashfield & Greer LLP shall be deemed a Permitted Reliance Party for any other purpose.

This opinion may not be relied upon by, and is not intended to confer any benefit upon, any purchaser of the Notes, any rating agency, any other person or entity participating in the transactions contemplated by the Note Purchase Agreement, or any other third party, in each case without our prior written consent.

10. Signature

Very truly yours,

[DRAFT — SIGNATURE TO BE INSERTED UPON FINALIZATION]

CALDERWOOD & HARKNESS LLP

NOTICE: This draft opinion has not been finalized and is not being delivered for reliance. It is circulated for discussion purposes only in connection with Calderwood & Harkness LLP Matter No. 1025-00007. The opinions expressed herein are preliminary in nature and are subject to revision, supplementation, or withdrawal upon further review of the Transaction Documents, completion of due diligence, and satisfaction of closing conditions. No person or entity should rely upon the opinions expressed in this draft for any purpose. The final opinion, if and when issued, will supersede this draft in its entirety.

Cross-Reference Documents

The following documents, as referenced throughout this opinion, are incorporated by cross-reference and form part of the basis for the analysis and opinions set forth herein:

1. Note Purchase Agreement (execution draft v3, dated October 12, 2022) among Quorum Receivables Funding 2022-1 LLC, Quorum Insurance Holdings Corp., and Ridgeline Capital Markets LLC.

2. Indenture (execution draft v4, dated October 12, 2022) between Quorum Receivables Funding 2022-1 LLC and Calvoneth Trust Company, N.A., as trustee.

3. Preliminary Offering Memorandum (v3, dated October 12, 2022), including the Issuer Supplement containing pool stratification tables.

4. Form of Restrictive Legends, as set forth in Exhibit [●] to the Indenture.

CALDERWOOD & HARKNESS LLP

CALDERWOOD & HARKNESS LLP Attorneys at Law
601 Lexington Avenue New York, New York 10022
Telephone: (212) 558-4000 Facsimile: (212) 558-3588
DRAFT — October 8, 2022
DRAFT — FOR DISCUSSION PURPOSES ONLY — NOT FOR RELIANCE
October 8, 2022
Quorum Receivables Funding 2022-1 LLC c/o Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, Connecticut 06901
Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, Connecticut 06901
Ridgeline Capital Markets LLC 383 Madison Avenue, 14th Floor New York, New York 10179
Calvoneth Trust Company, N.A. 600 Travis Street, Suite 5800 Houston, Texas 77002
Re: Quorum Receivables Funding 2022-1 LLC — $485,000,000 Asset-Backed Notes Draft Opinion — No Registration Required (Rule 144A / Regulation S) Calderwood & Harkness Matter No. 1025-00007
Ladies and Gentlemen:
1. Introduction
We have acted as counsel to Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (the "Issuer" or "QRF 2022-1"), and Quorum Insurance Holdings Corp., a Delaware corporation (the "Sponsor" or "QIH"), in connection with the proposed issuance by the Issuer of asset-backed notes in three classes (collectively, the "Notes"), as follows:
(a) $375,000,000 aggregate principal amount of Class A Notes (preliminary CUSIP: 74892TAA3) (the "Class A Notes");
(b) $75,000,000 aggregate principal amount of Class B Notes (preliminary CUSIP: 74892TAB1) (the "Class B Notes"); and
(c) $35,000,000 aggregate principal amount of Class C Notes (preliminary CUSIP: 74892TAC9) (the "Class C Notes" and, together with the Class A Notes and the Class B Notes, the "Notes").
The Notes represent an aggregate principal amount of $485,000,000. When combined with $15,000,000 in overcollateralization constituting the retained interest of the Issuer, the total issuance size of the transaction is $500,000,000.
The Notes are to be issued pursuant to an Indenture dated as of [●], 2022 (the "Indenture"), between the Issuer and Calvoneth Trust Company, N.A., a national banking association, as trustee (the "Trustee"). The Notes are to be offered and sold to Ridgeline Capital Markets LLC (the "Initial Purchaser") pursuant to the Note Purchase Agreement dated as of [●], 2022 (the "Note Purchase Agreement"), among the Issuer, the Sponsor, and the Initial Purchaser.
The Notes are backed by a revolving pool of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a Delaware limited liability company and wholly owned subsidiary of the Sponsor. QPF originates insurance premium finance loans to commercial and personal lines policyholders and is responsible for servicing the receivables in its capacity as servicer under the Servicing Agreement (as defined below).
This opinion is being delivered pursuant to Section [●] of the Note Purchase Agreement, which requires that Calderwood & Harkness LLP deliver to each of the addressees hereof a legal opinion addressing the availability of exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), in connection with the offer, sale, and resale of the Notes as contemplated by the Note Purchase Agreement and the Indenture. This opinion is identified as Calderwood & Harkness Matter No. 1025-00007.
2. Documents Examined
In connection with rendering the opinions set forth herein, we have examined originals, or copies identified to our satisfaction as being true copies of originals, of the following documents (collectively, the "Transaction Documents"):
1.  The Note Purchase Agreement (execution draft v3, dated October 12, 2022) among Quorum Receivables Funding 2022-1 LLC, Quorum Insurance Holdings Corp., and Ridgeline Capital Markets LLC (the "Note Purchase Agreement");
2.  The Indenture (execution draft v4, dated October 12, 2022) between Quorum Receivables Funding 2022-1 LLC and Calvoneth Trust Company, N.A., as trustee (the "Indenture");
3.  The Preliminary Offering Memorandum dated [●], 2022 (v3, dated October 12, 2022) (the "Offering Memorandum"), including the Issuer Supplement containing pool stratification tables, prepared in connection with the offer and sale of the Notes;
4.  The forms of the Class A Notes, Class B Notes, and Class C Notes, each substantially in the form attached as an exhibit to the Indenture;
5.  The Amended and Restated Limited Liability Company Agreement of Quorum Receivables Funding 2022-1 LLC, dated August 3, 2022 (the "LLC Agreement");
6.  The Certificate of Formation of Quorum Receivables Funding 2022-1 LLC (Delaware Secretary of State File No. 7894231), filed August 3, 2022, together with any amendments thereto;
7.  The Receivables Sale Agreement (execution draft v3) between Quorum Premium Finance LLC, as seller, and Quorum Receivables Holding LLC ("QRH"), as purchaser (the "Receivables Sale Agreement");
8.  The Receivables Transfer Agreement (execution draft v3) between Quorum Receivables Holding LLC, as transferor, and Quorum Receivables Funding 2022-1 LLC, as transferee (the "Receivables Transfer Agreement");
9.  The Servicing Agreement (execution draft v3) among Quorum Receivables Funding 2022-1 LLC, Quorum Premium Finance LLC, as servicer, and Calvoneth Trust Company, N.A., as trustee and backup servicer (the "Servicing Agreement");
10.  The Secretary's Certificate of Quorum Insurance Holdings Corp. dated July 27, 2022, certifying copies of board resolutions authorizing the Sponsor's participation in the transactions contemplated by the Transaction Documents, including the authorization and direction of officers to negotiate, execute, and deliver all related documentation;
11.  The Manager's Certificate of Quorum Premium Finance LLC dated July 27, 2022, certifying copies of the authorizing resolutions of the sole member and the manager of QPF approving QPF's entry into the Receivables Sale Agreement, the Servicing Agreement, and the other Transaction Documents to which QPF is a party;
12.  The Investor Presentation Deck dated October 20, 2022, prepared by the Sponsor and the Initial Purchaser for distribution to prospective investors in connection with the offering of the Notes;
13.  The Roadshow Script and Talking Points dated October 22, 2022, prepared by the Sponsor and the Initial Purchaser for use in one-on-one and small group investor presentations in connection with the offering of the Notes; and
14.  Such other documents, certificates, records, and instruments as we have deemed necessary or appropriate for purposes of rendering the opinions expressed herein, including certificates of public officials and officers of the Issuer and the Sponsor.
In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the authenticity of the originals of such copies. We have also assumed the completeness and accuracy, as of the date hereof, of all corporate and organizational records and documents furnished to us by the Issuer, the Sponsor, and their respective affiliates and representatives.
3. Assumptions
In rendering the opinions set forth herein, we have relied upon the following assumptions, in addition to those stated elsewhere in this opinion, without independent investigation or verification:
(a) All signatures on the documents examined by us are genuine, all documents submitted to us as originals are authentic, and all documents submitted to us as copies conform in all material respects to their respective originals.
(b) Each party to the Note Purchase Agreement, the Indenture, and each other Transaction Document (other than the Issuer and the Sponsor, as to which we have made an independent analysis) has been duly organized, is validly existing and in good standing under the laws of its jurisdiction of organization, and has full power and authority to execute, deliver, and perform its obligations under each such document to which it is a party.
(c) The Note Purchase Agreement, the Indenture, and the Notes have been or will be duly authorized, executed, and delivered by all parties thereto, and constitute or will constitute the legal, valid, and binding obligations of each such party, enforceable against each such party in accordance with their respective terms, subject to applicable bankruptcy, insolvency, and similar laws affecting creditors' rights generally and to general principles of equity.
(d) The Offering Memorandum, at the time of delivery to prospective purchasers of the Notes, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. We have not undertaken any independent investigation or verification of the accuracy, completeness, or adequacy of the information contained in the Offering Memorandum, and we express no view thereon.
(e) The Initial Purchaser (Ridgeline Capital Markets LLC) will comply in all material respects with its representations, warranties, and agreements set forth in the Note Purchase Agreement regarding the manner of the offering and sale of the Notes, including its undertakings regarding the classes of persons to whom the Notes will be offered and sold, the jurisdictions in which offers and sales will be made, and the procedures to be followed in connection therewith.
(f) Each purchaser of the Notes in reliance on Rule 144A under the Securities Act is a "qualified institutional buyer" ("QIB") within the meaning of Rule 144A(a)(1) promulgated under the Securities Act, and each such purchaser is acquiring the Notes for its own account or for the account of one or more QIBs.
(g) Each purchaser of the Notes in reliance on Regulation S under the Securities Act is not a "U.S. person" as defined in Rule 902(k) of Regulation S, and the offer and sale of Notes to each such purchaser occurs in an "offshore transaction" as defined in Rule 902(h) of Regulation S.
(h) No "general solicitation" or "general advertising" (as those terms are used in Rule 502(c) of Regulation D under the Securities Act) and no "directed selling efforts" (as that term is defined in Rule 902(c) of Regulation S under the Securities Act) have been or will be made or conducted in connection with the offering and sale of the Notes by the Issuer, the Sponsor, the Initial Purchaser, or any person acting on their behalf.
(i) The Notes will not be offered or sold within the United States or to U.S. persons (in the case of the Regulation S offering) except in accordance with Rule 144A, and all applicable offering restrictions and distribution compliance period requirements under Regulation S will be observed.
(j) All factual representations and warranties made by the Issuer, the Sponsor, the Initial Purchaser, and each other party in the Transaction Documents are and will be true and correct in all material respects as of the dates made and as of the closing date of the offering.
4. Applicable Law and Regulatory Framework
4.1 Securities Act of 1933
Section 5 of the Securities Act generally provides that it shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell or offer to sell a security, unless a registration statement has been filed and is in effect with the Securities and Exchange Commission (the "SEC") with respect to such security, or unless an exemption from the registration requirements is available.
The Notes constitute "securities" within the meaning of Section 2(a)(1) of the Securities Act. The term "security" is defined broadly under the Securities Act and includes "any note," subject to certain judicially recognized exceptions that are not applicable here. The Notes are debt securities backed by a pool of self-liquidating financial assets (insurance premium finance receivables) and are of a type routinely classified as securities under the Securities Act. There is no basis to contend that the Notes fall outside the scope of Section 2(a)(1).
The Notes have not been and will not be registered under the Securities Act. No registration statement on any form (including Form SF-1 or Form SF-3 under Regulation AB II) has been filed or is contemplated to be filed with the SEC with respect to the Notes. Accordingly, the offer, sale, and resale of the Notes must be effected in reliance upon one or more available exemptions from the registration requirements of Section 5 of the Securities Act.
4.2 Rule 144A
Rule 144A, promulgated under the Securities Act (17 C.F.R. § 230.144A), provides a non-exclusive safe harbor exemption from the registration requirements of Section 5 of the Securities Act for resales of certain "restricted securities" (as defined in Rule 144(a)(3) under the Securities Act) to QIBs. Rule 144A was adopted by the SEC in 1990 and has become the principal mechanism through which unregistered debt securities, including asset-backed securities, are distributed to institutional investors in the United States.
The key conditions of Rule 144A, and their applicability to the contemplated offering, are as follows:
(i) QIB Purchaser Requirement (Rule 144A(d)(1)). Securities must be offered and sold only to a person whom the seller and any person acting on behalf of the seller reasonably believe to be a QIB, or to a person whom the seller and any person acting on behalf of the seller reasonably believe is purchasing for the account of a QIB. A QIB is generally defined as an entity that, in the aggregate, owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with such entity. Registered broker-dealers need only own and invest on a discretionary basis at least $10 million in securities of non-affiliated issuers to qualify as QIBs. The Note Purchase Agreement and the Indenture require that resales in the United States be made only to persons whom the seller reasonably believes to be QIBs.
(ii) Notice Requirement (Rule 144A(d)(2)). The seller and any person acting on behalf of the seller must take reasonable steps to ensure that the purchaser is aware that the seller may be relying on the exemption from the registration requirements of Section 5 of the Securities Act provided by Rule 144A. The Note Purchase Agreement requires the Initial Purchaser to take such reasonable steps, and the Notes bear legends to such effect.
(iii) Non-Fungibility Requirement (Rule 144A(d)(3)). At the time of issuance, the securities being offered must not be of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted in an automated inter-dealer quotation system. The Notes constitute a newly created class of securities and are not, and at the time of issuance will not be, listed on any national securities exchange or quoted in any automated inter-dealer quotation system. This condition is satisfied.
(iv) Information Requirement (Rule 144A(d)(4)). In the case of securities of an issuer that is not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the holder of such securities and a prospective purchaser designated by the holder must have the right to obtain from the issuer, upon request, certain reasonably current information, including a brief statement of the nature of the business of the issuer and the products and services it offers, and the issuer's most recent balance sheet and profit and loss and retained earnings statements. The Offering Memorandum provides comprehensive disclosure regarding the Issuer, the Sponsor, the Originator, the receivables pool, and the transaction structure, and is sufficient to satisfy this information requirement. Additionally, the Indenture contains covenants requiring the Issuer to make available, upon request by any holder or prospective purchaser of the Notes, the information described in Rule 144A(d)(4), including periodic reports containing financial information, pool performance data, and any other information reasonably necessary for a prospective purchaser to evaluate the Notes and the underlying receivables.
4.3 Regulation S
Regulation S, promulgated under the Securities Act (17 C.F.R. §§ 230.901–230.905), provides a safe harbor for offers and sales of securities that occur outside the United States. Regulation S is premised on the territorial principle underlying the Securities Act, as articulated in Rule 901, which provides that offers and sales of securities that occur outside the United States are not subject to the registration requirements of Section 5.
Regulation S establishes three categories of safe harbors with varying conditions depending on the characteristics of the issuer and the securities, the degree of U.S. market interest, and other factors. Category 2 of Regulation S (as set forth in Rule 903(b)(2)) is applicable to the Notes because QRF 2022-1 is not a "reporting issuer" (i.e., it is not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act), and the Notes are debt securities.
The key conditions of Regulation S, as applicable to the Notes under Category 2, are as follows:
(i) Offshore Transaction (Rule 903(a)(1)). The offer and sale must occur in an "offshore transaction" as defined in Rule 902(h). An offshore transaction is one in which (A) the offer is not made to a person in the United States, and (B) either (1) at the time the buy order is originated, the buyer is outside the United States or the seller and any person acting on its behalf reasonably believe that the buyer is outside the United States, or (2) the transaction is executed in, on, or through the facilities of a designated offshore securities market. The Note Purchase Agreement requires the Initial Purchaser to ensure that all offers and sales made in reliance on Regulation S are made in offshore transactions satisfying these requirements.
(ii) No Directed Selling Efforts (Rule 903(a)(2)). No "directed selling efforts" (as defined in Rule 902(c)) may be made in the United States by the seller, an affiliate, or any person acting on their behalf. Directed selling efforts include, among other things, advertising, articles, notices, or other communications published in the United States or in a U.S. edition of a publication that may reasonably be expected to condition the market for the securities. The Issuer, the Sponsor, and the Initial Purchaser have represented and agreed that no directed selling efforts have been or will be made in connection with the offering of the Notes. We note that the Investor Presentation Deck and the Roadshow Script referenced in Section 2 above were prepared for and delivered only to prospective investors in one-on-one or small group presentations and do not constitute directed selling efforts.
(iii) Category 2 Distribution Compliance Period and Offering Restrictions (Rule 903(b)(2)). Category 2 imposes a 40-day "distribution compliance period" during which certain additional restrictions apply. During the distribution compliance period, offers and sales of the Notes in reliance on Regulation S may not be made to U.S. persons or for the account or benefit of U.S. persons (other than a distributor). In addition, the following transactional restrictions apply during the distribution compliance period:
(A) The Notes offered and sold in reliance on Regulation S will initially be represented by a temporary global note, which will be exchangeable for interests in a permanent global note only upon certification by the beneficial owner that such owner is not a U.S. person and that the Notes are not being acquired for the account or benefit of a U.S. person, or in a transaction meeting the requirements of another exemption from registration under the Securities Act;
(B) The Notes will bear legends restricting transfer to U.S. persons during the distribution compliance period, except in transactions exempt from registration under the Securities Act;
(C) All offering materials and documents used in connection with offers and sales made in reliance on Regulation S will include statements to the effect that the Notes have not been registered under the Securities Act and may not be offered or sold in the United States or to U.S. persons unless registered or exempt from registration; and
(D) Purchasers of Notes in reliance on Regulation S will be required to certify, at the time of purchase, that they are not U.S. persons and are not acquiring the Notes for the account or benefit of a U.S. person.
The Note Purchase Agreement and the Indenture contain provisions implementing each of these Regulation S requirements, including the transfer restrictions, legending obligations, and certification requirements described above.
4.4 Section 4(a)(2) of the Securities Act
As a supplemental and independent basis for the exemption of the initial sale of the Notes from registration, we note that the initial sale of the Notes by the Issuer to the Initial Purchaser (Ridgeline Capital Markets LLC) constitutes a transaction "not involving any public offering" within the meaning of Section 4(a)(2) of the Securities Act.
Section 4(a)(2) exempts from the registration requirements of Section 5 "transactions by an issuer not involving any public offering." The Supreme Court, in SEC v. Ralston Purina Co., 346 U.S. 119 (1953), established that the availability of this exemption turns on whether the particular class of persons affected needs the protection of the Securities Act, which in turn depends on whether the offerees have access to the kind of information that registration would disclose. Subsequent judicial and SEC interpretive guidance has identified a number of factors relevant to the Section 4(a)(2) analysis, including the number and sophistication of the offerees, the size of the offering, the manner of the offering, and the availability of information.
The following factors support the availability of the Section 4(a)(2) exemption for the initial sale of the Notes:
(a) Single Sophisticated Purchaser. The Notes are being offered and sold to a single Initial Purchaser, Ridgeline Capital Markets LLC. Ridgeline is a sophisticated institutional investor and an SEC-registered broker-dealer. Ridgeline has substantial experience in the purchase and resale of asset-backed securities, including insurance premium finance receivables securitizations. There is no basis to conclude that Ridgeline requires the protections afforded by the registration requirements of the Securities Act.
(b) No General Solicitation or General Advertising. The Notes have not been and will not be offered through any form of general solicitation or general advertising. No public advertisements, articles, notices, or communications of any kind have been published or disseminated in connection with the offering. The Investor Presentation Deck and Roadshow Script referenced in Section 2 above were delivered only to pre-qualified institutional investors in connection with one-on-one and small group investor meetings, and do not constitute general solicitation or general advertising.
(c) Access to Information. The Initial Purchaser has had access to the type of information that would be contained in a registration statement, through the Offering Memorandum, the Transaction Documents, and direct contact with the Issuer, the Sponsor, and their respective management teams. The Offering Memorandum contains detailed information regarding the Issuer, the Sponsor, the Originator, the receivables pool, the transaction structure, risk factors, and other material information necessary for an informed investment decision.
(d) Investment Intent. The Note Purchase Agreement contains representations by the Initial Purchaser that it is acquiring the Notes for the purpose of resale in accordance with Rule 144A and Regulation S, and not with a view to any distribution thereof in violation of the Securities Act. The Initial Purchaser has represented that it will comply with the transfer restrictions and other conditions applicable to resales under Rule 144A and Regulation S.
(e) Transfer Restrictions. The Notes are subject to transfer restrictions set forth in the Indenture, including legending requirements, which ensure that subsequent resales will be made only in compliance with applicable exemptions from registration.
Based on the foregoing factors, we believe that the initial sale of the Notes by the Issuer to the Initial Purchaser qualifies for the exemption from registration provided by Section 4(a)(2) of the Securities Act.
4.5 Regulation D Considerations
Although the Issuer is not formally relying on the safe harbor provided by Regulation D under the Securities Act (17 C.F.R. §§ 230.501–230.508), we note for completeness that the offering and sale of the Notes is consistent with the requirements of Rule 506(b) of Regulation D, which would provide an additional supplemental basis for the exemption. In particular:
(a) No general solicitation or general advertising has been or will be used in connection with the offering;
(b) The offering is being made to a limited number of purchasers (a single Initial Purchaser), all of whom are "accredited investors" within the meaning of Rule 501(a) of Regulation D; and
(c) The Notes are subject to the transfer restrictions required by Regulation D, including legending.
We express no formal opinion regarding the availability of the Regulation D exemption, but note the foregoing as a matter of additional comfort.
4.6 Securities Exchange Act of 1934
The Issuer is not, and as a result of the issuance and sale of the Notes will not become, subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Issuer is a special-purpose Delaware limited liability company formed for the sole purpose of acquiring insurance premium finance receivables and issuing the Notes. The Issuer has no class of securities registered or required to be registered under Section 12 of the Exchange Act, and the issuance of the Notes will not trigger any registration obligation under the Exchange Act.
In addition, QRF 2022-1 is not required to register as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act"), based on the Issuer's reliance on Rule 3a-7 thereunder, as discussed in Section 6 below.
5. Analysis of the Offering Structure
5.1 The Initial Sale (Issuer to Initial Purchaser)
The offering structure contemplates that the Issuer (QRF 2022-1) will sell the Notes directly to Ridgeline Capital Markets LLC as the sole Initial Purchaser pursuant to the Note Purchase Agreement. This initial sale constitutes a private placement and is not a public offering of securities.
Ridgeline Capital Markets LLC is a sophisticated, SEC-registered broker-dealer with extensive experience in the structuring, placement, and distribution of asset-backed securities and structured finance products. Ridgeline is an "accredited investor" under Rule 501(a) of Regulation D by virtue of its status as a registered broker-dealer. Ridgeline is also a QIB within the meaning of Rule 144A.
Ridgeline has represented and warranted in the Note Purchase Agreement that it is acquiring the Notes for the purpose of resale to investors in accordance with Rule 144A and Regulation S under the Securities Act, and not with a view to any distribution thereof in violation of the Securities Act. Ridgeline has further represented that it will comply with the offering restrictions and transfer procedures set forth in the Note Purchase Agreement and the Indenture.
As discussed in Section 4.4 above, the initial sale of the Notes by the Issuer to the Initial Purchaser qualifies for the exemption from registration provided by Section 4(a)(2) of the Securities Act. The sale involves a single, highly sophisticated institutional purchaser with full access to the information that would be contained in a registration statement, in a transaction conducted without general solicitation or general advertising and subject to appropriate transfer restrictions.
5.2 Resales Under Rule 144A
Following the initial purchase of the Notes from the Issuer, Ridgeline will resell the Notes (or portions thereof) in the United States to QIBs in transactions designed to meet the requirements of Rule 144A under the Securities Act. The structure of these resales, as implemented by the Note Purchase Agreement and the Indenture, satisfies each of the conditions of Rule 144A as follows:
(a) QIB Purchaser Requirement. The Note Purchase Agreement contains representations and agreements by Ridgeline that it will offer and sell the Notes in the United States only to persons it reasonably believes to be QIBs, or to persons it reasonably believes are purchasing for the account of one or more QIBs. Ridgeline has agreed to implement reasonable procedures to verify the QIB status of each prospective purchaser, including reliance on representations from such purchasers and, where applicable, on publicly available information regarding the investment portfolios of such purchasers.
(b) Notice to Purchasers. Ridgeline has agreed in the Note Purchase Agreement that it will inform each prospective purchaser of the Notes in the United States that the seller may be relying on the exemption from registration provided by Rule 144A. This notice is provided both through the Offering Memorandum, which includes a prominent statement regarding the availability of the Rule 144A exemption, and through the restrictive legends borne by the Notes.
(c) Delivery of Offering Memorandum. The Note Purchase Agreement further requires Ridgeline to deliver or make available to each prospective purchaser a copy of the most recent version of the Offering Memorandum, including any supplements or amendments thereto, prior to the consummation of any sale.
(d) Non-Fungibility. The Notes are not of the same class as any securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in an automated inter-dealer quotation system. The Notes are a newly created class of asset-backed securities, and no other securities of the Issuer are so listed or quoted. The non-fungibility condition of Rule 144A(d)(3) is satisfied.
(e) Information Availability. The Indenture contains provisions requiring the Issuer to furnish, upon request of any holder or beneficial owner of the Notes (or any prospective purchaser designated by such holder or beneficial owner), the information described in Rule 144A(d)(4) under the Securities Act. This information includes a brief statement of the nature of the Issuer's business and the financial assets held by the Issuer, as well as the Issuer's most recent financial statements (or, to the extent applicable, servicer reports containing equivalent financial information regarding the receivables pool). The Issuer has agreed to make such information available at all times during which the Notes are outstanding.
(f) Restrictive Legends. The Notes bear restrictive legends substantially in the form set forth in the Indenture, which state that the Notes have not been registered under the Securities Act and may not be offered, sold, or transferred except in compliance with the transfer restrictions described therein.
Based on the foregoing, and subject to the assumptions set forth in Section 3 above (including the assumption that Ridgeline and subsequent sellers will comply with the applicable requirements of Rule 144A), resales of the Notes in the United States to QIBs in accordance with the terms of the Note Purchase Agreement and the Indenture will qualify for the Rule 144A safe harbor and will be exempt from the registration requirements of Section 5 of the Securities Act.
5.3 Sales Under Regulation S
In addition to domestic resales under Rule 144A, Ridgeline will offer and sell Notes outside the United States to non-U.S. persons in offshore transactions in compliance with Regulation S under the Securities Act. As discussed in Section 4.3 above, Category 2 of Regulation S is applicable because QRF 2022-1 is not a reporting company under the Exchange Act and the Notes are debt securities.
The 40-day distribution compliance period applicable to Category 2 offerings begins on the later of (i) the date on which the Notes are first offered to persons other than distributors in reliance on Regulation S, and (ii) the closing date of the offering. During the distribution compliance period, the following restrictions apply:
(a) No offers or sales of the Notes may be made to U.S. persons or for the account or benefit of U.S. persons, except in transactions meeting the requirements of Rule 144A or another available exemption from registration.
(b) The Regulation S Notes will initially be represented by a temporary global note (the "Temporary Regulation S Global Note"), which will be deposited with the Trustee (or its designated custodian). Beneficial interests in the Temporary Regulation S Global Note may not be exchanged for interests in a permanent global note (the "Permanent Regulation S Global Note") until the expiration of the distribution compliance period, and only upon delivery by the beneficial owner of a certification (in the form prescribed by the Indenture) that such beneficial owner is not a U.S. person and is not acquiring the Notes for the account or benefit of a U.S. person, or is acquiring the Notes in a transaction meeting the requirements of an applicable exemption from registration under the Securities Act.
(c) The Notes bear legends restricting transfer to U.S. persons during the distribution compliance period, as described in Section 5.5 below.
(d) Purchasers of Notes in reliance on Regulation S are required to execute and deliver purchaser certifications (in the form attached to the Indenture) confirming their non-U.S. person status and the offshore nature of the transaction.
The Note Purchase Agreement and the Indenture implement each of the applicable offering restrictions, including the transfer restrictions, certification requirements, and temporary global note mechanics described above. Following the expiration of the distribution compliance period, the restrictions applicable to the Regulation S Notes will be relaxed in accordance with the terms of the Indenture, and beneficial interests in the Temporary Regulation S Global Note will be exchangeable for interests in the Permanent Regulation S Global Note upon delivery of the required certifications.
Based on the foregoing, and subject to the assumptions set forth in Section 3 above (including the assumption that Ridgeline and subsequent sellers will comply with the applicable requirements of Regulation S), offers and sales of the Notes outside the United States to non-U.S. persons in offshore transactions in compliance with Regulation S will be exempt from the registration requirements of Section 5 of the Securities Act.
5.4 Offering Memorandum Disclosure
Although the offering of the Notes is not required to comply with the disclosure requirements of Regulation AB II (17 C.F.R. §§ 229.1100–229.1125) promulgated by the SEC — the offering being exempt from registration as a Rule 144A / Regulation S private placement — the Offering Memorandum prepared in connection with the offering contains disclosure that is substantially consistent with market practice for insurance premium finance asset-backed securities transactions and provides prospective purchasers with the information necessary for an informed investment decision. The Offering Memorandum includes, among other things, the following:
(a) Transaction Parties. Descriptions of the Issuer (QRF 2022-1), the Sponsor (Quorum Insurance Holdings Corp., NYSE: QIHC), the Originator (Quorum Premium Finance LLC), the Depositor (Quorum Receivables Holding LLC), and the Servicer (Quorum Premium Finance LLC), including their respective roles, organizational structures, experience, and track records.
(b) Receivables Pool Characteristics. Detailed description of the initial receivables pool, including an initial pool balance of approximately $612,000,000, representing approximately 82,400 individual insurance premium finance loans, with a weighted average annual percentage rate ("APR") of 7.85%, a weighted average remaining term of 5.7 months, a historical net loss rate of 0.42% (based on static pool data from 2019 through 2021), and a 60+ day delinquency rate of 0.87% as of the statistical cut-off date of June 30, 2022. The Offering Memorandum also includes pool stratification tables presenting the composition of the receivables pool by, among other things, loan balance, APR, remaining term, geographic concentration, insurer concentration, and policy type.
(c) Capital Structure. Description of the capital structure of the transaction, including the Class A Notes ($375,000,000), the Class B Notes ($75,000,000), the Class C Notes ($35,000,000), and the overcollateralization amount ($15,000,000), together with a description of the subordination levels, credit enhancement mechanisms, and the sequential payment waterfall.
(d) Preliminary Ratings. Disclosure of the preliminary ratings assigned to each class of Notes by two nationally recognized rating agencies: Brindoval Ratings (AAA(cr) for the Class A Notes, A(cr) for the Class B Notes, and BBB(cr) for the Class C Notes) and Pinnacle Rating Services (Aaa(p) for the Class A Notes, A1(p) for the Class B Notes, and Baa2(p) for the Class C Notes).
(e) Risk Factors. A comprehensive discussion of risk factors applicable to an investment in the Notes, including risks relating to the credit quality and performance of the receivables pool, the financial condition and performance of the Originator and Servicer, the revolving nature of the receivables pool, prepayment risk, reinvestment risk, interest rate risk, subordination and credit enhancement risks, regulatory risks, and other factors material to an investment decision.
(f) Transaction Structure and Waterfall. Description of the transaction structure, including the flow of funds from obligors through the collection account to the various payment priorities, the sequential payment waterfall applicable to principal and interest distributions, the early amortization triggers (including pool performance triggers, servicer default triggers, and insolvency triggers), and the eligible receivables criteria applicable to new receivables added to the revolving pool.
(g) Tax Considerations. A discussion of certain United States federal income tax considerations relevant to an investment in the Notes, prepared by Sylvia Hartwell of Calderwood & Harkness LLP, including a discussion of the treatment of the Notes as indebtedness of the Issuer for federal income tax purposes, the treatment of interest payments on the Notes, the applicability of withholding requirements to non-U.S. holders, and certain FATCA considerations.
(h) Transfer Restrictions and Legending. Description of the transfer restrictions applicable to the Notes, including the restrictions on resale under Rule 144A and Regulation S, the legending requirements, and the conditions under which the restrictive legends may be removed.
Based on our review, the Offering Memorandum provides prospective purchasers with comprehensive disclosure of the information material to an evaluation of the Notes and the underlying receivables pool, and is adequate for purposes of Rule 144A(d)(4) and for purposes of supporting the availability of the Section 4(a)(2) exemption.
5.5 Transfer Restrictions and Legending
The Notes will bear restrictive legends substantially in the form set forth in Exhibit [●] to the Indenture. Each such legend includes a statement that:
(a) The Notes have not been registered under the Securities Act or the securities laws of any state or other jurisdiction, and may not be offered, sold, pledged, or otherwise transferred except in compliance with the Securities Act and applicable state securities laws;
(b) The Notes may be resold only (i) to the Issuer, (ii) pursuant to Rule 144A to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of one or more QIBs, (iii) in an offshore transaction in compliance with Regulation S, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), or (v) pursuant to an effective registration statement under the Securities Act, and in each case in accordance with any applicable securities laws of any state of the United States; and
(c) The holder of the Notes, by accepting delivery thereof, agrees to the foregoing transfer restrictions and agrees not to offer, sell, pledge, or otherwise transfer the Notes except in compliance therewith.
The Indenture provides that the Trustee (Calvoneth Trust Company, N.A.) shall not register any transfer of Notes that does not comply with the applicable transfer restrictions set forth therein. In particular, the Trustee is required to verify that any proposed transferee has delivered the required certifications and representations regarding its QIB or non-U.S. person status, as applicable, prior to registering any transfer.
As noted in Section 5.3 above, Notes offered and sold in reliance on Regulation S will initially be represented by a Temporary Regulation S Global Note, which will be exchangeable for interests in a Permanent Regulation S Global Note after the expiration of the 40-day distribution compliance period, upon certification of non-U.S. beneficial ownership. Notes offered and sold in reliance on Rule 144A will be represented by a separate global note (the "Rule 144A Global Note") deposited with the Trustee as custodian and held through the book-entry facilities of The Depository Trust Company.
These transfer restriction and legending mechanisms are consistent with prevailing market practice for Rule 144A / Regulation S offerings of asset-backed securities and are designed to ensure ongoing compliance with the exemptions relied upon in connection with the offering.
6. Investment Company Act Analysis
For the avoidance of doubt, we note that QRF 2022-1, as the Issuer, is not required to register as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Issuer's exemption from registration under the Investment Company Act is based on Rule 3a-7 thereunder (17 C.F.R. § 270.3a-7), which provides an exemption for certain structured finance vehicles.
Rule 3a-7 provides that an issuer will not be deemed an investment company if, among other conditions:
(a) The issuer issues securities the payment of which is primarily serviced by the cash flows from a discrete pool of receivables or other financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period;
(b) A trustee (or its functional equivalent) is appointed, with specified duties, to act on behalf of the holders of such securities;
(c) The securities are structured in a manner designed to protect holders from losses on the underlying financial assets; and
(d) The issuer does not engage in business activities other than the ownership of the financial assets and the issuance of the securities.
QRF 2022-1 satisfies each of these conditions. The Notes are asset-backed securities the payment of which is primarily serviced by the cash flows from a revolving pool of insurance premium finance receivables that, by their terms, convert into cash within a finite time period (the weighted average remaining term of the receivables is approximately 5.7 months). Calvoneth Trust Company, N.A. has been appointed as trustee under the Indenture with specified duties to act on behalf of the Noteholders, including the enforcement of remedies upon an event of default. The Notes are structured with sequential subordination and overcollateralization designed to protect senior Noteholders from losses on the underlying receivables. QRF 2022-1 does not engage in any business activities other than the acquisition, ownership, and financing of the receivables and the issuance of the Notes.
We are not delivering a separate formal opinion on the Investment Company Act status of the Issuer in connection with this transaction; this analysis is provided for contextual purposes and to confirm the consistency of the Issuer's structure with the requirements of Rule 3a-7. The addressees should not place independent reliance on this section as a formal Investment Company Act opinion.
7. Opinions
Based on the foregoing, and subject to the assumptions, qualifications, and limitations set forth herein, we are of the opinion that:
Opinion 1 — Section 4(a)(2) Exemption for Initial Sale
The offer and sale of the Notes by the Issuer to the Initial Purchaser pursuant to the Note Purchase Agreement are exempt from the registration requirements of Section 5 of the Securities Act by reason of Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering. The initial sale involves a single, sophisticated institutional purchaser (Ridgeline Capital Markets LLC, an SEC-registered broker-dealer and QIB) with full access to the type of information that would be contained in a registration statement, conducted without general solicitation or general advertising and subject to appropriate investment intent representations and transfer restrictions.
Opinion 2 — Rule 144A Resale Exemption
Assuming compliance by the Initial Purchaser with its representations, warranties, and agreements set forth in the Note Purchase Agreement regarding the manner of the offering and sale of the Notes, the resale of the Notes (or interests therein) by the Initial Purchaser to QIBs (within the meaning of Rule 144A(a)(1) under the Securities Act) in transactions meeting the requirements of Rule 144A under the Securities Act will not require registration under Section 5 of the Securities Act and will be exempt from the registration requirements thereof by virtue of the safe harbor provided by Rule 144A.
Opinion 3 — Regulation S Exemption
Assuming compliance by the Initial Purchaser with its representations, warranties, and agreements set forth in the Note Purchase Agreement regarding the manner of the offering and sale of the Notes, the offer and sale of the Notes by the Initial Purchaser in offshore transactions to non-U.S. persons (as defined in Rule 902(k) of Regulation S) in compliance with the applicable provisions of Regulation S under the Securities Act (including the Category 2 offering restrictions, distribution compliance period requirements, and certification procedures set forth in the Note Purchase Agreement and the Indenture) will not require registration under Section 5 of the Securities Act and will be exempt from the registration requirements thereof by virtue of the safe harbor provided by Regulation S.
Opinion 4 — No Integration
The offering and sale of the Notes, as described herein, should not be integrated with any prior or subsequent offering of securities by the Issuer, the Sponsor, or any affiliate thereof for purposes of determining whether the registration requirements of Section 5 of the Securities Act apply to the offering of the Notes. This opinion is based on the fact that the offering of the Notes is a discrete financing transaction with a defined structure, offering participants, and investor base, and is not part of a single plan of financing that would require integration with any other offering. This opinion is subject to the condition that any other offerings by the Issuer, the Sponsor, or their affiliates are conducted in compliance with applicable exemptions from registration under the Securities Act and are not designed or conducted in a manner that would cause integration with the offering of the Notes.
Opinion 5 — No General Solicitation
Based on our review of the Transaction Documents, the Offering Memorandum, the Investor Presentation Deck, the Roadshow Script and Talking Points, and such other materials and information as we have deemed relevant, no form of "general solicitation" or "general advertising" (within the meaning of Rule 502(c) of Regulation D under the Securities Act) or "directed selling efforts" (within the meaning of Rule 902(c) of Regulation S under the Securities Act) has been used in connection with the offer and sale of the Notes. This opinion is subject to the assumptions stated herein regarding the conduct of the Initial Purchaser, the Issuer, the Sponsor, and their respective agents and representatives. We note that the Investor Presentation Deck and Roadshow Script were distributed only to pre-qualified institutional investors in one-on-one and small group settings and were not published, circulated, or otherwise disseminated in a manner constituting general solicitation, general advertising, or directed selling efforts.
8. Qualifications and Limitations
The opinions expressed herein are subject to the following qualifications and limitations:
(a) This opinion is limited to the federal securities laws of the United States, including the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder by the SEC. We do not opine on the laws of any other jurisdiction, including any state or territorial "blue sky" or securities laws, the laws of any foreign jurisdiction, or the rules or regulations of any self-regulatory organization.
(b) This opinion is based on facts in existence and laws in effect as of the date hereof. We assume no obligation to advise the addressees or any other person of any change in applicable law, regulation, or interpretive guidance, or of any change in the facts or circumstances upon which this opinion is based, that may occur after the date hereof, regardless of whether such change would affect the opinions expressed herein.
(c) This opinion assumes that all parties to the Transaction Documents will comply in all material respects with their respective obligations under the Note Purchase Agreement, the Indenture, and the other Transaction Documents, and that all applicable conditions precedent set forth therein will be duly satisfied or, where applicable, waived. To the extent that the opinions expressed herein are dependent upon the future conduct of any party, such opinions assume that such conduct will be in accordance with the representations, warranties, and agreements contained in the Transaction Documents.
(d) This opinion is rendered solely for the benefit of the addressees named herein and may not be relied upon by any other person or entity without the prior written consent of Calderwood & Harkness LLP. Subject to the provisions of Section 9 below regarding permitted reliance parties, this opinion may not be used, circulated, quoted, or referred to for any purpose other than in connection with the transactions contemplated by the Note Purchase Agreement.
(e) This opinion does not address the following matters:
(i) Any antifraud provisions of the Securities Act (including Section 17(a) thereof) or the Securities Exchange Act of 1934, as amended (including Section 10(b) and Rule 10b-5 thereunder), or any similar antifraud provisions of any state or foreign securities laws. We express no view as to whether the Offering Memorandum, the Transaction Documents, or any other materials used in connection with the offering contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;
(ii) The availability of any exemption from registration under the Securities Act in connection with any resale of the Notes other than the specific resales addressed in Opinions 2 and 3 above, including any resale by a subsequent holder of the Notes;
(iii) Compliance with the securities or "blue sky" laws of any state of the United States or any other jurisdiction, or the securities laws of any foreign jurisdiction;
(iv) The characterization of the Issuer or the Notes under the Investment Company Act of 1940, as amended, or the rules and regulations thereunder, which is addressed in the contextual analysis set forth in Section 6 above but is not the subject of a formal opinion delivered herein;
(v) Any federal, state, local, or foreign tax matters relating to the Issuer, the Notes, or the transactions contemplated by the Transaction Documents, which are addressed in the separate Draft Opinion — Tax Characterization dated October 10, 2022, prepared by Sylvia Hartwell of Calderwood & Harkness LLP; and
(vi) Any matters arising under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended, relating to the suitability of the Notes as investments for employee benefit plans or individual retirement accounts.
(f) This opinion is subject to the effect of applicable bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent transfer, and similar laws affecting creditors' rights and remedies generally, including the Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in effect.
(g) The availability of equitable remedies, including specific performance and injunctive relief, is subject to the discretion of the court before which any proceeding therefor may be brought, and we express no opinion as to the availability of any particular equitable remedy with respect to the Notes or the Transaction Documents.
9. Reliance and Benefit
This opinion is furnished to the addressees named herein solely in connection with the transactions contemplated by the Note Purchase Agreement and may not be used, circulated, quoted, or relied upon for any other purpose or in connection with any other transaction.
The parties entitled to rely on this opinion are limited to the following (collectively, the "Permitted Reliance Parties"):
(a) Quorum Receivables Funding 2022-1 LLC, as the Issuer;
(b) Quorum Insurance Holdings Corp., as the Sponsor;
(c) Ridgeline Capital Markets LLC, as the Initial Purchaser; and
(d) Calvoneth Trust Company, N.A., as the Trustee.
No other party may rely on this opinion without the prior written consent of Calderwood & Harkness LLP.
Notwithstanding the foregoing, Calloway & Brandt LLP, as counsel to the Initial Purchaser, and Ashfield & Greer LLP, as counsel to the Trustee, may rely on this opinion solely for purposes of confirming the availability of the securities law exemptions described herein in connection with such firms' delivery of their respective closing opinions and due diligence assessments in connection with the transactions contemplated by the Note Purchase Agreement. Such reliance shall not extend to any other matter addressed or referenced in this opinion, and neither Calloway & Brandt LLP nor Ashfield & Greer LLP shall be deemed a Permitted Reliance Party for any other purpose.
This opinion may not be relied upon by, and is not intended to confer any benefit upon, any purchaser of the Notes, any rating agency, any other person or entity participating in the transactions contemplated by the Note Purchase Agreement, or any other third party, in each case without our prior written consent.
10. Signature
Very truly yours,
[DRAFT — SIGNATURE TO BE INSERTED UPON FINALIZATION]
CALDERWOOD & HARKNESS LLP
NOTICE: This draft opinion has not been finalized and is not being delivered for reliance. It is circulated for discussion purposes only in connection with Calderwood & Harkness LLP Matter No. 1025-00007. The opinions expressed herein are preliminary in nature and are subject to revision, supplementation, or withdrawal upon further review of the Transaction Documents, completion of due diligence, and satisfaction of closing conditions. No person or entity should rely upon the opinions expressed in this draft for any purpose. The final opinion, if and when issued, will supersede this draft in its entirety.
Cross-Reference Documents
The following documents, as referenced throughout this opinion, are incorporated by cross-reference and form part of the basis for the analysis and opinions set forth herein:
1.  Note Purchase Agreement (execution draft v3, dated October 12, 2022) among Quorum Receivables Funding 2022-1 LLC, Quorum Insurance Holdings Corp., and Ridgeline Capital Markets LLC.
2.  Indenture (execution draft v4, dated October 12, 2022) between Quorum Receivables Funding 2022-1 LLC and Calvoneth Trust Company, N.A., as trustee.
3.  Preliminary Offering Memorandum (v3, dated October 12, 2022), including the Issuer Supplement containing pool stratification tables.
4.  Form of Restrictive Legends, as set forth in Exhibit [●] to the Indenture.
CALDERWOOD & HARKNESS LLP | 601 Lexington Avenue, New York, NY 10022 | (212) 558-4000 PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

Record

Parties

Dates

Amounts