LIMITED LIABILITY COMPANY AGREEMENT
OF
QUORUM RECEIVABLES FUNDING 2022-1 LLC
a Delaware Limited Liability Company
Dated as of August 3, 2022
Sole Member: Quorum Receivables Holding LLC, a Delaware limited liability company
DE SOS File No.: 7894231
EIN: 88-1247653
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PREAMBLE
This Limited Liability Company Agreement (this "Agreement") of Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (the "Company"), is entered into and effective as of August 3, 2022 (the "Effective Date"), by Quorum Receivables Holding LLC, a Delaware limited liability company (the "Member"), as the sole member of the Company.
The Company was formed as a Delaware limited liability company pursuant to the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 3, 2022, under File No. 7894231 (the "Certificate of Formation"). The Company is formed and organized under, and this Agreement is entered into pursuant to, the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as amended from time to time (the "Act").
The Member, as the sole member of the Company, hereby enters into this Agreement to set forth the rights, powers, duties, obligations, and liabilities of the Member, the Company, and the Independent Manager (as defined herein), and to govern the affairs of the Company, all as more fully set forth herein.
RECITALS
WHEREAS, the Member desires to form a limited liability company under the Act for the purpose of acquiring, holding, and financing insurance premium finance receivables originated by Quorum Premium Finance LLC, a Delaware limited liability company ("QPF"), and issuing asset-backed securities (the "Notes") backed by such receivables;
WHEREAS, the Company is intended to be a bankruptcy-remote special purpose entity, organized and operated so as to minimize the risk that the Company would become subject to a bankruptcy proceeding or that its assets would be substantively consolidated with those of the Member, QPF, Quorum Insurance Holdings Corp. ("QIH"), or any of their respective affiliates;
WHEREAS, the Company is formed in connection with a proposed $500,000,000 asset-backed securitization transaction (the "Transaction") involving the issuance of Class A Notes, Class B Notes, and Class C Notes pursuant to an Indenture to be entered into between the Company and Calvoneth Trust Company, National Association, as indenture trustee (the "Trustee");
WHEREAS, in connection with the Transaction, the Company will enter into, among other agreements, a Receivables Transfer Agreement, an Indenture, a Servicing Agreement, a Liquidity Facility Agreement, an Account Control Agreement, a Custodian Agreement, a Grant of Security Interest (Pledge Agreement), and an Administration Agreement (collectively, and together with the other agreements, instruments, and documents entered into by or on behalf of the Company in connection with the Transaction, the "Transaction Documents"); and
WHEREAS, the Member desires to set forth the terms and conditions governing the management, operation, and governance of the Company as a bankruptcy-remote special purpose entity in connection with the Transaction.
NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Member hereby agrees as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Indenture or the other Transaction Documents, as applicable.
"Account Control Agreement" means the Account Control Agreement, dated as of the Closing Date, among the Company, the Servicer, and the Trustee, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Act" means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as the same may be amended from time to time.
"Administration Agreement" means the Administration Agreement, dated as of the Closing Date, between the Company and QIH, as administrator (in such capacity, the "Administrator"), as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Administrator" means QIH, in its capacity as administrator of the Company pursuant to the Administration Agreement, or any successor administrator appointed in accordance therewith.
"Affiliate" means, with respect to any specified person, any other person that directly or indirectly controls, is controlled by, or is under common control with, such specified person. For purposes of this definition, "control" (including, with correlative meaning, the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities or other ownership interests, by contract, or otherwise.
"Agreement" means this Limited Liability Company Agreement of the Company, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Back-Up Servicer" means Northvane Bank, National Association, a national banking association, in its capacity as back-up servicer under the Back-Up Servicing Agreement, or any successor back-up servicer appointed in accordance therewith.
"Back-Up Servicing Agreement" means the Back-Up Servicing Agreement, dated as of the Closing Date, among the Company, QPF, Northvane Bank, National Association, and the Trustee, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Bankruptcy" means, with respect to any person, (a) the filing of a voluntary petition by such person under Title 11 of the United States Code, as amended, or any successor statute thereto (the "Bankruptcy Code"), or the filing of an involuntary petition against such person under the Bankruptcy Code, (b) the making by such person of a general assignment for the benefit of creditors, (c) the appointment of a receiver, trustee, liquidator, conservator, custodian, or similar official for such person or for all or substantially all of its property or assets, (d) the admission by such person in writing of its inability to pay its debts generally as they become due, or (e) the entry of an order for relief against such person under the Bankruptcy Code, or any similar proceeding under any applicable federal, state, or foreign bankruptcy, insolvency, reorganization, moratorium, receivership, or similar law relating to or affecting the rights of creditors generally.
"Certificate of Formation" means the Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware on August 3, 2022, under File No. 7894231, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the Act and this Agreement.
"Class A Notes" means the Class A Notes issued by the Company under the Indenture in an aggregate initial principal amount of $375,000,000, or such other amount as may be set forth in the Indenture.
"Class B Notes" means the Class B Notes issued by the Company under the Indenture in an aggregate initial principal amount of $75,000,000, or such other amount as may be set forth in the Indenture.
"Class C Notes" means the Class C Notes issued by the Company under the Indenture in an aggregate initial principal amount of $35,000,000, or such other amount as may be set forth in the Indenture.
"Closing Date" means August 3, 2022, or such other date on which the Transaction is consummated and the Notes are initially issued.
"Company" means Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company formed pursuant to the Certificate of Formation and governed by this Agreement.
"Custodian Agreement" means the Custodian Agreement, dated as of the Closing Date, between the Company and Calvoneth Trust Company, National Association, as custodian, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Grant of Security Interest" means the Grant of Security Interest (Pledge Agreement), dated as of the Closing Date, from the Company to the Trustee for the benefit of the noteholders, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Indenture" means the Indenture, dated as of the Closing Date, between the Company, as issuer, and Calvoneth Trust Company, National Association, as trustee, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Independent Manager" means the person designated as the independent manager of the Company pursuant to Section 7.1 of this Agreement, initially Timothy R. Callan, or any successor independent manager appointed in accordance with Section 7.3.
"Independent Manager Agreement" means the Independent Manager Agreement, dated as of August 3, 2022, between the Company and the Independent Manager Provider, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Independent Manager Provider" means Fortbridge Corporate Services LLC, a Delaware limited liability company, with a principal office at 1209 Orange Street, Wilmington, Delaware 19801, or any successor provider of independent manager services engaged by the Company in accordance with Section 7.3.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations promulgated thereunder.
"Liquidity Facility Agreement" means the Liquidity Facility Agreement, dated as of the Closing Date, between the Company and Northvane Bank, National Association, as liquidity facility provider, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Member" means Quorum Receivables Holding LLC, a Delaware limited liability company, as the sole member of the Company, or any successor member admitted in accordance with Section 4.2.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes.
"Originator" means Quorum Premium Finance LLC, a Delaware limited liability company, in its capacity as originator of the Receivables.
"QPF" means Quorum Premium Finance LLC, a Delaware limited liability company.
"QIH" means Quorum Insurance Holdings Corp., a Delaware corporation.
"QRH" means Quorum Receivables Holding LLC, a Delaware limited liability company.
"Receivables" means the insurance premium finance receivables originated by QPF and transferred to the Company, directly or indirectly, pursuant to the Receivables Transfer Agreement, together with all related rights, payments, collections, and proceeds thereof.
"Receivables Transfer Agreement" means the Receivables Transfer Agreement, dated as of the Closing Date, between QRH, as transferor, and the Company, as transferee, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Registered Agent" means Ashgrove Services Inc., 28 Liberty Street, New York, New York 10005, or such other registered agent as may be appointed from time to time in accordance with the Act.
"Servicer" means QPF, in its capacity as servicer of the Receivables under the Servicing Agreement, or any successor servicer appointed in accordance with the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement, dated as of the Closing Date, among the Company, QPF, as servicer, and Calvoneth Trust Company, National Association, as trustee, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Special Purpose Entity" or "SPE" means an entity organized and maintained in accordance with the separateness covenants and limited purpose provisions set forth in this Agreement or similar organizational documents, and which is intended to be a bankruptcy-remote entity.
"Transaction" means the securitization transaction contemplated by the Transaction Documents, including the issuance by the Company of the Notes.
"Transaction Documents" means, collectively, this Agreement, the Indenture, the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Custodian Agreement, the Grant of Security Interest, the Note Purchase Agreement, the Independent Manager Agreement, and all other agreements, instruments, certificates, and documents entered into by or on behalf of the Company in connection with the Transaction, in each case as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Trustee" means Calvoneth Trust Company, National Association, a national banking association, with a corporate trust office at 600 Travis Street, Suite 5800, Houston, Texas 77002, in its capacity as trustee under the Indenture, or any successor trustee appointed in accordance with the Indenture.
Section 1.2 — Rules of Construction
Unless the context of this Agreement otherwise requires: (a) words of any gender shall be deemed to include each other gender; (b) words using the singular or plural number shall also include the plural or singular number, respectively; (c) references to "hereof," "herein," "hereby," "hereunder," and similar terms shall refer to this entire Agreement and not to the particular provision in which such reference appears; (d) references to "Article," "Section," "Exhibit," or "Schedule" shall refer to Articles, Sections, Exhibits, or Schedules of this Agreement, unless otherwise specified; (e) the word "including" and words of similar import shall mean "including, without limitation"; (f) the headings and captions used in this Agreement are used for convenience of reference only and shall not be deemed to constitute a part of this Agreement or to affect the meaning or interpretation of any provision hereof; (g) references to any law or regulation shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting such law or regulation; (h) references to any agreement or document shall include all amendments, restatements, supplements, and other modifications thereto in accordance with the terms thereof; and (i) references to any person shall include such person's successors and permitted assigns.
ARTICLE II — FORMATION AND ORGANIZATION
Section 2.1 — Formation
The Company was formed as a Delaware limited liability company by the filing of the Certificate of Formation with the Secretary of State of the State of Delaware on August 3, 2022, pursuant to the Act. The rights, powers, duties, obligations, and liabilities of the Member, the Company, and the Independent Manager shall be as provided in the Act, except as otherwise provided herein. To the extent that any provision of this Agreement is inconsistent with any mandatory provision of the Act, the applicable provision of the Act shall control. To the extent that any provision of this Agreement is inconsistent with any non-mandatory provision of the Act, the applicable provision of this Agreement shall control. The Company's Delaware Secretary of State File Number is 7894231. The Company's federal employer identification number (EIN) is 88-1247653.
Section 2.2 — Name
The name of the Company is "Quorum Receivables Funding 2022-1 LLC." The Company shall conduct its business solely under its own name, and shall not use the name of any Affiliate or any other person in a manner that would suggest that the Company is not a separate legal entity from the Member, QPF, QIH, QRH, or any other Affiliate. The Company's business shall be conducted, and its assets shall be held, solely in its own name, and all contracts, agreements, instruments, and documents to which the Company is a party shall be executed in the name of the Company.
Section 2.3 — Registered Office and Registered Agent
The registered office of the Company in the State of Delaware is c/o Ashgrove Services Inc., 28 Liberty Street, New York, New York 10005, or such other registered agent as may be appointed from time to time in accordance with the Act. The Member may change the registered agent and registered office of the Company from time to time in accordance with the Act, with the prior written consent of the Independent Manager. The Company shall at all times maintain a registered agent and registered office in the State of Delaware as required by the Act.
Section 2.4 — Principal Office
The principal office of the Company shall be at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901, or such other place as the Member may from time to time designate with the prior written consent of the Independent Manager. The Company may maintain such other offices as the Member may deem necessary or desirable, provided that any such additional office shall be maintained in a manner consistent with the separateness covenants set forth in Article VI.
Section 2.5 — Term
The Company shall have a perpetual term and shall continue in existence until dissolved in accordance with Article X of this Agreement and the Act. The existence of the Company as a separate legal entity shall continue until the filing of a certificate of cancellation with the Secretary of State of the State of Delaware in accordance with the Act and Section 10.3 of this Agreement.
Section 2.6 — Fiscal Year
The fiscal year of the Company shall be the calendar year, ending on December 31 of each year, unless otherwise determined by the Member with the prior written consent of the Independent Manager and in compliance with the requirements of the Internal Revenue Code and the Transaction Documents.
ARTICLE III — PURPOSE AND POWERS
Section 3.1 — Limited Purpose
The Company is organized for the following limited purposes, and the Company shall not engage in any business or activity other than in connection with the following:
(a) to acquire, hold, manage, and finance insurance premium finance receivables and related assets transferred to the Company by QRH pursuant to the Receivables Transfer Agreement;
(b) to issue the Notes under and pursuant to the Indenture, and to repay, redeem, or retire the Notes in accordance with the terms thereof;
(c) to grant a security interest in all of its assets to the Trustee for the benefit of the noteholders pursuant to the Grant of Security Interest and the Indenture;
(d) to enter into and perform its obligations under the Transaction Documents, including the Indenture, the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Custodian Agreement, the Grant of Security Interest, and the Note Purchase Agreement;
(e) to maintain such accounts and investments as may be required or permitted by the Transaction Documents;
(f) to engage in such other activities as are necessary, suitable, or convenient to accomplish the foregoing or are incidental thereto or connected therewith; provided that such activities are consistent with and do not contravene the separateness covenants set forth in Article VI or the limitations set forth in Section 3.3.
The Company shall not engage in any business or activity, or hold any assets, other than as expressly set forth in this Section 3.1. The limited purposes set forth in this Section 3.1 are intended to ensure that the Company operates exclusively as a bankruptcy-remote special purpose entity in connection with the Transaction.
Section 3.2 — Powers
Subject to the limitations set forth in this Agreement (including the separateness covenants set forth in Article VI, the consent requirements involving the Independent Manager set forth in Article VII, and the limitations on activities set forth in Section 3.3), the Company shall have all powers granted to a limited liability company organized under the Act that are necessary or convenient to carry out the limited purposes set forth in Section 3.1, including the power to execute, deliver, and perform its obligations under the Transaction Documents, to open and maintain bank accounts and other deposit accounts, to invest funds in permitted investments as specified in the Indenture, and to take all actions as may be required or permitted by the Transaction Documents and this Agreement.
Section 3.3 — Limitations on Activities
Notwithstanding anything to the contrary in this Agreement or the Act, the Company shall not:
(a) engage in any business or activity other than as described in Section 3.1;
(b) acquire any assets other than the Receivables, related rights, collections and proceeds thereof, and the accounts, investments, and other assets held pursuant to the Transaction Documents;
(c) incur any indebtedness other than (i) the Notes issued pursuant to the Indenture, (ii) borrowings under the Liquidity Facility Agreement with Northvane Bank, National Association (in an aggregate amount not to exceed $25,000,000 at any time outstanding), and (iii) trade payables incurred in the ordinary course of business not to exceed $100,000 in the aggregate at any time outstanding;
(d) merge with or into, or consolidate with, any other person, or sell all or substantially all of its assets, or dissolve, terminate, or liquidate in whole or in part (except as expressly permitted by Article X);
(e) amend, alter, change, or repeal any provision of this Agreement or the Certificate of Formation without the prior written consent of the Independent Manager and, following the issuance of the Notes, the Trustee;
(f) form, create, or acquire any subsidiary or acquire any ownership interest in any other person;
(g) make any loans or advances to any person, or extend credit to any person, except as may be expressly contemplated by the Transaction Documents;
(h) guarantee, become surety for, or otherwise become or remain directly or contingently liable for any obligation of any other person, including QIH, QPF, QRH, or any Affiliate;
(i) sell, transfer, exchange, assign, convey, or otherwise dispose of any of its assets, except as contemplated by the Transaction Documents, including in connection with the pledge of assets to the Trustee pursuant to the Grant of Security Interest and the Indenture;
(j) claim any tax credit or deduction with respect to the Receivables other than in its own capacity as the holder thereof (or, if treated as a disregarded entity, on behalf of its regarded owner);
(k) enter into any management or operating agreement or similar arrangement with respect to the management or operation of the Company other than the Administration Agreement and this Agreement; or
(l) take any action that would cause the Company to fail to comply with the separateness covenants set forth in Article VI.
ARTICLE IV — MEMBER
Section 4.1 — Sole Member
The sole member of the Company is Quorum Receivables Holding LLC, a Delaware limited liability company organized under the laws of the State of Delaware (Delaware Secretary of State File No. 7894228, EIN: 88-1247619). QRH is a wholly owned subsidiary of Quorum Premium Finance LLC, which is in turn a wholly owned subsidiary of Quorum Insurance Holdings Corp. The Member's principal office address is 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. The Member shall be the sole member of the Company unless additional members are admitted in accordance with Section 4.2.
Section 4.2 — Admission of Additional Members
No additional members shall be admitted to the Company without the prior written consent of the Member and the Independent Manager and, following the issuance of the Notes, the prior written consent of the Trustee. Any person admitted as an additional member of the Company shall be required to agree in writing to be bound by the terms and conditions of this Agreement, including the separateness covenants set forth in Article VI, the provisions regarding the Independent Manager set forth in Article VII, and the non-petition covenant set forth in Article IX.
Section 4.3 — Resignation or Withdrawal
The Member shall not resign or withdraw from the Company without the prior written consent of the Independent Manager and, following the issuance of the Notes, the prior written consent of the Trustee, and then only if a successor member has been duly admitted to the Company in accordance with Section 4.2. Any purported resignation or withdrawal in violation of this Section 4.3 shall be null and void and of no force or effect. In no event shall the resignation or withdrawal of the Member cause the dissolution of the Company if a successor member has been admitted in accordance with the terms of this Agreement.
Section 4.4 — Liability of Member
The Member shall not be liable for the debts, obligations, or liabilities of the Company solely by reason of being a member of the Company, as provided by the Act. The Member shall not be required to lend any funds to the Company or to make any additional capital contributions to the Company beyond those expressly set forth in this Agreement. Except as otherwise provided by the Act or as expressly provided in this Agreement, the personal liability of the Member, in its capacity as a member of the Company, for the obligations and liabilities of the Company shall be limited to the Member's capital contributions to the Company.
Section 4.5 — Transfer of Membership Interest
The Member shall not sell, assign, transfer, pledge, encumber, hypothecate, or otherwise dispose of all or any portion of its membership interest in the Company without the prior written consent of the Independent Manager and, following the issuance of the Notes, the prior written consent of the Trustee, except as may be expressly contemplated by the Transaction Documents. Any purported sale, assignment, transfer, pledge, encumbrance, or other disposition of any membership interest in violation of this Section 4.5 shall be null and void and of no force or effect. Notwithstanding the foregoing, the Member may pledge its membership interest in the Company to the Trustee pursuant to the Grant of Security Interest or as otherwise expressly contemplated by the Transaction Documents.
ARTICLE V — CAPITAL CONTRIBUTIONS AND ALLOCATIONS
Section 5.1 — Initial Capital Contribution
The Member has made or shall make, concurrently with the execution of this Agreement, an initial capital contribution to the Company in the amount of One Hundred Dollars ($100) in cash, as more particularly described in Exhibit B attached hereto. The initial capital contribution of the Member shall be reflected on the books and records of the Company and shall be credited to the Member's capital account.
Section 5.2 — Additional Capital Contributions
No member shall be required to make any additional capital contributions to the Company. The Member may, but shall not be obligated to, make additional capital contributions to the Company from time to time in such amounts and at such times as the Member may determine, in its sole discretion, to be necessary or appropriate. Any additional capital contributions shall be reflected on the books and records of the Company and shall be credited to the Member's capital account.
Section 5.3 — No Interest on Capital Contributions
No interest shall be paid on any capital contribution made by the Member to the Company. No member shall have the right to demand or receive any return of its capital contribution, except as provided in Section 5.7 and Article X of this Agreement.
Section 5.4 — Capital Accounts
A capital account shall be maintained for the Member in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv) promulgated under Section 704 of the Internal Revenue Code, to the extent applicable to a limited liability company with a sole member. The capital account of the Member shall be adjusted for all capital contributions, distributions, allocations of income, gain, loss, deduction, and credit, and any other items as required by applicable Treasury Regulations.
Section 5.5 — Allocations of Profits and Losses
All items of income, gain, loss, deduction, and credit of the Company for each fiscal year (or other relevant period) shall be allocated to the Member as the sole member of the Company. Because the Company has only one member, all allocations of income, gain, loss, deduction, and credit shall be made entirely to the Member, and no special allocation provisions shall be required.
Section 5.6 — Tax Classification
The Company is intended to be treated as a disregarded entity for United States federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3. The Company shall not elect to be classified as an association taxable as a corporation for federal income tax purposes, and neither the Company nor the Member shall file any election on Internal Revenue Service Form 8832 (Entity Classification Election) or otherwise that would result in the Company being treated as an entity separate from the Member for federal income tax purposes. All items of income, deduction, gain, loss, and credit of the Company shall be reported on the federal income tax return of the Member or, if the Member is also a disregarded entity for federal income tax purposes, on the return of the first entity in the ownership chain of the Company that is not a disregarded entity. The Company shall file any state, local, or other tax returns as may be required by applicable law.
Section 5.7 — Distributions
Distributions shall be made by the Company to the Member at such times and in such amounts as the Member may determine, subject to the following limitations:
(a) No distribution shall be made if, after giving effect thereto, the Company would not be able to pay its debts as they become due in the ordinary course of business, or if the total assets of the Company would be less than the sum of its total liabilities, in each case as determined in accordance with the Act;
(b) All distributions shall be made only as permitted by the Act and subject to the priority of payments set forth in the Indenture and the other Transaction Documents;
(c) Following the issuance of the Notes, distributions to the Member shall be made only in accordance with the waterfall provisions of the Indenture and only to the extent that all amounts due and payable to the Trustee, the noteholders, the Servicer, the Back-Up Servicer, the liquidity facility provider, and the other parties entitled to payments under the Transaction Documents have been paid in full or adequate provision has been made therefor in accordance with the Indenture; and
(d) No distribution shall be made that would cause the Company to violate any covenant, term, or condition of the Transaction Documents.
ARTICLE VI — SEPARATENESS COVENANTS
Section 6.1 — General
The Company has been organized as, and shall be maintained as, a Special Purpose Entity. The Company, the Member, and the Independent Manager shall at all times cause the Company to comply with the covenants set forth in this Article VI. The separateness covenants contained in this Article VI are intended to ensure that the Company is and remains a bankruptcy-remote entity, separate and distinct from the Member, QIH, QPF, QRH, and all other Affiliates, and to minimize the risk that the Company or its assets could become subject to a bankruptcy proceeding or that the Company's assets could be substantively consolidated with those of any other person.
Section 6.2 — Specific Covenants
So long as the Company exists, the Company shall:
(a) maintain its own separate books, records, and accounts (including bank accounts and all accounts established pursuant to the Transaction Documents) distinct from those of any Affiliate (including QIH, QPF, and QRH) and shall ensure that its financial records reflect its separate existence and all transactions with Affiliates;
(b) at all times hold itself out to the public and to all other persons as a legal entity separate and distinct from the Member, QIH, QPF, QRH, and any other Affiliate, including by:
(i) conducting business in its own name and through authorized officers and representatives of the Company;
(ii) maintaining a listed telephone number or other point of contact separate from those of its Affiliates;
(iii) using separate stationery, invoices, checks, and other business forms bearing the Company's own name and not the name of any Affiliate (except to the extent necessary to describe the relationship between the Company and an Affiliate);
(iv) not identifying itself as a division, department, or branch of any other person, including the Member, QIH, QPF, or QRH;
(c) maintain adequate capital in light of its contemplated business operations, and shall not be dependent on funds from the Member or any Affiliate except as permitted by the Transaction Documents;
(d) not commingle its funds or other assets with those of any Affiliate or any other person, and shall maintain its assets in a manner that facilitates their identification and segregation from those of any Affiliate or other person;
(e) maintain its own financial statements or, to the extent that the Company is included in the consolidated financial statements of QIH or any Affiliate, ensure that such consolidated statements contain a note or other disclosure clearly indicating that the Company is a separate legal entity whose assets are not available to pay the creditors of QIH or any other Affiliate (other than as contemplated by the Transaction Documents), and that the inclusion of the Company's financial information in such consolidated statements does not constitute a guaranty by the Company of the debts of QIH or any such Affiliate;
(f) pay its own liabilities and expenses (including administrative costs, filing fees, professional fees, and fees of the Independent Manager Provider) only from its own funds and assets, as provided by the Transaction Documents, and shall not pay the liabilities or expenses of any other person;
(g) observe all limited liability company formalities required by the Act and this Agreement, including the maintenance of proper records of all actions taken by the Member and the Independent Manager;
(h) not guarantee or become obligated for the debts or obligations of any other person, including QIH, QPF, QRH, or any Affiliate, and shall not hold itself out as being responsible for the debts or obligations of any other person;
(i) not acquire any obligation or securities of, or any ownership interest in, the Member, QIH, QPF, QRH, or any Affiliate (except as expressly provided in the Transaction Documents or as may be required by the Indenture in connection with permitted investments);
(j) not make any loans or advances to any person, or extend credit to any person (except as expressly contemplated by the Transaction Documents);
(k) not pledge its assets for the benefit of any person other than as contemplated by the Transaction Documents (including the Grant of Security Interest to the Trustee for the benefit of the noteholders);
(l) correct any known misunderstanding regarding its separate identity, and shall take all actions reasonably necessary to ensure that the separate existence and identity of the Company are at all times maintained;
(m) maintain arm's-length relationships with the Member, QIH, QPF, QRH, and all Affiliates, and shall deal with each such person as if the Company and such person were unrelated parties;
(n) not enter into any transaction with the Member or any Affiliate except on commercially reasonable terms comparable to those available from unaffiliated third parties in arm's-length transactions, and only as permitted by the Transaction Documents;
(o) at all times have at least one (1) Independent Manager who satisfies the requirements of Section 7.1 of this Agreement;
(p) file its own tax returns (to the extent required by applicable law) or, if treated as a disregarded entity for federal income tax purposes, cause its items of income, gain, loss, deduction, and credit to be properly reported on the tax return of its regarded owner in a manner that is consistent with the Company's status as a separate legal entity;
(q) not own any real property or any interest in real property, other than a leasehold interest in office space, if any, used by the Company in connection with its limited purposes;
(r) maintain a sufficient number of employees (if any) in light of its contemplated business operations and compensate any such employees from its own funds and in its own name; provided, however, that the Company may enter into the Administration Agreement for the provision of administrative services to the Company by QIH, and any employees of QIH or its Affiliates providing services under such agreement shall not be deemed employees of the Company; and
(s) not enter into or be a party to any transaction with any Affiliate except as expressly permitted by the Transaction Documents, and shall at all times comply with the terms and conditions of the Transaction Documents applicable to transactions with Affiliates.
Section 6.3 — Failure to Comply
Failure of the Company, the Member, or any other person to comply with any of the covenants set forth in this Article VI shall not affect the status of the Company as a separate legal entity or be deemed to cause the assets and liabilities of the Company to be deemed to be assets and liabilities of the Member, QIH, QPF, QRH, or any other Affiliate. Notwithstanding the foregoing, the Member and the Independent Manager shall use their respective best efforts to cause the Company to comply at all times with each of the covenants set forth in this Article VI, and the failure to so comply shall not in any manner relieve the Company, the Member, or the Independent Manager of their obligations to observe and comply with such covenants on a going-forward basis.
ARTICLE VII — INDEPENDENT MANAGER
Section 7.1 — Appointment; Qualifications
The Company shall at all times have at least one (1) Independent Manager. The initial Independent Manager shall be Timothy R. Callan, provided by Fortbridge Corporate Services LLC (the "Independent Manager Provider"), with a principal office at 1209 Orange Street, Wilmington, Delaware 19801. The appointment of the initial Independent Manager shall be effective as of the date of this Agreement.
The Independent Manager shall not be, and shall not have been at any time during the preceding five (5) years:
(i) a member, equityholder, stockholder, or partner of the Company, the Member, QPF, QIH, or any Affiliate thereof (other than as an independent manager or independent director of a special purpose entity that is an Affiliate of any such entity);
(ii) a creditor, supplier, employee, officer, director, family member, manager, or contractor of the Company, the Member, QPF, QIH, or any Affiliate thereof (other than as an independent manager or independent director of a special purpose entity that is an Affiliate of any such entity);
(iii) a person that controls (whether directly, indirectly, or otherwise) the Company, the Member, QPF, QIH, or any Affiliate thereof, or any creditor, supplier, employee, officer, director, family member, or contractor of any such controlling person; or
(iv) a person who receives any compensation, consulting fee, advisory fee, or any other form of remuneration from the Company, the Member, QPF, QIH, or any Affiliate thereof (other than reasonable compensation for serving as an Independent Manager of the Company or as an independent manager or independent director of another Special Purpose Entity in the Transaction structure or an affiliated special purpose entity structure).
The Independent Manager shall be a natural person who is a United States citizen or permanent resident and who has prior experience serving as an independent manager or independent director of one or more special purpose entities. The Independent Manager shall be independent of the Company, the Member, QPF, QIH, QRH, and all Affiliates thereof, and shall have no material financial interest in or business relationship with any such entity (other than as described above).
Section 7.2 — Duties and Consent Rights
The Independent Manager shall have no authority to manage the day-to-day business and affairs of the Company, which shall be managed by the Member as set forth in Article VIII. The Independent Manager shall not be an employee of the Company and shall not receive compensation or benefits from the Company, the Member, or any Affiliate, other than the fees payable to the Independent Manager Provider pursuant to the Independent Manager Agreement and any indemnification to which the Independent Manager may be entitled under Section 11.3 of this Agreement.
Notwithstanding the foregoing, the Company shall not, and the Member shall not cause or permit the Company to, take any of the following actions without the prior unanimous written consent of the Member and the Independent Manager:
(a) institute, or consent to the institution of, any Bankruptcy proceeding with respect to the Company;
(b) dissolve, liquidate, consolidate, merge, or sell all or substantially all of the assets of the Company (except as expressly permitted by the Transaction Documents);
(c) engage in any business activity other than as set forth in Section 3.1 of this Agreement;
(d) amend, alter, change, or repeal any provision of this Agreement or the Certificate of Formation;
(e) seek to appoint or authorize a trustee, liquidating agent, receiver, sequestrator, or similar official for the Company or for all or any portion of its property or assets; or
(f) take any action that would cause the Company to fail to observe the separateness covenants set forth in Article VI of this Agreement.
In exercising his or her consent rights under this Section 7.2, the Independent Manager shall owe fiduciary duties to the Company (including a duty to consider the interests of the creditors of the Company, including the noteholders and the Trustee), and shall not consent to any action that, in the Independent Manager's reasonable judgment, is not in the best interests of the Company (taking into account the interests of such creditors). The Independent Manager's consent to any action described in this Section 7.2 shall be evidenced by a written instrument signed by the Independent Manager and delivered to the Member and, following the issuance of the Notes, to the Trustee.
Section 7.3 — Removal and Replacement
The Independent Manager may be removed and replaced only by the Member with the prior written consent of the Trustee (following the issuance of the Notes). Any successor Independent Manager must satisfy all of the qualifications set forth in Section 7.1 of this Agreement. In the event the Independent Manager is removed, resigns, becomes incapacitated, dies, or otherwise ceases to serve, the Member shall promptly (and in no event later than ten (10) business days after such vacancy arises) appoint a replacement Independent Manager who satisfies the qualifications of Section 7.1. The Company shall promptly notify the Trustee, the rating agencies, and the Back-Up Servicer of any change in the identity of the Independent Manager.
Section 7.4 — Compensation
The Independent Manager shall be entitled to receive reasonable compensation from the Company for services rendered as Independent Manager, payable by the Company solely from its own funds. Such compensation shall be as agreed between the Company and the Independent Manager Provider pursuant to the Independent Manager Agreement and shall constitute an administrative expense of the Company, payable in accordance with the priority of payments set forth in the Indenture.
Section 7.5 — Independent Manager Provider Agreement
The appointment of the Independent Manager shall be governed by that certain Independent Manager Agreement, dated as of August 3, 2022, between the Company and Fortbridge Corporate Services LLC, as Independent Manager Provider. The terms and conditions of the Independent Manager Agreement shall be consistent with the provisions of this Agreement, and in the event of any conflict between the terms of the Independent Manager Agreement and the provisions of this Agreement, the provisions of this Agreement shall control.
ARTICLE VIII — MANAGEMENT
Section 8.1 — Management by Member
The business and affairs of the Company shall be managed by the Member, subject to the consent rights of the Independent Manager set forth in Section 7.2 and the limitations set forth in Article III, Article VI, and Article IX of this Agreement. The Member shall have full, exclusive, and complete authority to manage and control the business, affairs, and properties of the Company, to make all decisions regarding the Company, and to perform any and all other acts or activities customary or incident to the management of the Company's business, in each case subject to the restrictions and limitations set forth in this Agreement and the Transaction Documents. The Member may designate one or more officers to act on behalf of the Company in accordance with Section 8.2.
Section 8.2 — Officers
The Member may appoint officers of the Company, including a President, one or more Vice Presidents, a Secretary, a Treasurer, an Assistant Secretary, an Assistant Treasurer, or such other officers as the Member may deem appropriate from time to time. Sandra Ling-Hwang, in her capacity as Treasurer of QIH and Manager of QPF, is authorized to act on behalf of the Member in connection with the administration of the Company and is hereby designated as an authorized representative of the Company for purposes of executing and delivering documents and instruments on behalf of the Company. Each officer shall hold office until his or her successor is duly appointed by the Member or until his or her earlier resignation, removal, or death. The Member may remove any officer at any time, with or without cause.
Section 8.3 — Authority of Officers
Any officer appointed in accordance with Section 8.2 shall have such authority and duties as may be delegated to such officer by the Member, subject to the limitations set forth in this Agreement and the Transaction Documents. No officer shall have the authority to take any action that requires the consent of the Independent Manager under Section 7.2 without first obtaining such consent in writing. No officer shall have the authority to take any action on behalf of the Company that is inconsistent with the limited purposes set forth in Section 3.1, the limitations on activities set forth in Section 3.3, or the separateness covenants set forth in Article VI. Any officer acting on behalf of the Company shall act solely in the name of and on behalf of the Company, and shall not purport to bind the Member, QIH, QPF, QRH, or any Affiliate in connection with any such action.
Section 8.4 — Reliance by Third Parties
Any person dealing with the Company may rely upon a certificate signed by any authorized officer of the Company (or by the Member) as to (a) the identity of any officer or other person authorized to act on behalf of the Company, (b) the existence and terms of any resolution, consent, or authorization of the Member or the Independent Manager, or (c) the authority of any such officer or person to take any action on behalf of the Company. No person dealing with the Company shall be required to inquire into the authority of any officer or representative of the Company to execute any agreement, instrument, or document on behalf of the Company, provided that such person has received such a certificate.
ARTICLE IX — NON-PETITION COVENANT
Section 9.1 — Non-Petition Covenant
Each of the Member and the Independent Manager hereby covenants and agrees that it shall not, prior to the date that is one year and one day (or, if longer, the applicable preference period under applicable law plus one day) after the payment in full of all Notes and all other obligations under the Transaction Documents:
(a) institute, or join in any institution of, any Bankruptcy proceeding against the Company;