PRELIMINARY TERM SHEET — CONFIDENTIAL

PRELIMINARY TERM SHEET — CONFIDENTIAL
Quorum Receivables Funding 2022-1 LLC
Insurance Premium Finance Asset-Backed Notes
July 18, 2022
v1 — Draft for Discussion Purposes Only
Prepared by:
Calderwood & Harkness LLP, as Issuer's Counsel 601 Lexington Avenue New York, NY 10022
Matter No.: 1025-00007
Distribution:
Quorum Insurance Holdings Corp. — Nolan Whitford (General Counsel); Sandra Ling-Hwang (Treasurer)
Ridgeline Capital Markets LLC — Julian Weatherstone (Head of ABS Origination); Rebecca Tran (Managing Director, Insurance Finance ABS)
Calloway & Brandt LLP — Harrison Collier (Lead Partner, Underwriter's Counsel)
DISCLAIMER: This preliminary term sheet is for discussion purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The terms set forth herein are preliminary in nature, are subject to change, and remain subject to negotiation among the parties, rating agency feedback, market conditions, investor feedback, and the execution of definitive documentation. No binding obligation of any kind arises from the circulation of this term sheet. Recipients should refer to the full disclaimer and confidentiality notice set forth in Section 22 hereof.
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1. Transaction Summary
The following sets forth a summary of the principal terms of a proposed asset-backed securities issuance by Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company organized as a bankruptcy-remote special purpose entity. This transaction will involve the issuance of floating-rate asset-backed notes secured by a pool of insurance premium finance receivables originated by Quorum Premium Finance LLC, a wholly owned subsidiary of Quorum Insurance Holdings Corp.
Transaction Type: Asset-backed securities issuance (Structured Finance).
Offering Format: Rule 144A / Regulation S private placement. The Notes will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws and may only be offered and sold in the United States to qualified institutional buyers ("QIBs") within the meaning of Rule 144A under the Securities Act and outside the United States in accordance with Regulation S under the Securities Act.
Total Issuance Size: $500,000,000 (five hundred million U.S. dollars) aggregate principal amount, issued in three classes of rated notes and a retained overcollateralization interest, as more fully described in Section 3 below.
Underlying Asset: Insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF") in the ordinary course of its premium finance lending business. The receivables consist of short-term loans made to U.S. commercial policyholders and are secured by assignment of unearned premium refund rights from the underlying insurance policies. Further detail regarding the receivables pool is set forth in Section 5.
Issuer: Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"), a Delaware limited liability company organized as a bankruptcy-remote special purpose entity. QRF 2022-1 has been formed for the sole purpose of acquiring insurance premium finance receivables from the Depositor and issuing asset-backed notes secured by such receivables.
Sponsor / Parent: Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation listed on the New York Stock Exchange (ticker symbol: QIHC), headquartered at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. QIH serves as the ultimate parent of the Originator and the Depositor, and will act as sponsor of the transaction for purposes of Dodd-Frank risk retention requirements.
Originator / Seller / Servicer: Quorum Premium Finance LLC ("QPF"), a Delaware limited liability company and wholly owned subsidiary of QIH. QPF originates insurance premium finance loans to commercial policyholders across all fifty states and will serve as the initial servicer of the receivables pool. QPF will sell the receivables to the Depositor pursuant to a Receivables Sale Agreement structured as a true sale.
Depositor / Intermediate SPV: Quorum Receivables Holding LLC ("QRH"), a Delaware limited liability company and bankruptcy-remote special purpose entity. QRH is an intermediate entity interposed between QPF and the Issuer to enhance the bankruptcy remoteness of the transaction structure. QRH's sole member is QPF. QRH will acquire receivables from QPF and transfer them to the Issuer pursuant to a Receivables Transfer Agreement.
Governing Law: The transaction documents, including without limitation the Indenture, Note Purchase Agreement, Servicing Agreement, and Liquidity Facility Agreement, will be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of law principles thereof. The organizational documents of QRF 2022-1 and QRH, including their respective limited liability company agreements, will be governed by the laws of the State of Delaware.
Target Closing Date: Q4 2022, subject to market conditions, completion of definitive documentation, receipt of final ratings, and satisfaction of all conditions precedent to closing as described in Section 19. The indicative timeline set forth in Section 20 contemplates pricing and closing in November 2022.
2. Parties and Roles
2.1 Issuer
Name: Quorum Receivables Funding 2022-1 LLC
Jurisdiction: Delaware limited liability company; organized as a bankruptcy-remote special purpose entity in accordance with customary structured finance requirements.
Sole Member: Quorum Receivables Holding LLC.
Independent Manager: Timothy R. Callan, provided by Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. The Independent Manager will be required to consent to any voluntary filing of a bankruptcy, insolvency, or similar proceeding by QRF 2022-1, and Mr. Callan's consent will constitute a condition to any such filing.
Registered Agent: Ashgrove Services Inc., 28 Liberty Street, New York, New York 10005.
Purpose: QRF 2022-1 has been organized for the limited purpose of (a) acquiring and holding insurance premium finance receivables, (b) issuing asset-backed notes secured by such receivables and related collateral, (c) entering into and performing its obligations under the transaction documents, and (d) engaging in activities incidental thereto. QRF 2022-1 will not engage in any business or activity other than as described in the foregoing sentence.
2.2 Depositor
Name: Quorum Receivables Holding LLC
Jurisdiction: Delaware limited liability company; organized as an intermediate bankruptcy-remote special purpose entity to facilitate a two-step true sale structure.
Sole Member: Quorum Premium Finance LLC.
Independent Manager: Eleanor M. Vasquez, provided by Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. The Independent Manager will be required to consent to any voluntary filing of a bankruptcy, insolvency, or similar proceeding by QRH.
Purpose: QRH has been organized for the limited purpose of acquiring insurance premium finance receivables from QPF and transferring such receivables to QRF 2022-1 in furtherance of the securitization transaction.
2.3 Originator / Seller
Name: Quorum Premium Finance LLC
Jurisdiction: Delaware limited liability company; wholly owned subsidiary of Quorum Insurance Holdings Corp.
Principal Office: 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901.
Manager: Sandra Ling-Hwang, in her capacity as Treasurer of QIH.
Business Description: QPF is a leading originator and servicer of insurance premium finance loans to U.S. commercial policyholders. QPF is licensed to conduct premium finance business in all fifty states and the District of Columbia. QPF originates short-term loans (typically with original terms not exceeding twelve months) that enable commercial policyholders to finance the payment of insurance premiums over time. Each loan is secured by an assignment of the unearned premium refund rights under the related insurance policy, providing QPF with a direct claim against the applicable insurance carrier in the event of a policyholder default.
2.4 Sponsor
Name: Quorum Insurance Holdings Corp. ("QIH")
Jurisdiction: Delaware corporation, listed on the New York Stock Exchange under the ticker symbol QIHC.
Principal Executive Officers:
Chief Executive Officer: Marcus Devereaux Chief Financial Officer: Priya Raghavan General Counsel: Nolan Whitford Treasurer: Sandra Ling-Hwang
Financial Overview: QIH is a diversified financial services company operating across three principal business lines: property and casualty insurance distribution, premium finance lending, and insurtech software-as-a-service platforms. For the fiscal year ended December 31, 2021, QIH reported consolidated revenue of approximately $3.8 billion. As of the most recent fiscal year end, QPF's total managed premium finance receivables portfolio was approximately $2.1 billion.
Unsecured Credit Ratings:
Brindoval Ratings Inc.: BBB Pinnacle Rating Services LLC: Baa2
2.5 Servicer
Name: Quorum Premium Finance LLC (initial servicer).
QPF will serve as the initial servicer of the receivables pool pursuant to a Servicing Agreement among QRF 2022-1, QPF, and Calvoneth Trust Company, N.A., as Indenture Trustee. The servicer will be responsible for collecting payments on the receivables, administering the receivables in accordance with customary servicing standards, processing cancellations and claims for unearned premium refunds upon policyholder defaults, and remitting collections to the Issuer's accounts held at Calvoneth Trust.
Servicing Fee: 1.00% per annum, calculated on the outstanding pool balance as of the first day of each collection period, payable monthly from collections in accordance with the payment waterfall described in Section 10 hereof. At the initial pool balance of approximately $612,000,000, the monthly servicing fee is expected to be approximately $510,000.
2.6 Back-Up Servicer
Name: Northvane Bank, National Association
Principal Office: 200 Vesey Street, New York, New York 10281.
Contact: Diane Coletti, Managing Director, Structured Products Group.
Role: Northvane Bank will serve as the back-up servicer pursuant to a Back-Up Servicing Agreement among QRF 2022-1, QPF, Northvane Bank, and Calvoneth Trust Company, N.A. In the event of a servicer default or termination of QPF as servicer, Northvane Bank will assume servicing responsibilities for the receivables pool. During the term of QPF's engagement as servicer, Northvane Bank will maintain data tapes and systems readiness to facilitate a prompt transition of servicing functions.
Back-Up Servicer Fee: $50,000 per annum, payable quarterly in arrears ($12,500 per quarter), from collections in accordance with the payment waterfall.
2.7 Structuring Agent / Lead Bookrunner / Sole Placement Agent
Name: Ridgeline Capital Markets LLC
Status: SEC-registered broker-dealer; Delaware limited liability company.
Principal Office: 383 Madison Avenue, 14th Floor, New York, New York 10179.
Key Personnel:
Head of ABS Origination: Julian Weatherstone Managing Director, Insurance Finance ABS: Rebecca Tran
Role: Ridgeline Capital Markets will serve as the sole structuring agent, lead bookrunner, and sole placement agent for the offering of the Notes. Ridgeline will be responsible for structuring the transaction, marketing the Notes to qualified institutional buyers, conducting the investor roadshow, and managing the price discovery and allocation process. Placement fees payable to Ridgeline are described in Section 4 hereof.
2.8 Indenture Trustee / Paying Agent / Calculation Agent / Securities Intermediary / Custodian
Name: Calvoneth Trust Company, National Association
Corporate Trust Office: 600 Travis Street, Suite 5800, Houston, Texas 77002.
Senior Trust Officer: Gerald K. Fontaine.
Role: Calvoneth Trust will serve in multiple fiduciary and administrative capacities under the transaction. As Indenture Trustee, Calvoneth Trust will hold the security interest in the receivables and related collateral for the benefit of the noteholders and will administer the Indenture. As Paying Agent, Calvoneth Trust will distribute interest and principal payments to the noteholders on each payment date. As Calculation Agent, Calvoneth Trust will perform the calculations necessary to determine amounts distributable to each class of notes under the payment waterfall. As Securities Intermediary, Calvoneth Trust will maintain the transaction accounts described in Section 18. As Custodian, Calvoneth Trust will hold the receivables files and related documentation on behalf of the Issuer.
2.9 Liquidity Facility Provider
Name: Northvane Bank, National Association (same entity as the back-up servicer).
Role: Northvane Bank will provide a liquidity facility to the Issuer in the amount of $25,000,000 to address timing mismatches between the receipt of collections and the payment of obligations under the Indenture. The terms of the liquidity facility are described in Section 12 hereof.
2.10 Independent Manager Provider
Name: Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801.
Role: Fortbridge will provide independent managers to each of QRF 2022-1 and QRH in connection with the bankruptcy-remote structuring of those entities. Timothy R. Callan will serve as independent manager of QRF 2022-1, and Eleanor M. Vasquez will serve as independent manager of QRH.
2.11 Rating Agencies
Brindoval Ratings Inc.
55 Water Street, New York, New York 10041 Lead Analyst: Andrew Petrosian
Pinnacle Rating Services LLC
7 World Trade Center, New York, New York 10007 Lead Analyst: Monica Sung
Preliminary and final ratings from both Brindoval Ratings and Pinnacle Rating Services will be a condition to closing. Preliminary rating targets for each class of notes are set forth in Section 3.1 below.
2.12 Issuer's Counsel
Name: Calderwood & Harkness LLP
Address: 601 Lexington Avenue, New York, New York 10022.
Team:
Responsible Partner: Douglas Carmichael Billing Partner: Francesca Morano Lead Associate: Yuki Nakamura Working Associate: Carlos Espinoza Tax Specialist Partner: Sylvia Hartwell
Calderwood & Harkness will serve as counsel to the Issuer, the Depositor, and the Sponsor in connection with the structuring, documentation, and closing of the transaction, and will deliver the legal opinions described in Section 15 hereof.
2.13 Underwriter's Counsel
Name: Calloway & Brandt LLP
Address: One Liberty Plaza, 165 Broadway, New York, New York 10006.
Team:
Lead Partner: Harrison Collier Senior Associate: Megan O'Shaughnessy
Calloway & Brandt will serve as counsel to Ridgeline Capital Markets LLC in connection with the offering and placement of the Notes.
2.14 Trustee's Counsel
Name: Ashfield & Greer LLP
Address: One Chase Manhattan Plaza, New York, New York 10005.
Lead Partner: Vivian Sato.
Ashfield & Greer will serve as counsel to Calvoneth Trust Company, N.A. in connection with the Indenture and related transaction documents.
2.15 Auditor
Name: Meridian Ledger LLP
Address: 1301 Avenue of the Americas, New York, New York 10019.
Engagement Partner: Robert Falcone.
Role: Meridian Ledger serves as the independent auditors of QIH and will provide an agreed-upon procedures letter and a comfort letter in connection with the closing of the transaction. The comfort letter will address certain financial and statistical information included in the Offering Memorandum.
2.16 Verification Agent
Name: Veristead Analytics LLC
Address: 100 Summer Street, Suite 1500, Boston, Massachusetts 02110.
Managing Director: Katharine Drummond.
Role: Veristead Analytics will serve as the independent third-party verification agent and will prepare a pool verification report confirming the accuracy of the pool stratification data, tape reconciliation, and compliance of the receivables with the eligible receivables criteria. The pool verification report will be delivered as a condition to closing.
3. Capital Structure
3.1 Tranche Summary
The following table sets forth the preliminary capital structure of the offering. All terms, including coupon spreads and rating targets, are indicative only and remain subject to market conditions, rating agency feedback, and negotiation among the parties.
The overcollateralization / retained interest of $15,000,000 will be retained by QIH (as sponsor) and will represent QIH's horizontal risk retention interest for purposes of compliance with Dodd-Frank Section 941, as further discussed in Section 8.4 and Section 17 hereof.
3.2 Credit Enhancement Detail
Credit enhancement for each class of notes is provided through subordination of the classes junior thereto and overcollateralization. The credit enhancement structure is summarized as follows:
Class A Notes — Total Credit Enhancement: 25.0%
Class B subordination: 15.0% ($75,000,000) Class C subordination: 7.0% ($35,000,000) Overcollateralization: 3.0% ($15,000,000)
Class B Notes — Total Credit Enhancement: 10.0%
Class C subordination: 7.0% ($35,000,000) Overcollateralization: 3.0% ($15,000,000)
Class C Notes — Total Credit Enhancement: 3.0%
Overcollateralization: 3.0% ($15,000,000)
The credit enhancement levels described above are preliminary and are subject to adjustment based on rating agency analysis, collateral performance modeling, and final pool composition as of the closing date.
3.3 Preliminary CUSIPs
The following CUSIP numbers have been assigned on a preliminary basis and are subject to change prior to closing:
Class A Notes: 74892TAA3 (placeholder; not finalized) Class B Notes: 74892TAB1 (placeholder; not finalized) Class C Notes: 74892TAC9 (placeholder; not finalized)
Final CUSIP numbers will be confirmed prior to pricing.
3.4 Form of Notes
The Notes will be issued in book-entry form only. Beneficial interests in the Notes will be held through the facilities of The Depository Trust Company ("DTC") in the United States, and, for non-U.S. investors, through Westmark & Co. ("Ashgrove Enterprises") and Stonefield Industries ("Thackeray Partners LLC"), in each case through their respective participants. No definitive (certificated) notes will be issued except under limited circumstances as described in the Indenture.
Minimum Denominations: $250,000 and integral multiples of $1,000 in excess thereof. Each beneficial owner of Notes must at all times hold Notes in an aggregate principal amount of at least $250,000.
3.5 Interest Rate
Each class of Notes will bear interest at a floating rate equal to Compounded SOFR (Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, or a successor administrator), plus the applicable spread as set forth in the tranche summary table in Section 3.1 above.
Interest Payment Frequency: Monthly. Interest on the Notes will accrue during each interest accrual period and will be payable on each monthly payment date, as determined in accordance with the Indenture.
Day Count Convention: Actual/360.
The Indenture will include customary SOFR fallback provisions, including benchmark replacement waterfall language consistent with the ARRC's recommended best practices for securitization transactions as of the date of closing.
4. Placement Fees
The following placement fees will be payable by the Issuer to Ridgeline Capital Markets LLC upon the closing of the transaction in consideration for Ridgeline's services as sole structuring agent, lead bookrunner, and sole placement agent:
Placement fees are payable in full upon the closing and settlement of the Notes from the proceeds of the offering. The placement fee structure reflects the relative credit risk and placement difficulty associated with each class of notes, with higher fees applicable to the more subordinated and less liquid tranches. The foregoing fee schedule is subject to confirmation in the definitive Note Purchase Agreement.
5. Receivables Pool Characteristics
5.1 Initial Pool (as of Proposed Cut-Off Date: June 30, 2022)
The receivables pool as of the proposed cut-off date of June 30, 2022 is expected to have the following characteristics. All figures are preliminary and are based on QPF's loan tape as of the proposed cut-off date, subject to verification by Veristead Analytics LLC. Final pool composition will be determined as of the actual closing date and will be subject to the eligible receivables criteria set forth in Section 6 and the concentration limits set forth in Section 7.
The initial pool balance of $612,000,000 exceeds the total issuance size of $500,000,000, reflecting the initial overcollateralization and the expectation that a portion of the initial pool will amortize between the cut-off date and the closing date. The pool balance at closing will be calibrated to ensure that initial credit enhancement levels and overcollateralization targets are achieved.
5.2 Credit Quality Metrics
The following credit quality metrics are based on QPF's historical performance data for its managed premium finance receivables portfolio and the composition of the preliminary pool:
QPF's historical credit performance reflects the relatively low-risk nature of insurance premium finance receivables, which benefit from the servicer's ability to cancel the underlying insurance policy and recover unearned premium refunds from the insurance carrier upon a policyholder default. This cancellation mechanism provides a highly effective recovery tool that distinguishes insurance premium finance receivables from other forms of consumer or commercial lending.
5.3 Concentration Data
The following concentration data are based on the preliminary pool tape as of the proposed cut-off date:
Geographic Concentration (Top 3 States):
The pool exhibits strong geographic diversification across QPF's national origination platform. No single state accounts for more than 15% of the pool balance, and the pool includes receivables originated in all fifty states. The concentration limits described in Section 7 will be applicable at closing and during the revolving period to maintain adequate diversification.
5.4 Collateral Description
The receivables in the pool consist of insurance premium finance loans made by QPF to U.S. commercial policyholders. Each loan enables the obligor to finance the payment of insurance premiums for one or more commercial insurance policies (including, without limitation, general liability, property, workers' compensation, commercial auto, and umbrella/excess liability policies) over the term of the loan, rather than paying the full premium amount upfront.
Each receivable is secured by an assignment of the unearned premium refund rights arising under the underlying insurance policy or policies. This assignment grants QPF (and its assignees, including the Issuer) the right to cancel the underlying insurance policy upon a default by the obligor and to receive directly from the applicable insurance carrier the unearned portion of the premium refund. The assignment of unearned premium refund rights is typically acknowledged by the insurance carrier or its agent at the time of loan origination.
Upon a policyholder default, the servicer follows a customary cancellation and collection process:
(a) The servicer delivers a notice of intent to cancel to the obligor and the insurance carrier;
(b) If the default is not cured within the applicable notice period, the servicer instructs the insurance carrier to cancel the policy;
(c) The insurance carrier processes the cancellation and remits the unearned premium refund to the servicer; and
(d) The servicer applies the unearned premium refund to satisfy the outstanding loan balance, with any excess returned to the obligor.
This cancellation and recovery mechanism has historically resulted in high recovery rates on defaulted receivables and is a key credit strength of the asset class.
6. Eligible Receivables Criteria
Each receivable included in the initial pool as of the closing date, and each receivable acquired during the revolving period, must satisfy the following eligibility criteria (the "Eligible Receivables Criteria") at the time of its inclusion in the pool:
(i) The receivable was originated by QPF in the ordinary course of QPF's premium finance lending business, in accordance with QPF's customary underwriting guidelines and origination procedures;
(ii) The receivable is denominated in U.S. dollars and is payable in U.S. dollars;
(iii) The receivable is secured by an assignment of unearned premium refund rights under one or more insurance policies issued by a licensed insurance carrier;
(iv) The original term of the receivable does not exceed twelve (12) months from the date of origination;
(v) The obligor under the receivable is a U.S. commercial policyholder (and not a natural person borrowing for personal, family, or household purposes);
(vi) The receivable is not in default, and no payment on the receivable is more than sixty (60) days past due as of the date of inclusion in the pool;
(vii) The receivable was originated in compliance with all applicable federal, state, and local laws, rules, and regulations, including without limitation all applicable usury and interest rate limitation laws, premium finance licensing statutes, and consumer protection laws in the state of origination; and
(viii) Such other criteria as may be established in the definitive Receivables Sale Agreement and Receivables Transfer Agreement, subject to rating agency confirmation.
The Servicer will be responsible for certifying compliance with the Eligible Receivables Criteria for each receivable at the time of its inclusion in the pool. Any receivable that fails to satisfy the Eligible Receivables Criteria at the time of its inclusion will be subject to repurchase by QPF (or substitution with an eligible receivable) in accordance with the terms of the Receivables Sale Agreement.
7. Concentration Limits
The following concentration limits (the "Concentration Limits") will apply to the receivables pool at all times, including at closing and during the revolving period. Any purchase of additional receivables during the revolving period that would cause a Concentration Limit to be breached will not be permitted unless the breach is cured simultaneously with or promptly following such purchase.
Single Obligor: No single obligor (or group of affiliated obligors) may represent more than 0.75% of the total outstanding pool balance at any time.
Single State: No single state of origination may represent more than 20.0% of the total outstanding pool balance at any time.
Single Insurance Carrier: No single insurance carrier may represent more than 15.0% of the total outstanding pool balance at any time (measured by the aggregate outstanding principal balance of receivables secured by policies issued by such insurance carrier).
Compliance with the Concentration Limits will be monitored by the Servicer on a monthly basis and will be reported to the Indenture Trustee and the rating agencies in the monthly servicer report. A breach of any Concentration Limit that is not cured within the applicable cure period (to be specified in the definitive Servicing Agreement) may constitute an early amortization event as described in Section 11.
8. Transaction Structure
8.1 Overview of Transfers
The transaction will be structured using a two-step true sale methodology to achieve bankruptcy remoteness and a first-priority perfected security interest in the receivables for the benefit of the noteholders. The transfers are structured as follows:
Step 1 — Sale from Originator to Depositor: QPF (as Originator and Seller) will sell the initial pool of eligible receivables to QRH (as Depositor) pursuant to a Receivables Sale Agreement to be entered into between QPF and QRH. This transfer will be structured as a true sale of the receivables from QPF to QRH, intended to constitute a sale of assets for all purposes under applicable law (including for purposes of the U.S. Bankruptcy Code). As a precautionary measure, QPF will also grant a security interest in the receivables to QRH to secure QPF's obligations under the Receivables Sale Agreement.
Step 2 — Transfer from Depositor to Issuer: QRH (as Depositor) will transfer and contribute the receivables to QRF 2022-1 (as Issuer) pursuant to a Receivables Transfer Agreement to be entered into between QRH and QRF 2022-1. This transfer will also be structured as a true sale of the receivables from QRH to QRF 2022-1. As a precautionary measure, QRH will also grant a back-up security interest in the receivables to QRF 2022-1 to secure QRH's obligations under the Receivables Transfer Agreement.
Step 3 — Grant of Security Interest to Indenture Trustee: QRF 2022-1 (as Issuer) will grant a first-priority security interest in all receivables, collections, accounts, contract rights, and other collateral held by QRF 2022-1 to Calvoneth Trust Company, N.A., as Indenture Trustee, for the benefit of the noteholders, pursuant to the Indenture and a Grant of Security Interest (or Pledge Agreement). The security interest will be perfected by the filing of UCC-1 financing statements and by control over the transaction accounts held at Calvoneth Trust as securities intermediary.
8.2 Bankruptcy Remoteness
The transaction is structured to isolate the receivables from the bankruptcy risk of QPF, QIH, and their affiliates. The following structural features are designed to achieve bankruptcy remoteness:
(a) Special Purpose Entity Structure: Each of QRF 2022-1 and QRH has been organized as a bankruptcy-remote special purpose entity with limited purposes, limited activities, and customary separateness covenants as set forth in its respective limited liability company agreement.
(b) Independent Managers: Each of QRF 2022-1 and QRH will have an independent manager provided by Fortbridge Corporate Services LLC. The consent of the independent manager will be required before either entity may file a voluntary petition for bankruptcy, insolvency, or similar relief.
(c) Non-Petition Provisions: The transaction documents will include customary non-petition provisions pursuant to which each party agrees not to file or join in the filing of an involuntary bankruptcy petition against QRF 2022-1 or QRH.
(d) Separateness Covenants: Each of QRF 2022-1 and QRH will maintain separate books and records, separate bank accounts, and separate financial statements (or, as applicable, financial statements clearly identifying the assets and liabilities of such entity). Each entity will hold itself out as a separate entity and will not commingle its assets or liabilities with those of any affiliate.
(e) Limitations on Activities: Each of QRF 2022-1 and QRH will be prohibited from incurring indebtedness (other than the Notes, in the case of QRF 2022-1), guaranteeing obligations of any other entity, or engaging in any business other than the transactions contemplated by the transaction documents.
(f) Non-Consolidation Opinions: Calderwood & Harkness LLP will deliver non-consolidation opinions at closing, opining that, in the event of a bankruptcy of QPF, QIH, or any of their affiliates, a court exercising competent jurisdiction would not order the substantive consolidation of the assets and liabilities of QRF 2022-1 or QRH with those of QPF, QIH, or any other affiliate.
8.3 True Sale
The characterization of each transfer of receivables (from QPF to QRH and from QRH to QRF 2022-1) as a "true sale" is critical to the bankruptcy remoteness of the transaction and the protection of the noteholders' interest in the receivables.
True Sale Opinions: Calderwood & Harkness LLP will deliver true sale opinions at closing, opining that, under applicable law (including the U.S. Bankruptcy Code), each transfer of receivables constitutes a sale of such receivables and not a secured loan or financing arrangement. The true sale opinions will address both the QPF-to-QRH transfer and the QRH-to-QRF 2022-1 transfer.
Back-Up Security Interest Grants: As a precautionary measure, in the event that any transfer is recharacterized as a secured financing rather than a true sale, each transferor will grant a security interest in the transferred receivables to the applicable transferee to secure the transferor's obligations under the applicable transfer agreement.
UCC Financing Statements: UCC-1 financing statements will be filed with the Delaware Secretary of State at each transfer level:
(a) QPF (debtor) to QRH (secured party) — covering the receivables sold under the Receivables Sale Agreement;
(b) QRH (debtor) to QRF 2022-1 (secured party) — covering the receivables transferred under the Receivables Transfer Agreement; and
(c) QRF 2022-1 (debtor) to Calvoneth Trust Company, N.A. (secured party) — covering all receivables, collections, accounts, and other collateral pledged under the Indenture and Grant of Security Interest.
8.4 Risk Retention
QIH, as sponsor of the securitization transaction, intends to comply with the risk retention requirements of Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder (the "Risk Retention Rules"). QIH intends to satisfy the risk retention requirement by retaining a horizontal interest in the form of the $15,000,000 overcollateralization / retained interest, which represents 3.0% of the total issuance amount. This horizontal interest will be the most subordinated interest in the transaction and will absorb losses before any class of rated notes.
Further analysis of compliance with the Risk Retention Rules, including the calculation of the "fair value" of the retained interest and the applicable holding period requirements, will be set forth in a separate memorandum to be prepared by Calderwood & Harkness LLP. The parties acknowledge that the retained interest percentage of 3.0% is below the 5.0% threshold generally required by the Risk Retention Rules; accordingly, additional risk retention may be required, potentially through retention of additional notes or an increase in the overcollateralization amount, and the parties will work with the rating agencies and their respective legal advisors to finalize the risk retention structure in advance of closing.
9. Revolving Period and Amortization
9.1 Revolving Period
The transaction will include a revolving period of twenty-four (24) months commencing on the closing date (the "Revolving Period"). During the Revolving Period, collections on the receivables (net of amounts required for interest payments, servicing fees, trustee fees, and other expenses payable under the payment waterfall) will be used to acquire additional eligible receivables from QPF, subject to satisfaction of the Eligible Receivables Criteria and the Concentration Limits.
The revolving structure is designed to maintain the pool balance and extend the weighted average life of the notes, reflecting the short-term nature of the underlying receivables (which have a weighted average remaining term of approximately 5.7 months as of the proposed cut-off date). Without a revolving feature, the rapid amortization of the receivables would result in an uneconomically short weighted average life for the notes.
During the Revolving Period, the outstanding pool balance must be maintained at or above $450,000,000 at all times (the "Minimum Pool Balance"). A failure to maintain the Minimum Pool Balance will constitute an early amortization event as described in Section 11 hereof.
9.2 Amortization Period
Following the expiration of the Revolving Period (or the earlier occurrence of an early amortization event), the transaction will enter a controlled amortization period of twelve (12) months (the "Amortization Period"). During the Amortization Period, no additional receivables will be acquired, and all collections (net of required expense payments) will be applied to the sequential pay-down of the notes in order of priority:
(a) First, to the repayment of the Class A Notes until the outstanding principal balance thereof is reduced to zero;
(b) Second, to the repayment of the Class B Notes until the outstanding principal balance thereof is reduced to zero; and
(c) Third, to the repayment of the Class C Notes until the outstanding principal balance thereof is reduced to zero.
9.3 Legal Final Maturity
The legal final maturity date of all classes of Notes will be forty-two (42) months from the closing date (the "Legal Final Maturity Date"). If any Notes remain outstanding on the Legal Final Maturity Date, the remaining collateral will be liquidated and all available proceeds will be distributed to the noteholders in accordance with the payment waterfall. The expected weighted average life of the Notes will be significantly shorter than the Legal Final Maturity Date, subject to actual collateral performance and the occurrence or non-occurrence of early amortization events.
10. Payment Waterfall
On each monthly payment date, the Indenture Trustee will distribute available collections in the following order of priority (the "Payment Waterfall"):
1.  First, to the Indenture Trustee, payment of all accrued and unpaid trustee fees and expenses (including, without limitation, the annual trustee fee and the per-payment-date calculation fee described in Section 13);
2.  Second, to the Servicer, payment of the monthly servicing fee equal to one-twelfth of 1.00% per annum on the outstanding pool balance (and, if applicable, any accrued and unpaid back-up servicer fees);
3.  Third, to the Class A Noteholders, pro rata, payment of accrued and unpaid interest on the Class A Notes;
4.  Fourth, to the Class B Noteholders, pro rata, payment of accrued and unpaid interest on the Class B Notes;
5.  Fifth, to the Class C Noteholders, pro rata, payment of accrued and unpaid interest on the Class C Notes;
6.  Sixth, to the Class A Noteholders, pro rata, payment of principal on the Class A Notes in accordance with the amortization schedule (during the Amortization Period) or as otherwise required under the Indenture, until the outstanding principal balance of the Class A Notes has been reduced to zero;
7.  Seventh, to the Class B Noteholders, pro rata, payment of principal on the Class B Notes in accordance with the amortization schedule (during the Amortization Period) or as otherwise required under the Indenture, until the outstanding principal balance of the Class B Notes has been reduced to zero;
8.  Eighth, to the Class C Noteholders, pro rata, payment of principal on the Class C Notes in accordance with the amortization schedule (during the Amortization Period) or as otherwise required under the Indenture, until the outstanding principal balance of the Class C Notes has been reduced to zero;
9.  Ninth, to the Reserve Account, an amount necessary to replenish the overcollateralization to the target level of $15,000,000 (to the extent the balance of the Reserve Account is less than such target level); and
10.  Tenth, the residual (if any) to the Issuer, for the account of the Sponsor, as a distribution on the retained interest.
During the Revolving Period, amounts that would otherwise be applied to principal payments under steps 6 through 8 above will instead be used to acquire additional eligible receivables from QPF, subject to the terms of the Receivables Sale Agreement and the Servicing Agreement. Principal payments under steps 6 through 8 will commence upon the transition from the Revolving Period to the Amortization Period (or, if earlier, upon the occurrence of an early amortization event).
11. Early Amortization Events
The Revolving Period will terminate, and early amortization of the Notes will commence, upon the occurrence of any of the following events (each, an "Early Amortization Event"):
(a) Excess Net Losses: The three-month average net loss rate on the receivables pool exceeds 2.00% for any three consecutive collection periods;
(b) Excess Delinquencies: The 60+ day delinquency rate on the receivables pool exceeds 3.50% as of the last day of any collection period;
(c) Available Funds Cap Deficit: An available funds cap deficit exists for two (2) or more consecutive payment periods, meaning that the collections available for distribution under the Payment Waterfall are insufficient to pay all required amounts in steps 1 through 5 (trustee fees, servicing fees, and interest on all classes of Notes);
(d) Servicer Default or Downgrade: The occurrence of a servicer default under the Servicing Agreement, or a downgrade of QIH's unsecured long-term credit rating below BB(cr) by Brindoval Ratings Inc. or below Ba2(p) by Pinnacle Rating Services LLC;
(e) Minimum Pool Balance Breach: The outstanding pool balance falls below the Minimum Pool Balance of $450,000,000 at any time during the Revolving Period and such deficiency is not cured within five (5) business days following notice thereof; and
(f) Other Events: Such other events as may be specified in the definitive Indenture, including without limitation (i) the occurrence of an event of default under the Indenture, (ii) the failure by QPF to deliver eligible receivables sufficient to maintain the Minimum Pool Balance, and (iii) any breach of a representation, warranty, or covenant by any transaction party that is not cured within the applicable cure period.
Upon the occurrence of an Early Amortization Event, the transaction will immediately transition to the Amortization Period, and all collections will be applied to the sequential pay-down of the Notes in accordance with the Payment Waterfall, without further acquisition of additional receivables.
12. Liquidity Facility
Provider: Northvane Bank, National Association.
Facility Size: $25,000,000.
Commitment Fee: 0.25% per annum on the undrawn amount of the facility ($62,500 per year, assuming no draws), payable quarterly in arrears.
Drawn Rate: Compounded SOFR plus 150 basis points on drawn amounts, accruing on an Actual/360 day count basis.
Purpose: The liquidity facility is intended to provide short-term liquidity support to the Issuer to cover timing mismatches between the receipt of collections on the receivables and the payment of obligations under the Indenture on scheduled payment dates. The liquidity facility is not intended to provide credit support or loss coverage and is not sized as a credit enhancement mechanism. Draws under the facility are expected to be repaid from subsequent collections within the same or following collection period.
Draw Conditions: The conditions under which the Issuer may draw on the liquidity facility, the mechanics for requesting and funding draws, and the repayment terms will be set forth in the definitive Liquidity Facility Agreement to be entered into between QRF 2022-1 and Northvane Bank. It is anticipated that draws will be permitted only if available collections are insufficient to pay required trustee fees, servicing fees, and interest on the Notes on a scheduled payment date, and only to the extent of such shortfall.
Repayment Priority: Repayment of amounts drawn under the liquidity facility will be addressed in the Payment Waterfall at a priority level to be determined in the definitive documentation, subject to rating agency review. It is anticipated that liquidity facility repayments will rank at the top of the waterfall, immediately following trustee fees and expenses.
Events of Default: The Liquidity Facility Agreement will include customary events of default, including failure to pay, breach of representations and warranties, and cross-default provisions. The termination of the liquidity facility upon the occurrence of an event of default thereunder will be addressed in the definitive documentation.
13. Trustee Fees
The following fees will be payable to Calvoneth Trust Company, N.A. in its capacity as Indenture Trustee, Paying Agent, Calculation Agent, Securities Intermediary, and Custodian:
Annual Fee: $35,000 per annum, payable in equal monthly installments from collections at the top of the Payment Waterfall.
Per-Payment-Date Fee: $5,000 per payment date, payable on each monthly payment date from collections at the top of the Payment Waterfall, in consideration for distribution calculations, investor reporting, and related administrative services.
The foregoing fees are exclusive of reasonable out-of-pocket expenses incurred by Calvoneth Trust in the performance of its duties under the Indenture, which will be reimbursable to Calvoneth Trust from collections in accordance with the Payment Waterfall. Trustee fees and expenses are the senior-most obligation in the Payment Waterfall and will be paid in priority to all other amounts, including servicing fees and interest on the Notes.
Additional trustee fees may be applicable in connection with extraordinary services, amendments, consents, or waivers, as set forth in the definitive Indenture. The trustee fee schedule is subject to negotiation and finalization in the Indenture.
14. Key Transaction Documents
The following is a list of the principal definitive transaction documents that are anticipated to be executed and delivered at or prior to closing. All documents are in preliminary form and remain subject to drafting, negotiation, and review by the parties, their respective counsel, and the rating agencies.
1.  Indenture — by and between QRF 2022-1, as Issuer, and Calvoneth Trust Company, N.A., as Indenture Trustee, setting forth the terms and conditions of the Notes, the grant of security interest, the Payment Waterfall, events of default, and related provisions.
2.  Receivables Sale Agreement — by and between QPF, as Originator/Seller, and QRH, as Depositor, providing for the true sale of eligible receivables from QPF to QRH.
3.  Receivables Transfer Agreement — by and between QRH, as Depositor, and QRF 2022-1, as Issuer, providing for the true sale (or contribution) of eligible receivables from QRH to QRF 2022-1.
4.  Servicing Agreement — by and among QRF 2022-1, as Issuer, QPF, as Servicer, and Calvoneth Trust Company, N.A., as Indenture Trustee, setting forth the terms of QPF's servicing obligations with respect to the receivables pool.
5.  Back-Up Servicing Agreement — by and among QRF 2022-1, as Issuer, QPF, as Servicer, Northvane Bank, National Association, as Back-Up Servicer, and Calvoneth Trust Company, N.A., as Indenture Trustee, setting forth the terms of Northvane Bank's back-up servicing obligations.
6.  Administration Agreement — by and between QRF 2022-1, as Issuer, and QIH, as Administrator, providing for the administration of QRF 2022-1's day-to-day activities.
7.  Note Purchase Agreement — by and among QRF 2022-1, as Issuer, QIH, as Sponsor, and Ridgeline Capital Markets LLC, as Sole Placement Agent, setting forth the terms and conditions for the purchase and placement of the Notes.
8.  Liquidity Facility Agreement — by and between QRF 2022-1, as Issuer, and Northvane Bank, National Association, as Liquidity Facility Provider, setting forth the terms of the $25,000,000 liquidity facility.
9.  Account Control Agreement — by and between QRF 2022-1, as Issuer, and Calvoneth Trust Company, N.A., as Securities Intermediary, providing for the establishment and control of the transaction accounts described in Section 18.
10.  Custodian Agreement — by and between QRF 2022-1, as Issuer, and Calvoneth Trust Company, N.A., as Custodian, providing for the custody and safekeeping of the receivables files and related documentation.
11.  Grant of Security Interest / Pledge Agreement — by QRF 2022-1, as Issuer, in favor of Calvoneth Trust Company, N.A., as Indenture Trustee, granting a first-priority security interest in all receivables, collections, accounts, and other collateral for the benefit of the noteholders.
12.  Performance Guaranty — by QIH, in favor of Calvoneth Trust Company, N.A., as Indenture Trustee, guaranteeing certain obligations of QPF and QRH under the transaction documents.
13.  Limited Liability Company Agreements — for each of QRF 2022-1 and QRH, containing separateness covenants, independent manager provisions, non-petition provisions, and limitations on activities.
14.  Independent Manager Agreements — by and between Fortbridge Corporate Services LLC and each of QRF 2022-1 and QRH, providing for the appointment and compensation of the independent managers.
Additional ancillary documents, including officer's certificates, secretary's certificates, bring-down certificates, and filing receipts, will also be delivered at closing as conditions precedent.
15. Legal Opinions to be Delivered at Closing
The following legal opinions are expected to be delivered at or prior to closing as conditions precedent to the issuance and sale of the Notes:
1.  True Sale Opinions — Calderwood & Harkness LLP will deliver opinions (a) that the transfer of receivables from QPF to QRH under the Receivables Sale Agreement constitutes a true sale and not a secured financing, and (b) that the transfer of receivables from QRH to QRF 2022-1 under the Receivables Transfer Agreement constitutes a true sale and not a secured financing.
2.  Non-Consolidation Opinions — Calderwood & Harkness LLP will deliver opinions that, in the event of a bankruptcy of QPF, QIH, or any affiliate thereof, a court would not order the substantive consolidation of (a) the assets and liabilities of QRF 2022-1 with those of QPF, QIH, or any affiliate, or (b) the assets and liabilities of QRH with those of QPF, QIH, or any affiliate.
3.  Enforceability Opinion — Calderwood & Harkness LLP will deliver an opinion that the Indenture constitutes a valid, binding, and enforceable obligation of QRF 2022-1 and that the Notes, when executed, authenticated, and delivered in accordance with the Indenture, will constitute valid, binding, and enforceable obligations of QRF 2022-1 entitled to the benefits of the Indenture.
4.  Security Interest Perfection Opinion — Calderwood & Harkness LLP will deliver an opinion that QRF 2022-1 has granted to the Indenture Trustee a valid and perfected first-priority security interest in the receivables, collections, accounts, and other collateral described in the Indenture and Grant of Security Interest, in accordance with Article 9 of the Uniform Commercial Code as in effect in the State of Delaware.
5.  Tax Characterization Opinion — Calderwood & Harkness LLP (Sylvia Hartwell, Tax Specialist Partner) will deliver an opinion (a) that the Notes will be treated as debt for U.S. federal income tax purposes, and (b) that QRF 2022-1 will be treated as a disregarded entity (or qualifying special purpose entity) and not as a taxable entity for U.S. federal income tax purposes.
6.  Securities Law Opinion — Calderwood & Harkness LLP will deliver an opinion that the offer and sale of the Notes in the manner described in the Offering Memorandum and the Note Purchase Agreement are exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof and Rule 144A and Regulation S thereunder.
7.  Delaware LLC Formation and Authorization Opinions — Calderwood & Harkness LLP will deliver opinions that each of QRF 2022-1 and QRH (a) has been duly formed and is validly existing and in good standing as a limited liability company under the laws of the State of Delaware, and (b) has all necessary limited liability company power and authority to execute, deliver, and perform its obligations under the transaction documents to which it is a party.
Additional opinions, including opinions from Calloway & Brandt LLP (underwriter's counsel), Ashfield & Greer LLP (trustee's counsel), and local counsel in relevant jurisdictions, may be required as determined during the documentation process.
16. Tax Considerations (Summary)
The following is a summary of certain U.S. federal income tax considerations relevant to the transaction. This summary is preliminary in nature and is based on current law and the anticipated transaction structure. A detailed tax structuring analysis will be prepared separately by Sylvia Hartwell, Tax Specialist Partner at Calderwood & Harkness LLP.
Debt Treatment of Notes. The Notes are intended to be treated as indebtedness of QRF 2022-1 for U.S. federal income tax purposes, and not as equity interests in QRF 2022-1 or any other entity. Holders of the Notes will be required to include interest income on the Notes in their gross income for U.S. federal income tax purposes in accordance with their regular method of accounting. The Indenture and the Note Purchase Agreement will include provisions requiring holders to treat the Notes as indebtedness for all tax purposes.
Disregarded Entity Status. QRF 2022-1 is intended to be treated as a disregarded entity (or qualifying special purpose entity) for U.S. federal income tax purposes and not as a separate taxable entity. This treatment is premised on QRF 2022-1 having a single owner (QRH) for U.S. federal income tax purposes and not electing to be classified as a corporation. Calderwood & Harkness LLP will deliver a tax characterization opinion confirming this treatment at closing.
FATCA Compliance. The Notes will be structured to comply with the withholding requirements of the Foreign Account Tax Compliance Act ("FATCA") (Sections 1471–1474 of the Internal Revenue Code of 1986, as amended). Non-U.S. holders of the Notes will be subject to standard W-8 documentation requirements (including IRS Forms W-8BEN, W-8BEN-E, or W-8IMY, as applicable) in order to establish their status under FATCA and any applicable intergovernmental agreement.
State Tax Considerations. QRF 2022-1 has been organized and will be operated in a manner intended to minimize state-level franchise tax, income tax, or other tax exposure in states other than Delaware. QRF 2022-1 will not maintain offices, employees, or tangible personal property in any state other than Delaware, and its activities will be limited to those necessary to effectuate the transactions contemplated by the transaction documents. The Delaware limited liability company annual tax of $300 will be payable by QRF 2022-1.
Further Analysis. The foregoing summary is not intended to constitute legal or tax advice. A detailed tax structuring memorandum will be prepared by Sylvia Hartwell (Calderwood & Harkness LLP) and circulated to the parties in connection with the preparation of definitive documentation. The tax structuring memorandum will address, among other things, the application of the grantor trust rules, the tax treatment of the overcollateralization / retained interest, and withholding obligations applicable to the Issuer and the Indenture Trustee.
17. Regulatory Considerations (Summary)
The following is a summary of certain regulatory considerations applicable to the transaction. These matters remain subject to further analysis and will be addressed in greater detail in the definitive documentation and the Offering Memorandum.
Regulation AB II. The Notes will be offered and sold in a private placement pursuant to Rule 144A and Regulation S under the Securities Act and will not be registered with the Securities and Exchange Commission. Accordingly, the transaction is not subject to the registration-based disclosure and reporting requirements of Regulation AB (17 C.F.R. §§ 229.1100–229.1125) and Regulation AB II. Notwithstanding the foregoing, the parties intend to observe best-practice disclosure standards in the Offering Memorandum and the ongoing reporting delivered to noteholders, including collateral-level data, pool performance metrics, and compliance certificates.
Volcker Rule. An analysis of the applicability of the Volcker Rule (Section 619 of the Dodd-Frank Act; 12 U.S.C. § 1851) to QRF 2022-1 and the Notes will be completed prior to closing. The analysis will address whether QRF 2022-1 constitutes a "covered fund" under the Volcker Rule and whether the "loan securitization" exclusion (as defined in 12 C.F.R. § 248.10(c)(8)) is available with respect to the receivables pool. If the loan securitization exclusion is available, banking entities subject to the Volcker Rule would not be prohibited from acquiring or retaining an ownership interest in the Notes. The parties anticipate that the loan securitization exclusion will be available, given that the receivables constitute loans (premium finance agreements) originated by QPF; however, this determination is subject to further legal analysis and may depend on the specific terms of the receivables and the structure of the transaction.
Risk Retention (Dodd-Frank Section 941). QIH, as the sponsor of the securitization transaction, will be required to retain an economic interest in the credit risk of the securitized assets in accordance with Section 941 of the Dodd-Frank Act and the joint final rules promulgated thereunder by the Federal banking regulators, the SEC, the FHFA, and HUD (the "Risk Retention Rules"). The Risk Retention Rules generally require the sponsor to retain not less than 5% of the credit risk of the securitized assets. QIH intends to satisfy this requirement by retaining a horizontal interest in the form of the overcollateralization / retained interest. As noted in Section 8.4, the current overcollateralization level of 3.0% is below the 5.0% threshold, and the parties will work to finalize a risk retention structure that satisfies the applicable requirements prior to closing.
State Premium Finance Licensing. QPF is licensed as a premium finance company in all fifty states and the District of Columbia. The eligible receivables criteria set forth in Section 6 include a requirement that each receivable be originated in compliance with all applicable usury and licensing laws in the state of origination. QPF will represent and warrant in the Receivables Sale Agreement that it holds all licenses, permits, and authorizations necessary to conduct its premium finance business in each jurisdiction in which it originates receivables.
18. Accounts
The following accounts (collectively, the "Transaction Accounts") will be established at Calvoneth Trust Company, N.A. in connection with the closing of the transaction. All Transaction Accounts will be subject to an Account Control Agreement pursuant to which Calvoneth Trust will serve as securities intermediary and will maintain exclusive control over the accounts for the benefit of the noteholders.
Collection Account. A segregated trust account to be established at Calvoneth Trust for the deposit of all collections on the receivables, including regularly scheduled payments, prepayments, unearned premium refund proceeds, and any other amounts received in respect of the receivables. The Servicer will be required to deposit (or cause to be deposited) all collections into the Collection Account within two (2) business days of receipt (or such other period as may be specified in the Servicing Agreement).
Payment Account. A segregated trust account to be established at Calvoneth Trust for the distribution of payments to the noteholders and other parties on each monthly payment date. On each payment date, the Indenture Trustee will transfer amounts from the Collection Account to the Payment Account in accordance with the Payment Waterfall set forth in Section 10 and distribute such amounts to the entitled parties.
Reserve Account. A segregated trust account to be established at Calvoneth Trust to hold the overcollateralization amounts. The Reserve Account will be funded at closing in the amount of $15,000,000 (representing the target overcollateralization level) and will be replenished on each payment date to the extent necessary to restore the balance to the target level, in accordance with the Payment Waterfall.
Liquidity Reserve Account. A segregated trust account to be established at Calvoneth Trust for the deposit of amounts drawn under the Liquidity Facility Agreement with Northvane Bank. Amounts deposited in the Liquidity Reserve Account will be avai