CONFIDENTIAL TREATMENT REQUESTED — EXECUTION DRAFT v2 — OCTOBER 12, 2022
ACCOUNT CONTROL AGREEMENT
among
QUORUM RECEIVABLES FUNDING 2022-1 LLC, as Issuer and Entitlement Holder,
QUORUM PREMIUM FINANCE LLC, as Servicer,
and
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION, as Securities Intermediary, Indenture Trustee, and Paying Agent
Dated as of [●], 2022
TABLE OF CONTENTS
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ACCOUNT CONTROL AGREEMENT
This ACCOUNT CONTROL AGREEMENT (this "Agreement") is made and entered into as of [●], 2022, by and among:
(1) QUORUM RECEIVABLES FUNDING 2022-1 LLC, a Delaware limited liability company (the "Issuer" and the "Entitlement Holder");
(2) QUORUM PREMIUM FINANCE LLC, a Delaware limited liability company ("QPF" or the "Servicer"); and
(3) CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States (the "Securities Intermediary," and in its capacity as indenture trustee, the "Indenture Trustee," and in its capacity as paying agent, the "Paying Agent," and together with its successors and assigns, "Calvoneth Trust").
The Issuer, the Servicer, and the Securities Intermediary are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. Quorum Receivables Funding 2022-1 LLC (the "Issuer"), a Delaware limited liability company (Delaware Secretary of State File No. 7894231), has been formed as a bankruptcy-remote special purpose entity for the purpose of acquiring insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF" or the "Servicer") and issuing notes backed by such receivables. The Issuer's sole member is Quorum Receivables Holding LLC, a Delaware limited liability company. Timothy R. Callan (Fortbridge Corporate Services LLC) serves as the independent manager of the Issuer.
B. The Issuer is issuing $500,000,000 aggregate principal amount of asset-backed notes in three tranches: (i) $375,000,000 Class A Notes (preliminary CUSIP 74892TAA3), (ii) $75,000,000 Class B Notes (preliminary CUSIP 74892TAB1), and (iii) $35,000,000 Class C Notes (preliminary CUSIP 74892TAC9) (collectively, the "Notes"), pursuant to that certain Indenture dated as of [●], 2022 (the "Indenture"), between the Issuer and Calvoneth Trust Company, National Association, as indenture trustee (in such capacity, the "Indenture Trustee"). The Notes are backed by a pool of insurance premium finance receivables originated by QPF and sold or contributed to the Issuer.
C. Pursuant to the Indenture, the Issuer is required to establish and maintain certain accounts at the Securities Intermediary for the collection, investment, and distribution of funds in connection with the transaction, including (i) the Collection Account, (ii) the Payment Account, (iii) the Reserve Account, and (iv) the Liquidity Reserve Account (each as defined herein, and collectively, the "Controlled Accounts"). The establishment, funding, and maintenance of such accounts are conditions to the issuance of the Notes and are integral to the credit enhancement and payment structure of the transaction.
D. QPF will act as servicer of the receivables pool pursuant to the Servicing Agreement dated as of [●], 2022 (the "Servicing Agreement"), among the Issuer, QPF, and Calvoneth Trust, as indenture trustee. In its capacity as Servicer, QPF is responsible for the collection, administration, and remittance of all payments received in respect of the receivables and for delivering periodic reports to the Securities Intermediary regarding the performance of the receivables pool.
E. The Parties desire to enter into this Account Control Agreement to establish the Securities Intermediary's control over the Controlled Accounts for the benefit of the Secured Parties (as defined in the Indenture), in accordance with the requirements of Articles 8 and 9 of the Uniform Commercial Code as in effect in the State of New York (the "UCC"). This Agreement is intended to ensure that the Securities Intermediary, acting as Indenture Trustee, has "control" (within the meaning of UCC Sections 8-106 and 9-106) over the Controlled Accounts and all financial assets, security entitlements, and other property credited thereto, such that the security interest of the Indenture Trustee in such accounts is perfected by control.
F. Pursuant to that certain Grant of Security Interest (Pledge Agreement) dated as of [●], 2022 (the "Grant of Security Interest"), from the Issuer to Calvoneth Trust, as Indenture Trustee, the Issuer has granted a first-priority security interest in all receivables, collections, accounts, and other collateral described therein for the benefit of the holders of the Notes, the Indenture Trustee, and the other Secured Parties. The parties intend this Agreement to effectuate and perfect such security interest with respect to the Controlled Accounts and Account Property (as defined herein).
G. Pursuant to that certain Liquidity Facility Agreement dated as of [●], 2022 (the "Liquidity Facility Agreement"), between the Issuer and Northvane Bank, N.A. ("Northvane"), Northvane has agreed to provide a $25,000,000 revolving liquidity facility to the Issuer, the proceeds of which may be deposited into the Liquidity Reserve Account established hereunder to provide additional liquidity support for the payment of interest on the Notes and certain senior expenses during periods of temporary collection shortfalls.
NOW, THEREFORE, in consideration of the mutual agreements, covenants, and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Account Property" means all financial assets, security entitlements, investment property, cash, instruments, general intangibles, and any other property at any time credited to, or required to be credited to, any Controlled Account, together with all proceeds thereof and all income, dividends, interest, and other payments and distributions with respect thereto.
"blocked Account Period" means the period commencing upon the delivery of a Shifting Control Notice by the Securities Intermediary (acting as Indenture Trustee) to the Issuer and the Servicer and ending upon the termination of such blocked Account Period in accordance with Section 3.04 hereof.
"Business Day" means any day other than a Saturday, Sunday, or any day on which banking institutions in the State of New York or the State of Texas are authorized or required by law, regulation, or executive order to remain closed.
"Class A Notes" means the $375,000,000 aggregate principal amount of Class A Asset-Backed Notes issued by the Issuer pursuant to the Indenture, with a preliminary CUSIP number of 74892TAA3, rated AAA(cr) by Brindoval Ratings Inc. and Aaa(p) by Pinnacle Rating Services LLC.
"Class B Notes" means the $75,000,000 aggregate principal amount of Class B Asset-Backed Notes issued by the Issuer pursuant to the Indenture, with a preliminary CUSIP number of 74892TAB1, rated A(cr) by Brindoval Ratings Inc. and A1(p) by Pinnacle Rating Services LLC.
"Class C Notes" means the $35,000,000 aggregate principal amount of Class C Asset-Backed Notes issued by the Issuer pursuant to the Indenture, with a preliminary CUSIP number of 74892TAC9, rated BBB(cr) by Brindoval Ratings Inc. and Baa2(p) by Pinnacle Rating Services LLC.
"Closing Date" means [●], 2022, the date on which the Notes are initially issued and the receivables pool is conveyed to the Issuer.
"Collection Account" means the segregated securities account established and maintained at the Securities Intermediary for the deposit of all collections on the receivables pool, designated as Account No. [●], and titled "Quorum Receivables Funding 2022-1 LLC — Collection Account," subject to the control of the Securities Intermediary acting as Indenture Trustee.
"Controlled Accounts" means, collectively, the Collection Account, the Payment Account, the Reserve Account, and the Liquidity Reserve Account, and each individually a "Controlled Account."
"Corporate Trust Office" means the office of the Securities Intermediary at which at any particular time its corporate trust business is principally administered, which office as of the date hereof is located at 600 Travis Street, Suite 5800, Houston, TX 77002.
"Brindoval" means Brindoval Ratings Inc., and any successor thereto.
"Determination Date" means, with respect to each Payment Date, the date that is two (2) Business Days prior to such Payment Date.
"Early Amortization Event" has the meaning ascribed to such term in the Indenture. Without limiting the generality of the foregoing, Early Amortization Events include: (i) the three-month average net loss rate exceeding 2.00%; (ii) the sixty-day-plus delinquency rate exceeding 3.50%; (iii) an available funds cap deficit occurring for two (2) consecutive periods; (iv) a servicer default or servicer rating downgrade below BB(cr) by Brindoval or Ba2(p) by Pinnacle; and (v) the pool balance falling below $450,000,000 during the revolving period.
"Eligible Investments" means any one or more of the following investments or obligations: (i) money market funds rated at least AAA by Brindoval and Aaa by Pinnacle; (ii) direct obligations of, or obligations unconditionally guaranteed by, the United States of America or any agency or instrumentality thereof, maturing within thirty (30) days of the date of acquisition; and (iii) demand deposits or time deposits (maturing within thirty (30) days) at depository institutions organized under the laws of the United States of America or any state thereof, the short-term unsecured debt obligations of which are rated at least A-1 by Brindoval and P-1 by Pinnacle (or the equivalent thereof).
"Entitlement Holder" means the Issuer, as the person having a security entitlement with respect to the financial assets and other property credited to each Controlled Account, within the meaning of UCC Section 8-102(a)(7).
"Entitlement Order" has the meaning ascribed to such term in UCC Section 8-102(a)(8).
"Event of Default" has the meaning ascribed to such term in the Indenture.
"Grant of Security Interest" means the Grant of Security Interest (Pledge Agreement) dated as of [●], 2022, from the Issuer to Calvoneth Trust, as Indenture Trustee, as amended, restated, supplemented, or otherwise modified from time to time.
"Indenture" means the Indenture dated as of [●], 2022, between the Issuer and Calvoneth Trust, as Indenture Trustee, as amended, restated, supplemented, or otherwise modified from time to time, including any supplements thereto.
"Issuer" means Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (Delaware Secretary of State File No. 7894231), whose sole member is Quorum Receivables Holding LLC, and whose independent manager is Timothy R. Callan (Fortbridge Corporate Services LLC).
"Liquidity Facility Agreement" means the Liquidity Facility Agreement dated as of [●], 2022, between the Issuer and Northvane Bank, N.A., pursuant to which Northvane provides a $25,000,000 revolving liquidity facility to the Issuer, as amended, restated, supplemented, or otherwise modified from time to time.
"Liquidity Reserve Account" means the segregated securities account established and maintained at the Securities Intermediary for the deposit and maintenance of liquidity facility proceeds drawn under the Liquidity Facility Agreement and related amounts, designated as Account No. [●], and titled "Quorum Receivables Funding 2022-1 LLC — Liquidity Reserve Account."
"Northvane" means Northvane Bank, N.A., a national banking association, in its capacity as provider of the liquidity facility under the Liquidity Facility Agreement.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes.
"Payment Account" means the segregated securities account established and maintained at the Securities Intermediary from which distributions to the holders of the Notes and other payments are made on each Payment Date, designated as Account No. [●], and titled "Quorum Receivables Funding 2022-1 LLC — Payment Account."
"Payment Date" means the fifteenth (15th) day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day.
"Payment Waterfall" means the sequential priority of payments on each Payment Date as specified in the Indenture, which is as follows:
(1) first, to the Indenture Trustee, the Trustee fees and expenses then due and payable;
(2) second, to the Servicer, the servicing fee then due and payable;
(3) third, to the holders of the Class A Notes, interest then due and payable on the Class A Notes;
(4) fourth, to the holders of the Class B Notes, interest then due and payable on the Class B Notes;
(5) fifth, to the holders of the Class C Notes, interest then due and payable on the Class C Notes;
(6) sixth, to the holders of the Class A Notes, principal then due and payable on the Class A Notes (including any principal deficiency amounts);
(7) seventh, to the holders of the Class B Notes, principal then due and payable on the Class B Notes (including any principal deficiency amounts);
(8) eighth, to the holders of the Class C Notes, principal then due and payable on the Class C Notes (including any principal deficiency amounts);
(9) ninth, to the Reserve Account, any amounts required to replenish the Reserve Account to its required balance (the overcollateralization target); and
(10) tenth, to the Issuer (or its designee), any remaining amounts as a residual distribution.
"Pinnacle" means Pinnacle Rating Services LLC, and any successor thereto.
"Reserve Account" means the segregated securities account established and maintained at the Securities Intermediary for the maintenance of required reserves, designated as Account No. [●], and titled "Quorum Receivables Funding 2022-1 LLC — Reserve Account."
"Secured Parties" means, collectively, the holders of the Notes, the Indenture Trustee, and any other persons secured by the collateral under the Indenture and the Grant of Security Interest, each in their respective capacities as such.
"Securities Intermediary" means Calvoneth Trust Company, National Association, in its capacity as securities intermediary under Article 8 of the UCC, and its successors and assigns in such capacity.
"Servicer Report" means the monthly report delivered by the Servicer to the Securities Intermediary (as Indenture Trustee) on each Determination Date, setting forth, among other things, the allocation of funds on deposit in the Collection Account, the amounts to be transferred to the Payment Account, and the application of such amounts in accordance with the Payment Waterfall.
"Servicing Agreement" means the Servicing Agreement dated as of [●], 2022, among the Issuer, QPF (as servicer), and Calvoneth Trust (as Indenture Trustee), pursuant to which QPF serves as servicer of the receivables pool at a servicing fee of 1.00% per annum calculated on the outstanding pool balance, as amended, restated, supplemented, or otherwise modified from time to time.
"Shifting Control Notice" means a written notice delivered by the Securities Intermediary (acting as Indenture Trustee) to the Issuer and the Servicer, in substantially the form attached hereto as Exhibit A, directing that exclusive control over the Controlled Accounts has shifted to the Securities Intermediary, which notice shall be delivered upon the occurrence and continuance of an Event of Default or an Early Amortization Event under the Indenture.
"Transaction Documents" means, collectively, this Agreement, the Indenture, the Servicing Agreement, the Grant of Security Interest, the Liquidity Facility Agreement, the purchase and sale agreements relating to the receivables, and all other agreements, instruments, and documents executed and delivered in connection with the issuance of the Notes.
"UCC" means the Uniform Commercial Code as in effect in the State of New York from time to time, including all official comments thereto as adopted in the State of New York. For purposes of this Agreement, any reference to a particular Article or Section of the UCC shall be deemed to include any successor provision thereto.
Section 1.02 — Interpretation
(a) Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Indenture.
(b) All references herein to Articles, Sections, and Exhibits are to Articles and Sections of, and Exhibits to, this Agreement, unless otherwise specified.
(c) Terms defined in the UCC that are used but not otherwise defined in this Agreement or the Indenture shall have the respective meanings given to such terms in the UCC.
(d) The headings and subheadings of the Articles, Sections, and Exhibits of this Agreement are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
(e) As used herein, the word "including" (and words of similar import) means "including without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(f) References to any agreement or instrument shall mean such agreement or instrument as amended, restated, supplemented, or otherwise modified from time to time, unless otherwise expressly stated.
(g) References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting such statute or regulation.
(h) The singular includes the plural and vice versa, and the use of any gender includes all genders, as the context may require.
Section 1.03 — UCC Characterization
(a) Each Controlled Account shall be, and hereby is, designated as a "securities account" as defined in UCC Section 8-501.
(b) All cash, checks, securities, instruments, investment property, and other assets at any time credited to, or required to be credited to, any Controlled Account shall be treated as "financial assets" within the meaning of UCC Section 8-102(a)(9). The Securities Intermediary agrees to treat all items credited to the Controlled Accounts as financial assets in accordance with this Section 1.03(b), regardless of whether such items would otherwise qualify as financial assets under the UCC.
(c) The Issuer is, and at all times during the term of this Agreement shall be, the Entitlement Holder with respect to each Controlled Account, and shall have the security entitlement with respect to all financial assets credited to the Controlled Accounts. Notwithstanding the foregoing, the Issuer's rights as Entitlement Holder are subject to the security interest of the Indenture Trustee for the benefit of the Secured Parties as contemplated by the Indenture and the Grant of Security Interest and are further subject to the control provisions of this Agreement.
(d) Each Party acknowledges and agrees that the characterizations set forth in this Section 1.03 are intended to ensure that the security interest of the Indenture Trustee in the Controlled Accounts and Account Property is perfected by control in accordance with UCC Sections 8-106, 9-106, and 9-314(a).
ARTICLE II — ESTABLISHMENT AND MAINTENANCE OF ACCOUNTS
Section 2.01 — Establishment of Controlled Accounts
(a) The Securities Intermediary hereby confirms that it has established and will continue to maintain the following accounts, each in the name of the Issuer (Quorum Receivables Funding 2022-1 LLC), on its books and records at its Corporate Trust Office:
(i) Collection Account — Account No. [●], titled "Quorum Receivables Funding 2022-1 LLC — Collection Account";
(ii) Payment Account — Account No. [●], titled "Quorum Receivables Funding 2022-1 LLC — Payment Account";
(iii) Reserve Account — Account No. [●], titled "Quorum Receivables Funding 2022-1 LLC — Reserve Account"; and
(iv) Liquidity Reserve Account — Account No. [●], titled "Quorum Receivables Funding 2022-1 LLC — Liquidity Reserve Account."
(b) Each Controlled Account shall be maintained as a separate segregated account on the books and records of the Securities Intermediary, distinct from all other accounts maintained by the Securities Intermediary for its own account or on behalf of any other person or entity.
(c) Each Controlled Account is established and maintained at the Corporate Trust Office of Calvoneth Trust Company, N.A., located at 600 Travis Street, Suite 5800, Houston, TX 77002. The Securities Intermediary shall not change the location at which any Controlled Account is maintained without the prior written consent of the Issuer and the Servicer, and such change shall not be effective until a supplement or amendment to this Agreement has been executed reflecting the new location.
(d) The details of each Controlled Account, including account numbers, titles, and initial balances, are set forth on Exhibit B attached hereto and incorporated herein by reference.
Section 2.02 — Collection Account
(a) All collections on the receivables pool, including without limitation principal payments, interest payments, finance charges, late fees, insurance refund proceeds, recoveries on defaulted receivables, and any other amounts received by or on behalf of the Issuer or the Servicer in respect of the receivables (collectively, "Collections"), shall be deposited by the Servicer into the Collection Account within two (2) Business Days of receipt by the Servicer.
(b) No funds other than Collections on the receivables and permitted investment earnings thereon shall be deposited into the Collection Account. The Servicer shall ensure that all amounts deposited into the Collection Account consist solely of Collections and that no other funds of the Servicer, the Issuer, or any other person are commingled with such Collections, except as expressly contemplated by the Transaction Documents.
(c) On each Determination Date (which is the date that is two (2) Business Days prior to each Payment Date), the Servicer shall deliver a Servicer Report to the Securities Intermediary specifying the allocation of funds on deposit in the Collection Account in accordance with the Payment Waterfall. The Servicer Report shall set forth, in reasonable detail, the total amount of Collections received during the related collection period, the amounts allocable to interest, principal, and other categories, and the amounts to be transferred to the Payment Account on the related Payment Date.
(d) The Securities Intermediary shall apply or transfer funds on deposit in the Collection Account solely in accordance with the instructions of the Servicer (prior to a blocked Account Period) or the Securities Intermediary (during a blocked Account Period), in each case in accordance with the Indenture and the Payment Waterfall.
Section 2.03 — Payment Account
(a) On each Payment Date, amounts shall be transferred from the Collection Account (and, to the extent applicable, from the Reserve Account and the Liquidity Reserve Account) to the Payment Account in accordance with the Payment Waterfall set forth in the Indenture. The Securities Intermediary shall effectuate such transfers based upon the Servicer Report delivered on the related Determination Date (or, during a blocked Account Period, based upon the Securities Intermediary's own calculations in accordance with the Indenture).
(b) Distributions to the holders of the Notes on each Payment Date shall be made solely from the Payment Account. No other account shall be used for the purpose of distributing amounts to the holders of the Notes.
(c) The Securities Intermediary, acting in its capacity as Paying Agent under the Indenture, shall make distributions from the Payment Account to the holders of the Notes in strict accordance with the sequential Payment Waterfall, paying each level of the Payment Waterfall in full before making any payment at the next lower level. In no event shall the Securities Intermediary make any distribution from the Payment Account in a manner inconsistent with the Payment Waterfall.
(d) Any amounts remaining in the Payment Account after all distributions on a Payment Date have been made shall be returned to the Collection Account or applied as otherwise specified in the Indenture.
Section 2.04 — Reserve Account
(a) On the Closing Date, the Issuer shall cause to be deposited into the Reserve Account an initial amount equal to [●] (the "Initial Reserve Deposit"). Such Initial Reserve Deposit shall constitute part of the credit enhancement for the Notes.
(b) The Reserve Account required balance (the "Required Reserve Account Balance") shall be maintained at the level specified in the Indenture. If, on any Payment Date, the balance on deposit in the Reserve Account (after giving effect to all deposits and withdrawals on such Payment Date) is less than the Required Reserve Account Balance, amounts shall be deposited into the Reserve Account from available funds in accordance with the ninth priority of the Payment Waterfall.
(c) Withdrawals from the Reserve Account shall be permitted only to cover shortfalls in payments at higher-priority levels of the Payment Waterfall, in each case as specified in the Indenture. The Securities Intermediary shall not permit any withdrawal from the Reserve Account that is not expressly authorized by the Indenture.
(d) Amounts on deposit in the Reserve Account shall be invested in Eligible Investments in accordance with Section 2.06 hereof. All investment earnings on the Reserve Account shall be credited to the Reserve Account and treated as reserve funds for purposes of the Payment Waterfall.
Section 2.05 — Liquidity Reserve Account
(a) Proceeds of draws made by the Issuer under the Liquidity Facility Agreement with Northvane Bank, N.A. (which provides a $25,000,000 revolving liquidity facility) shall be deposited into the Liquidity Reserve Account promptly upon receipt by the Issuer. The Liquidity Reserve Account shall be used exclusively for the purposes described in this Section 2.05 and in the Indenture.
(b) Withdrawals from the Liquidity Reserve Account shall be permitted solely to fund liquidity shortfalls as specified in the Indenture and the Liquidity Facility Agreement, including shortfalls in the amounts available to pay interest on the Notes and certain senior expenses of the trust. No withdrawal from the Liquidity Reserve Account shall be made for any other purpose.
(c) Repayment of amounts drawn under the Liquidity Facility Agreement shall be made from available funds in the Collection Account or other available sources in accordance with the Payment Waterfall, at the priority level specified in the Indenture.
(d) The commitment fee payable under the Liquidity Facility Agreement is 0.25% per annum on undrawn amounts (equal to $62,500 per year based on the full $25,000,000 commitment), and the drawn rate is the Secured Overnight Financing Rate ("SOFR") plus 150 basis points on amounts drawn. Such commitment fees and interest shall be payable from the Liquidity Reserve Account or the Collection Account as specified in the Indenture.
(e) Amounts on deposit in the Liquidity Reserve Account shall be invested in Eligible Investments in accordance with Section 2.06 hereof.
Section 2.06 — Investment of Funds
(a) Amounts on deposit in any Controlled Account shall be invested and reinvested in Eligible Investments at the written direction of the Servicer (prior to a blocked Account Period) or the Securities Intermediary (during a blocked Account Period), in each case in accordance with the terms of this Agreement and the Indenture. The form of written investment direction to be used by the Servicer is attached hereto as Exhibit D.
(b) All investment earnings (including interest and realized gains) on amounts invested in Eligible Investments shall be credited to the applicable Controlled Account from which the invested amounts were derived and shall be treated as Collections (in the case of the Collection Account) or reserve funds (in the case of the Reserve Account or the Liquidity Reserve Account), as applicable, for purposes of the Payment Waterfall.
(c) The Securities Intermediary shall not be liable for any investment losses on Eligible Investments made in accordance with the investment directions received from the Servicer or otherwise in accordance with this Agreement, except to the extent such losses result from the Securities Intermediary's own gross negligence, willful misconduct, or breach of this Agreement.
(d) All Eligible Investments shall mature no later than the Business Day preceding the next succeeding Payment Date, so that the proceeds of such investments will be available for application on such Payment Date. In no event shall any funds in a Controlled Account be invested in any instrument or obligation that does not satisfy the definition of Eligible Investments.
(e) The Securities Intermediary may, in its discretion, invest funds in demand deposits at Calvoneth Trust Company, N.A. (provided that such deposits satisfy the requirements of the definition of Eligible Investments), and the Securities Intermediary shall have no liability for the selection of any Eligible Investment so long as the investment satisfies the criteria set forth herein.
Section 2.07 — Statements and Records
(a) The Securities Intermediary shall furnish monthly account statements for each Controlled Account to the Issuer, the Servicer, and the Indenture Trustee (to the extent acting in a separate capacity), not later than five (5) Business Days following the end of each calendar month. Such statements shall be in a format reasonably acceptable to the Issuer and the Servicer.
(b) Each monthly account statement shall reflect, in reasonable detail, all deposits to, withdrawals from, and transfers between Controlled Accounts during the applicable period, all investment activity (including the purchase, maturity, and sale of Eligible Investments), all investment earnings and losses, and the closing balance of each Controlled Account as of the last Business Day of the applicable period.
(c) The Securities Intermediary shall maintain complete and accurate records of all transactions in the Controlled Accounts, including all deposits, withdrawals, transfers, investment purchases and maturities, and communications received from the Issuer, the Servicer, or any other party, for a period of at least six (6) years following the termination of this Agreement. Such records shall be made available for inspection by the Issuer, the Servicer, and the Indenture Trustee (or their respective agents) upon reasonable notice during normal business hours.
ARTICLE III — CONTROL OF ACCOUNTS
Section 3.01 — Securities Intermediary's Agreement Regarding Control
(a) The Securities Intermediary hereby acknowledges and agrees that it will comply with all Entitlement Orders originated by the Securities Intermediary in its capacity as Indenture Trustee with respect to each Controlled Account and all financial assets and other property credited thereto, without further consent of the Issuer (in its capacity as Entitlement Holder) or any other person. The Securities Intermediary confirms that it has not granted, and will not grant, any other person the right to originate Entitlement Orders with respect to any Controlled Account, except as expressly contemplated by this Agreement.
(b) The Securities Intermediary will not comply with any Entitlement Order originated by the Issuer, the Servicer, or any other person (other than the Securities Intermediary acting in its capacity as Indenture Trustee) if such Entitlement Order conflicts with any Entitlement Order of the Securities Intermediary acting as Indenture Trustee. For the avoidance of doubt, the Securities Intermediary acknowledges that, as between the Issuer and the Securities Intermediary (acting as Indenture Trustee), the instructions of the Securities Intermediary (acting as Indenture Trustee) shall take priority and shall be controlling in all respects.
(c) The Parties hereby acknowledge and agree that the provisions of this Section 3.01 are intended to, and do, establish "control" by the Securities Intermediary (acting as Indenture Trustee) over each Controlled Account and all financial assets and other property credited thereto within the meaning of UCC Sections 8-106(d)(2) and 9-106(a). The Securities Intermediary agrees that it is acting as securities intermediary with respect to the Controlled Accounts and that, in addition, it has control over the Controlled Accounts in its separate capacity as Indenture Trustee.
Section 3.02 — Servicer Instructions Prior to blocked Account Period
(a) Prior to the delivery of a Shifting Control Notice, the Securities Intermediary shall act on the instructions of the Servicer (QPF) with respect to: (i) the investment of funds on deposit in the Controlled Accounts in Eligible Investments; (ii) transfers of funds between and among the Controlled Accounts; and (iii) distributions from the Payment Account on each Payment Date; provided, however, that the Securities Intermediary shall act on such instructions only to the extent that such instructions are consistent with the terms and provisions of the Indenture, the Servicing Agreement, and this Agreement.
(b) The Securities Intermediary shall have no obligation to independently verify that the Servicer's instructions comply with the terms of the Indenture, the Servicing Agreement, or this Agreement, unless a responsible officer of the Securities Intermediary at the Corporate Trust Office has actual knowledge that such instructions do not so comply. In the absence of such actual knowledge, the Securities Intermediary may conclusively rely on the instructions and certifications of the Servicer.
(c) Notwithstanding the foregoing, any instruction from the Servicer directing a withdrawal from, or transfer of funds in, any Controlled Account that is not consistent with the Payment Waterfall as set forth in the Indenture shall not be honored by the Securities Intermediary, and the Securities Intermediary shall promptly notify the Servicer of its refusal to comply with any such instruction.
(d) Only those persons identified on Exhibit C hereto (or as subsequently updated in accordance with the procedures described therein) shall be authorized to deliver instructions on behalf of the Servicer to the Securities Intermediary.
Section 3.03 — Shifting Control Notice; blocked Account Period
(a) Upon the occurrence and continuance of an Event of Default or an Early Amortization Event under the Indenture, the Securities Intermediary (acting in its capacity as Indenture Trustee) shall promptly deliver a Shifting Control Notice to the Issuer and the Servicer, in substantially the form attached hereto as Exhibit A. The Securities Intermediary shall deliver the Shifting Control Notice as soon as practicable, but in no event later than two (2) Business Days following the date on which a responsible officer of the Securities Intermediary at the Corporate Trust Office obtains actual knowledge of the occurrence and continuance of such Event of Default or Early Amortization Event.
(b) Following the delivery of a Shifting Control Notice, the following provisions shall apply during the blocked Account Period:
(i) The Servicer shall have no further authority to direct the investment, transfer, or withdrawal of funds from any Controlled Account. All instructions previously given by the Servicer that have not yet been executed shall be deemed revoked and of no further force or effect, except to the extent the Securities Intermediary determines, in its sole discretion, that the execution of any such instruction is consistent with the Indenture.
(ii) The Securities Intermediary (acting as Indenture Trustee) shall have sole and exclusive authority to direct the investment, transfer, and withdrawal of funds from each Controlled Account, and the Securities Intermediary shall exercise such authority in accordance with the terms of the Indenture and this Agreement.
(iii) The Securities Intermediary shall apply all Collections and other funds on deposit in the Controlled Accounts in accordance with the Payment Waterfall as specified in the Indenture. The Securities Intermediary shall prepare its own calculations of the amounts payable at each level of the Payment Waterfall, based on the information available to the Securities Intermediary, and shall make distributions accordingly.
(c) Without limiting the generality of the foregoing, the Early Amortization Events that may give rise to the delivery of a Shifting Control Notice include, among others:
(i) the three-month average net loss rate exceeding 2.00%;
(ii) the sixty-day-plus (60+) delinquency rate exceeding 3.50%;
(iii) an available funds cap deficit occurring for two (2) consecutive collection periods;
(iv) the occurrence of a servicer default or a downgrade of the Servicer's credit rating below BB(cr) by Brindoval or Ba2(p) by Pinnacle; and
(v) the outstanding pool balance falling below $450,000,000 during the revolving period.
(d) The Issuer and the Servicer each acknowledge and agree that the delivery of a Shifting Control Notice by the Securities Intermediary (acting as Indenture Trustee) pursuant to this Section 3.03 is not subject to the prior consent or approval of the Issuer or the Servicer.
Section 3.04 — Termination of blocked Account Period
(a) The blocked Account Period shall terminate upon the earliest to occur of: (i) written notice from the Securities Intermediary (acting as Indenture Trustee) to the Issuer and the Servicer that the Event of Default or Early Amortization Event giving rise to the Shifting Control Notice has been cured or waived in accordance with the terms of the Indenture; or (ii) payment in full of all outstanding Notes and all other obligations under the Indenture and the other Transaction Documents.
(b) Upon termination of the blocked Account Period, the authority of the Servicer to provide instructions with respect to the investment, transfer, and withdrawal of funds in the Controlled Accounts shall be reinstated in accordance with Section 3.02 hereof, and the Securities Intermediary shall promptly notify the Issuer and the Servicer in writing of such reinstatement.
(c) Nothing in this Section 3.04 shall be construed to obligate the Securities Intermediary (acting as Indenture Trustee) to deliver a notice of cure or waiver if the conditions for such cure or waiver have not been satisfied in accordance with the Indenture.
Section 3.05 — No Other Agreements
(a) The Securities Intermediary shall not enter into any agreement with any person (other than the Parties hereto and as contemplated by the Transaction Documents) that purports to grant control over, or a security interest in, any Controlled Account or any financial asset or other property credited thereto. The Securities Intermediary represents that no such agreement is currently in effect.
(b) No lien, encumbrance, claim, right of setoff, or security interest shall be claimed, asserted, or exercised by the Securities Intermediary against the Controlled Accounts or Account Property, except for (i) the first-priority security interest of the Indenture Trustee for the benefit of the Secured Parties, as granted under the Grant of Security Interest and perfected by this Agreement, and (ii) the Securities Intermediary's right to fees and expenses as set forth in the Indenture, consisting of an annual trustee fee of $35,000 plus $5,000 per Payment Date for distribution calculations, and reimbursement of reasonable out-of-pocket expenses, payable at the first priority of the Payment Waterfall. For the avoidance of doubt, the Securities Intermediary hereby subordinates any banker's lien, right of setoff, or similar right it may have in the Controlled Accounts to the security interest of the Indenture Trustee for the benefit of the Secured Parties.
ARTICLE IV — DUTIES AND STANDARD OF CARE OF SECURITIES INTERMEDIARY
Section 4.01 — Duties
(a) The Securities Intermediary shall perform only those duties expressly set forth in this Agreement, the Indenture, and the other Transaction Documents. No implied duties or obligations shall be read into this Agreement. The Securities Intermediary shall not be required to take any action that is contrary to this Agreement or applicable law.
(b) The Securities Intermediary shall act in accordance with standard industry practices for securities intermediaries maintaining securities accounts for structured finance transactions, including compliance with all applicable rules and regulations of the Depository Trust Company, the Federal Reserve Bank, and other applicable clearing organizations.
(c) The Securities Intermediary shall promptly credit to the applicable Controlled Account all amounts received for deposit therein, and shall make such credits available in accordance with the Securities Intermediary's standard processing procedures, which processing shall occur no later than the Business Day following receipt of such amounts.
Section 4.02 — Standard of Care
(a) The Securities Intermediary shall exercise the same degree of care in the maintenance and administration of the Controlled Accounts and Account Property as it exercises with respect to its own property of a similar nature, but in no event less than a reasonable degree of care.
(b) The Securities Intermediary shall not be liable for any loss, cost, damage, expense, or liability resulting from (i) the investment of funds in Eligible Investments in accordance with instructions received from the Servicer or otherwise in accordance with this Agreement, (ii) any act or omission taken or suffered in good faith and in accordance with the advice of legal counsel, (iii) any delay or failure of performance caused by circumstances beyond the Securities Intermediary's reasonable control (including acts of God, war, terrorism, strikes, power failures, or failures of communication equipment), or (iv) any error of judgment made in good faith by a responsible officer of the Securities Intermediary; provided, however, that the foregoing shall not relieve the Securities Intermediary of liability for losses resulting from its own gross negligence, willful misconduct, or material breach of this Agreement or the Indenture.
(c) The Securities Intermediary may rely on any notice, instruction, certificate, request, direction, or other document or communication (including electronic communications) believed by it in good faith to be genuine, to have been signed or sent by an authorized person, and to conform to the requirements of this Agreement or the Indenture. The Securities Intermediary shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith in accordance with such notice, instruction, or document.
Section 4.03 — Reliance; Information
(a) The Securities Intermediary may rely conclusively on any officer's certificate, opinion of counsel, notice, instruction, direction, Servicer Report, or other document delivered in connection with this Agreement or the Indenture, and shall be fully protected in acting or refraining from acting in reliance thereon.
(b) The Securities Intermediary shall not be charged with knowledge of any Event of Default, Early Amortization Event, or other event under the Indenture or any other Transaction Document unless a responsible officer of the Securities Intermediary at the Corporate Trust Office has actual knowledge thereof or has received written notice thereof in accordance with the notice provisions of Section 10.04 hereof. For purposes of this Section, "actual knowledge" means the actual conscious awareness by such responsible officer of the relevant fact or circumstance, without any duty of investigation.
(c) Gerald K. Fontaine is hereby designated as the Senior Trust Officer responsible for the administration of this Agreement on behalf of Calvoneth Trust Company, N.A. The Securities Intermediary may change the designated Senior Trust Officer by written notice to the Issuer and the Servicer, such notice to be effective upon receipt.
(d) The Securities Intermediary may consult with counsel of its own choosing (which may be counsel to the Issuer, the Servicer, or any other party) and shall not be liable for any action taken, tolerated, or omitted by it in good faith in accordance with the advice of such counsel.
Section 4.04 — No Liability for Servicer Actions
(a) The Securities Intermediary shall not be responsible for, and shall have no liability in respect of, the acts or omissions of the Servicer or any sub-servicer appointed by the Servicer, including any failure by the Servicer to collect, remit, or properly allocate Collections, any failure to deliver Servicer Reports on a timely basis, or any errors or omissions in the Servicer Reports.
(b) The Securities Intermediary shall not be obligated to independently verify the accuracy, completeness, or correctness of any Servicer Report, collection remittance, allocation instruction, or other information provided by the Servicer, except as otherwise expressly provided in the Indenture. The Securities Intermediary shall be entitled to assume, in the absence of actual knowledge to the contrary, that all information provided by the Servicer is true, accurate, and complete.
ARTICLE V — REPRESENTATIONS AND WARRANTIES
Section 5.01 — Representations and Warranties of the Issuer
The Issuer hereby represents and warrants to each of the other Parties, as of the date hereof and as of the Closing Date, that:
(a) The Issuer is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894231). The Issuer is qualified to do business in each jurisdiction where the nature of its business or the character of its property requires such qualification, except where the failure to so qualify would not reasonably be expected to have a material adverse effect on the Issuer's ability to perform its obligations under this Agreement.
(b) The execution, delivery, and performance of this Agreement have been duly authorized by all necessary limited liability company action on the part of the Issuer, including the consent of its sole member, Quorum Receivables Holding LLC, and the consent of its independent manager, Timothy R. Callan (Fortbridge Corporate Services LLC), to the extent such consent is required by the Issuer's limited liability company agreement.
(c) This Agreement constitutes a legal, valid, and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, and similar laws affecting creditors' rights generally and to general principles of equity (whether considered in a proceeding in equity or at law).
(d) No consent, approval, authorization, or order of, or filing with, any governmental authority or regulatory body or any other person is required for the execution, delivery, or performance by the Issuer of this Agreement, other than (i) filings with the Delaware Secretary of State, (ii) filings and recordings to perfect the security interests contemplated hereby, and (iii) such consents, approvals, authorizations, orders, and filings as have been obtained or made and are in full force and effect.
(e) The Issuer is the Entitlement Holder with respect to each Controlled Account and has not granted any security interest in, lien on, or other encumbrance against the Controlled Accounts or any Account Property to any person other than the Securities Intermediary (in its capacity as Indenture Trustee) for the benefit of the Secured Parties under the Indenture and the Grant of Security Interest.
Section 5.02 — Representations and Warranties of the Servicer
The Servicer hereby represents and warrants to each of the other Parties, as of the date hereof and as of the Closing Date, that:
(a) QPF is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware (Employer Identification Number: 84-2653198). QPF is qualified to do business in each jurisdiction where the nature of its business or the character of its property requires such qualification, except where the failure to so qualify would not reasonably be expected to have a material adverse effect on QPF's ability to perform its obligations under this Agreement or the Servicing Agreement.
(b) QPF has full limited liability company power and authority to execute, deliver, and perform its obligations under this Agreement and the Servicing Agreement, and all necessary limited liability company action has been taken to authorize the execution, delivery, and performance of this Agreement and the Servicing Agreement.
(c) This Agreement constitutes a legal, valid, and binding obligation of QPF, enforceable against QPF in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, and similar laws affecting creditors' rights generally and to general principles of equity (whether considered in a proceeding in equity or at law).
(d) QPF is duly licensed as a premium finance company in all fifty (50) states of the United States of America and is in compliance in all material respects with all applicable usury, premium finance, insurance, and licensing laws, rules, and regulations in each jurisdiction in which it conducts business. No proceeding is pending, or to the best knowledge of QPF, threatened, that could result in the revocation or suspension of any such license.
Section 5.03 — Representations and Warranties of the Securities Intermediary
The Securities Intermediary hereby represents and warrants to each of the other Parties, as of the date hereof and as of the Closing Date, that:
(a) Calvoneth Trust Company, N.A. is a national banking association duly organized and validly existing under the laws of the United States of America, with its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, TX 77002. Calvoneth Trust has all requisite banking and trust powers necessary to conduct its business as presently conducted.
(b) Calvoneth Trust has all necessary corporate power and authority to execute, deliver, and perform this Agreement and to act as securities intermediary, indenture trustee, and paying agent under the Transaction Documents. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Calvoneth Trust.
(c) Each Controlled Account has been duly established as a securities account on the books and records of the Securities Intermediary. Each Controlled Account is maintained in the name of the Issuer, as specified in Section 2.01 hereof, and is subject to the control of the Securities Intermediary (acting as Indenture Trustee) as provided herein.
(d) The Securities Intermediary's "securities intermediary's jurisdiction" (within the meaning of UCC Section 8-110(e)) is the State of New York, by virtue of the express agreement of the Parties set forth in this Agreement. The Securities Intermediary shall not take any action to change its securities intermediary's jurisdiction with respect to the Controlled Accounts without the prior written consent of the Issuer and, during a blocked Account Period, the consent of the holders of a majority in principal amount of the Class A Notes then outstanding.
(e) The Securities Intermediary is not aware of any claim to, or lien, encumbrance, or security interest on, any Controlled Account or any Account Property, other than the first-priority security interest of the Indenture Trustee for the benefit of the Secured Parties as contemplated by the Grant of Security Interest and this Agreement.
(f) The Securities Intermediary has not entered into, and will not enter into, any agreement with any person (other than the Parties hereto and as contemplated by the Transaction Documents) granting such person control over any Controlled Account or any financial asset or other property credited thereto. The Securities Intermediary does not know of any claim or interest of any person in any Controlled Account or Account Property other than the interests created by this Agreement and the other Transaction Documents.
ARTICLE VI — COVENANTS
Section 6.01 — Covenants of the Issuer