PERFORMANCE GUARANTY
Execution Draft v1
October 12, 2022
QUORUM INSURANCE HOLDINGS CORP. a Delaware corporation as Guarantor
in favor of
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION a national banking association as Indenture Trustee
for the benefit of the Noteholders
in connection with
Quorum Receivables Funding 2022-1 LLC $500,000,000 Asset-Backed Notes
consisting of
$375,000,000 Class A Notes $75,000,000 Class B Notes $35,000,000 Class C Notes
TABLE OF CONTENTS
Right-click to update Table of Contents
PERFORMANCE GUARANTY
This PERFORMANCE GUARANTY (this "Guaranty"), dated as of October 12, 2022, is executed and delivered by QUORUM INSURANCE HOLDINGS CORP., a Delaware corporation (the "Guarantor"), in favor of CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as indenture trustee (in such capacity, together with its successors and assigns in such capacity, the "Trustee") under the Indenture (as defined below), for the benefit of the Noteholders (as defined below).
RECITALS
WHEREAS, Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (the "Issuer"), proposes to issue $500,000,000 aggregate principal amount of asset-backed notes (collectively, the "Notes") consisting of $375,000,000 aggregate principal amount of Class A Asset-Backed Notes (the "Class A Notes"), $75,000,000 aggregate principal amount of Class B Asset-Backed Notes (the "Class B Notes"), and $35,000,000 aggregate principal amount of Class C Asset-Backed Notes (the "Class C Notes"), in each case pursuant to the terms of the Indenture dated as of October 12, 2022 (as the same may be amended, supplemented, or otherwise modified from time to time, the "Indenture"), between the Issuer and Calvoneth Trust Company, National Association, as Trustee;
WHEREAS, Quorum Premium Finance LLC, a Delaware limited liability company ("QPF"), a wholly owned subsidiary of the Guarantor, serves as (i) the originator and seller of insurance premium finance receivables under the Receivables Sale Agreement dated as of October 12, 2022 (as the same may be amended, supplemented, or otherwise modified from time to time, the "Sale Agreement"), between QPF, as Seller, and Quorum Receivables Holding LLC, a Delaware limited liability company ("QRH"), as Purchaser, and (ii) the servicer of the receivables under the Servicing Agreement dated as of October 12, 2022 (as the same may be amended, supplemented, or otherwise modified from time to time, the "Servicing Agreement"), among the Issuer, QPF, as Servicer, and the Trustee;
WHEREAS, the Issuer, QPF, the Trustee, and Northvane Bank, National Association ("Northvane"), as Back-Up Servicer, have entered into the Back-Up Servicing Agreement dated as of October 12, 2022 (as the same may be amended, supplemented, or otherwise modified from time to time, the "Back-Up Servicing Agreement");
WHEREAS, the Guarantor, as the ultimate parent entity of QPF, derives substantial economic and strategic benefit from the securitization transaction contemplated by the Transaction Documents and the issuance of the Notes, and acknowledges that such benefit constitutes adequate consideration for the execution and delivery of this Guaranty;
WHEREAS, it is a condition precedent to the issuance of the Notes and the obligations of the initial purchasers to purchase the Notes on the Closing Date that the Guarantor execute and deliver this Guaranty in favor of the Trustee, for the benefit of the Noteholders, guaranteeing certain obligations of QPF under the Transaction Documents, as more particularly described herein;
WHEREAS, the Guarantor's principal executive office is located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901; the Guarantor is a publicly traded company whose common stock is listed on the New York Stock Exchange under the ticker symbol "QIHC"; the Guarantor reported consolidated revenue of approximately $3.8 billion for the fiscal year ended December 31, 2021; and the Guarantor maintains investment-grade credit ratings of BBB from Brindoval Ratings and Baa2 from Pinnacle Rating Services; and
NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained, the issuance of the Notes, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Guaranty, the following terms shall have the meanings set forth below. Unless otherwise defined herein, capitalized terms used in this Guaranty shall have the meanings assigned to such terms in the Indenture or the Servicing Agreement, as applicable, and such definitions are incorporated herein by reference.
"Administration Agreement" means the Administration Agreement dated as of October 12, 2022, between the Issuer and the Guarantor, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Back-Up Servicer" means Northvane Bank, National Association, a national banking association, in its capacity as back-up servicer under the Back-Up Servicing Agreement, together with its successors and assigns in such capacity.
"Back-Up Servicing Agreement" has the meaning assigned to such term in the Recitals hereto.
"Board Resolutions" means the resolutions of the Board of Directors of the Guarantor adopted on July 27, 2022, authorizing the execution, delivery, and performance of this Guaranty and the other Transaction Documents to which the Guarantor is a party, as certified by the Secretary or an Assistant Secretary of the Guarantor.
"Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banking institutions in New York, New York, Houston, Texas, or Stamford, Connecticut are authorized or required by law or regulation to close.
"Class A Notes" means the $375,000,000 aggregate principal amount of Class A Asset-Backed Notes issued by the Issuer under the Indenture.
"Class B Notes" means the $75,000,000 aggregate principal amount of Class B Asset-Backed Notes issued by the Issuer under the Indenture.
"Class C Notes" means the $35,000,000 aggregate principal amount of Class C Asset-Backed Notes issued by the Issuer under the Indenture.
"Closing Date" means October 12, 2022.
"Collection Account" means the segregated trust account established at Calvoneth Trust Company, National Association, for the benefit of the Noteholders, as described in the Indenture.
"Brindoval" means Brindoval Ratings, or any successor thereto.
"Demand Notice" means a notice substantially in the form of Exhibit A hereto.
"Eligible Receivables Criteria" has the meaning assigned to such term in the Sale Agreement.
"Guaranteed Obligations" has the meaning assigned to such term in Section 2.01 hereof.
"Guarantor" means Quorum Insurance Holdings Corp., a Delaware corporation (EIN: 82-4391067), and its successors and assigns hereunder.
"Guarantor Event of Default" has the meaning assigned to such term in Section 5.01 hereof.
"Indenture" means the Indenture dated as of October 12, 2022, between the Issuer and the Trustee, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Issuer" means Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (EIN: 88-1247653).
"Noteholders" means the holders from time to time of the Class A Notes, the Class B Notes, and the Class C Notes.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes, in each case issued under the Indenture.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof, or any other entity.
"Pinnacle" means Pinnacle Rating Services, or any successor thereto.
"QPF" means Quorum Premium Finance LLC, a Delaware limited liability company (EIN: 84-2653198), a wholly owned subsidiary of the Guarantor.
"QRH" means Quorum Receivables Holding LLC, a Delaware limited liability company (EIN: 88-1247619).
"Receivables" means the insurance premium finance receivables originated by QPF in the ordinary course of its business and sold or transferred to QRH and subsequently to the Issuer pursuant to the Transaction Documents.
"Sale Agreement" has the meaning assigned to such term in the Recitals hereto.
"Servicer Default" has the meaning assigned to such term in the Servicing Agreement.
"Servicing Agreement" has the meaning assigned to such term in the Recitals hereto.
"Servicing Fee" means the fee payable to QPF (or any successor servicer) for its services as Servicer under the Servicing Agreement, in an amount equal to 1.00% per annum on the outstanding pool balance, payable monthly from collections in accordance with the priority of payments set forth in the Indenture.
"Transaction Documents" means, collectively, the Indenture, the Sale Agreement, the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Note Purchase Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Custodian Agreement, the Grant of Security Interest, and this Guaranty, in each case as the same may be amended, supplemented, or otherwise modified from time to time in accordance with their respective terms.
"Trustee" means Calvoneth Trust Company, National Association, a national banking association, in its capacity as indenture trustee under the Indenture, together with its successors and assigns in such capacity.
Section 1.02 — Rules of Construction
(a) Unless the context otherwise requires, all references herein to articles, sections, exhibits, and schedules are to articles, sections, exhibits, and schedules of and to this Guaranty.
(b) Unless the context otherwise requires, words importing the singular number shall include the plural and vice versa, words importing any gender shall include every gender, and references to "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(c) The table of contents and headings of articles, sections, and subsections herein are for convenience of reference only and shall not be construed to affect the meaning, construction, or effect of the provisions hereof.
(d) Unless otherwise specified, all references to dollar amounts herein shall mean lawful money of the United States of America.
(e) This Guaranty shall be interpreted and construed in accordance with the principles of the law of the State of New York, including, without limitation, Section 5-1401 of the New York General Obligations Law, subject to the rules of construction set forth in this Section 1.02.
(f) The terms "herein," "hereof," "hereto," "hereunder," and similar terms refer to this Guaranty as a whole and not to any particular section, article, or provision hereof.
(g) References to any statute, rule, or regulation shall include any amendments or successor provisions thereto.
ARTICLE II — GUARANTY
Section 2.01 — Scope of Guaranty; Guaranteed Obligations
The Guarantor hereby absolutely, unconditionally, and irrevocably guarantees to the Trustee, for the ratable benefit of the Noteholders, the full and punctual payment and performance by QPF of each and all of the following obligations of QPF (collectively, the "Guaranteed Obligations"):
(a) Seller Obligations. All obligations of QPF, in its capacity as Seller, under or in connection with the Sale Agreement, including, without limitation:
(i) the obligation to transfer and convey to QRH Receivables that, at the time of each such transfer, meet all of the Eligible Receivables Criteria as set forth in the Sale Agreement (which criteria include, among other requirements, that each such Receivable shall have been (A) originated by QPF in the ordinary course of its insurance premium finance business, (B) denominated in United States dollars, (C) secured by the obligor's rights to unearned premium refunds, (D) originated with an original term not to exceed twelve (12) months, (E) payable by an obligor that is a United States commercial policyholder, (F) not in default and with no payment more than sixty (60) days past due as of the applicable cut-off date, and (G) originated and maintained in compliance with all applicable federal and state usury, consumer protection, and licensing laws and regulations);
(ii) all representations and warranties made by QPF with respect to the Receivables, including representations and warranties relating to the validity, enforceability, and characteristics of the Receivables, the accuracy of the information set forth in the Receivables schedule, and the perfection of the security interests conveyed therein;
(iii) the obligation of QPF to repurchase or substitute Receivables in the event of any breach of QPF's representations and warranties with respect to such Receivables, as provided in the Sale Agreement, including the obligation to pay the applicable repurchase price within the timeframes specified therein;
(iv) all indemnification obligations of QPF under the Sale Agreement, including obligations to indemnify QRH, the Issuer, the Trustee, the Noteholders, and their respective officers, directors, employees, and agents against losses, claims, damages, liabilities, and expenses arising from breaches of QPF's representations, warranties, or covenants under the Sale Agreement; and
(v) all other payment and performance obligations of QPF arising under or in connection with the Sale Agreement.
(b) Servicer Obligations. All obligations of QPF, in its capacity as Servicer, under or in connection with the Servicing Agreement, including, without limitation:
(i) the obligation to collect, administer, and enforce the Receivables in accordance with the Servicing Agreement and the Customary Servicing Standard (as defined in the Servicing Agreement), including the obligation to use commercially reasonable efforts to collect all payments due on the Receivables;
(ii) the obligation to remit all collections received in respect of the Receivables to the Collection Account maintained at Calvoneth Trust Company, National Association, within two (2) Business Days of receipt of such collections, in accordance with the terms of the Servicing Agreement and the Indenture;
(iii) the obligation to prepare and deliver to the Trustee monthly servicer reports on or before the fifteenth (15th) day of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day) setting forth the information required by the Servicing Agreement, and to deliver annual compliance certificates and reports, including the annual statement of compliance and the annual assessment of compliance required by Rules 13a-18 and 15d-18 under the Securities Exchange Act of 1934, as amended;
(iv) the obligation to maintain accurate and complete books, records, computer files, and servicing systems with respect to the Receivables, including all information necessary for the preparation of tax returns, investor reports, and regulatory filings;
(v) the Servicing Fee payable to QPF at the rate of 1.00% per annum on the outstanding pool balance, payable monthly from collections in accordance with the priority of payments; provided, however, that the Guarantor's guaranty hereunder does not extend to the payment of the Servicing Fee itself, which shall be payable solely from collections and other funds available therefor in accordance with the Indenture;
(vi) the obligation to cooperate fully with the Back-Up Servicer, Northvane Bank, National Association, in connection with all data transfer and warm standby protocols, including the obligation to transmit to the Back-Up Servicer, on a monthly basis or more frequently as required, electronic data files containing all servicing data, receivables schedules, collection records, and obligor information necessary to enable the Back-Up Servicer to assume servicing responsibilities in a timely and efficient manner upon the occurrence of a Servicer Default or servicer termination event;
(vii) the obligation to comply with all concentration limits applicable to the pool of Receivables, including (A) the single obligor concentration limit of not more than 0.75% of the aggregate outstanding pool balance, (B) the single state concentration limit of not more than 20% of the aggregate outstanding pool balance, and (C) the single insurance carrier concentration limit of not more than 15% of the aggregate outstanding pool balance, in each case as measured on each Monthly Reporting Date and as more particularly described in the Servicing Agreement;
(viii) all indemnification obligations of QPF in its capacity as Servicer under the Servicing Agreement, including obligations to indemnify the Issuer, the Trustee, the Noteholders, the Back-Up Servicer, and their respective officers, directors, employees, and agents against losses, claims, damages, liabilities, and expenses arising from QPF's acts or omissions in its capacity as Servicer; and
(ix) all other payment and performance obligations of QPF arising under or in connection with the Servicing Agreement.
(c) Transition Obligations. All obligations of QPF to cooperate in an orderly transition of servicing to Northvane Bank, National Association, as successor servicer, upon the occurrence of any Servicer Default or servicer termination event under the Servicing Agreement or the Back-Up Servicing Agreement, including, without limitation, the obligation to (i) deliver to the successor servicer all receivables files, documents, records, and data within the timeframes specified in the Back-Up Servicing Agreement, (ii) execute and deliver any instruments of transfer or assignment reasonably requested by the Trustee or the successor servicer, (iii) provide reasonable cooperation and assistance during the transition period, and (iv) refrain from taking any action that would impede, delay, or interfere with the transition of servicing responsibilities.
(d) Performance Obligations. Any and all other payment and performance obligations of QPF arising under or in connection with any Transaction Document to which QPF is a party, including the Back-Up Servicing Agreement and any other agreement, instrument, or document executed in connection with the transactions contemplated by the Transaction Documents, in each case as more particularly described in Schedule 1 hereto.
Notwithstanding anything to the contrary contained herein, the Guaranteed Obligations shall not include the obligations of the Issuer to make payments of principal of, or interest on, the Notes. This Guaranty is a performance guaranty and not a guaranty of the payment of the Notes. Nothing herein shall be construed to render the Guarantor primarily liable for the indebtedness evidenced by the Notes or to create a direct obligation of the Guarantor to pay any amounts owing under the Notes to the Noteholders.
Section 2.02 — Nature of Guaranty
(a) This Guaranty is a guaranty of payment and performance and not merely a guaranty of collection. The Trustee shall not be required to exhaust any right or remedy, or to take any action, against QPF, the Issuer, QRH, the Back-Up Servicer, or any other Person, or against any collateral or security for the Guaranteed Obligations, before proceeding against the Guarantor under this Guaranty. The obligations of the Guarantor hereunder are independent of the obligations of QPF under the Transaction Documents, and a separate action or actions may be brought against the Guarantor to enforce this Guaranty, regardless of whether any action is brought against QPF or whether QPF is joined in any such action.
(b) This Guaranty is a continuing guaranty and shall remain in full force and effect until all Guaranteed Obligations have been fully and indefeasibly performed, paid, or discharged and all Notes have been paid in full in accordance with the terms of the Indenture, or until this Guaranty is terminated in accordance with Section 7.10 hereof.
(c) This Guaranty is absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any Transaction Document, or any provision thereof;
(ii) any change in the time, manner, or place of payment or performance of any of the Guaranteed Obligations, or any other amendment or waiver of, or consent to departure from, any Transaction Document;
(iii) any amendment, modification, supplement, or waiver of any Transaction Document, whether or not the Guarantor shall have received notice thereof or consented thereto;
(iv) any exchange, release, subordination, or non-perfection of any security interest or lien granted in connection with the Transaction Documents, or any release or amendment of any other guaranty for any of the Guaranteed Obligations;
(v) any change in the corporate existence, structure, or ownership of QPF, the Issuer, QRH, or the Guarantor, or any insolvency, bankruptcy, reorganization, or other similar proceeding affecting QPF, the Issuer, QRH, or the Guarantor or any of their respective assets;
(vi) the existence of any claim, set-off, counterclaim, or other right that the Guarantor may have at any time against QPF, the Issuer, QRH, the Trustee, any Noteholder, or any other Person, whether in connection with this Guaranty, the Transaction Documents, or any unrelated transaction; or
(vii) any other circumstance (including any statute of limitations) or any existence of or reliance on any representation by the Trustee that might otherwise constitute a defense available to, or a discharge of, QPF, a surety, or a guarantor.
Section 2.03 — Reinstatement
If at any time any payment or other performance received by the Trustee or any Noteholder on account of the Guaranteed Obligations is rescinded, avoided, set aside, or otherwise returned or required to be returned for any reason whatsoever (including, without limitation, by reason of any order, judgment, or decree of any court or governmental authority in connection with any bankruptcy, insolvency, reorganization, arrangement, moratorium, or similar proceeding, or by reason of the application of any law relating to fraudulent transfers or preferences), then the obligations of the Guarantor hereunder shall be automatically reinstated and restored to the extent of such rescission, avoidance, or return, and the Guarantor shall be liable for all costs and expenses (including reasonable attorneys' fees and disbursements) incurred by the Trustee in connection therewith. This Section 2.03 shall survive the termination of this Guaranty and shall remain in full force and effect notwithstanding any prior release or discharge of the Guarantor.
Section 2.04 — Subrogation
(a) Until all Notes have been paid in full and all Guaranteed Obligations have been fully and indefeasibly performed, paid, or discharged, the Guarantor hereby irrevocably waives any and all rights of subrogation, contribution, reimbursement, or indemnification that the Guarantor may have against QPF, the Issuer, QRH, or any other Transaction party, and any right to participate in or benefit from any collateral or security now or hereafter held by the Trustee for the benefit of the Noteholders. The Guarantor further agrees that it shall not exercise any rights of subrogation, contribution, reimbursement, or indemnification, or assert any claim, in respect of any payments or performances made by the Guarantor hereunder, unless and until all Notes have been paid in full and all Guaranteed Obligations have been fully and indefeasibly satisfied.
(b) Upon the full and indefeasible satisfaction of all Guaranteed Obligations and the payment in full of all Notes, the Guarantor shall be subrogated to the rights of the Trustee and the Noteholders to the extent of all payments and performances made by the Guarantor hereunder, and the Trustee shall, at the Guarantor's request and expense, execute and deliver such instruments and documents as the Guarantor may reasonably request to evidence such subrogation.
Section 2.05 — Waivers by Guarantor
To the fullest extent permitted by applicable law, the Guarantor hereby irrevocably waives each of the following:
(a) notice of acceptance of this Guaranty by the Trustee or any Noteholder;
(b) notice of the creation, existence, or incurrence of any Guaranteed Obligations or any increase in the amount thereof;
(c) presentment, demand for payment or performance, protest, and notice of dishonor or non-payment or non-performance of any of the Guaranteed Obligations;
(d) notice of any default or Servicer Default by QPF under any Transaction Document, or any other notice to which the Guarantor might otherwise be entitled under applicable law;
(e) all defenses based on suretyship, guarantorship, or impairment of collateral, including any defense arising under Sections 49 and 50 of the New York General Obligations Law or any comparable provision of any other applicable jurisdiction;
(f) any defense arising by reason of any disability, lack of authority, or other defense of QPF, or the cessation of the liability of QPF from any cause whatsoever, other than the full and indefeasible satisfaction of the Guaranteed Obligations;
(g) any right to require the Trustee to proceed first against QPF, the Issuer, any collateral, or any other guarantor before enforcing this Guaranty, or to pursue any other remedy in the Trustee's or any Noteholder's power whatsoever;
(h) any defense based upon the Trustee's election to proceed by judicial or non-judicial foreclosure, or any election of remedies that may destroy or impair the Guarantor's subrogation rights or the Guarantor's right to proceed against QPF for reimbursement; and
(i) any defense based upon any applicable statute of limitations in any action under or related to this Guaranty.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR
The Guarantor hereby represents and warrants to the Trustee, for the benefit of the Noteholders, as of the date hereof and as of the Closing Date, as follows:
Section 3.01 — Organization and Good Standing
The Guarantor is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Guarantor has the corporate power and authority to own, lease, and operate its properties and to carry on its business as now conducted and as proposed to be conducted. The Guarantor is duly qualified and authorized to transact business and is in good standing in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, including the State of Connecticut, where its principal executive office is located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901, except where the failure to be so qualified would not have a material adverse effect on the Guarantor's ability to perform its obligations under this Guaranty.
Section 3.02 — Authorization; Binding Effect
The execution, delivery, and performance of this Guaranty by the Guarantor have been duly authorized by all necessary corporate action on the part of the Guarantor, including resolutions of the Board of Directors of the Guarantor adopted on July 27, 2022, and no further corporate action on the part of the Guarantor is necessary for such execution, delivery, and performance. This Guaranty has been duly executed and delivered by the Guarantor and constitutes a legal, valid, and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
Section 3.03 — No Conflict
The execution, delivery, and performance of this Guaranty by the Guarantor, and the consummation of the transactions contemplated hereby, do not and will not:
(a) violate, conflict with, or result in a breach of any provision of the Guarantor's Certificate of Incorporation (as amended) or Amended and Restated Bylaws;
(b) violate any applicable law, rule, regulation, order, judgment, decree, or governmental permit or license applicable to the Guarantor or any of its properties or assets;
(c) result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which the Guarantor is a party or by which the Guarantor or any of its properties or assets is bound or affected; or
(d) result in the creation or imposition of any lien, mortgage, pledge, charge, security interest, or encumbrance of any kind upon any property or asset of the Guarantor (other than as contemplated by the Transaction Documents).
Section 3.04 — No Consent Required
No consent, approval, authorization, order, registration, qualification, or filing with any federal, state, local, or foreign governmental authority, regulatory body, or other third party is required for the execution, delivery, and performance of this Guaranty by the Guarantor or the consummation of the transactions contemplated hereby, except as has already been obtained, made, or given prior to the date hereof, and all such consents, approvals, authorizations, orders, registrations, qualifications, and filings are in full force and effect.
Section 3.05 — Litigation
There are no pending or, to the knowledge of the Guarantor after due inquiry, threatened actions, suits, proceedings, investigations, or claims against the Guarantor, at law or in equity, before or by any court, governmental authority, arbitrator, or other tribunal that (a) challenge the validity or enforceability of this Guaranty or any of the Transaction Documents to which the Guarantor is a party, or (b) individually or in the aggregate, could reasonably be expected to have a material adverse effect on the Guarantor's business, financial condition, results of operations, or ability to perform its obligations under this Guaranty.
Section 3.06 — Financial Condition
(a) The audited consolidated financial statements of the Guarantor for the fiscal year ended December 31, 2021, copies of which have been delivered to the Trustee, were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis and were audited by Meridian Ledger LLP, a PCAOB-registered public accounting firm. Such financial statements fairly present, in all material respects, the financial condition of the Guarantor and its consolidated subsidiaries as of the date thereof and the results of operations and cash flows for the fiscal year then ended.
(b) Since December 31, 2021, there has been no material adverse change in the Guarantor's business, financial condition, results of operations, properties, or prospects, individually or taken as a whole.
(c) As of the date hereof, the Guarantor's unsecured long-term credit ratings are BBB as assigned by Brindoval Ratings and Baa2 as assigned by Pinnacle Rating Services. To the knowledge of the Guarantor, no rating agency has placed the Guarantor's credit ratings on review for possible downgrade or issued a negative outlook with respect thereto.
Section 3.07 — Ownership of QPF
QPF is a wholly owned subsidiary of the Guarantor. The Guarantor directly or indirectly owns 100% of the issued and outstanding equity interests of QPF, free and clear of any liens, pledges, encumbrances, or restrictions (other than restrictions under applicable securities laws or organizational documents). The Guarantor has the ability, through its ownership and control of QPF, to cause QPF to perform the Guaranteed Obligations.
Section 3.08 — Solvency
The Guarantor is, and after giving full effect to the execution and delivery of this Guaranty and the incurrence of the contingent obligations contemplated hereby will be, solvent and able to pay its debts as they become due. The fair value and fair saleable value of the assets of the Guarantor exceed, and after giving effect to this Guaranty will exceed, the total amount of the Guarantor's liabilities (including contingent liabilities). The Guarantor is not entering into this Guaranty with the intent to hinder, delay, or defraud any of its present or future creditors.
Section 3.09 — Investment Company Act
The Guarantor is not an "investment company" or a company "controlled by" an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder.
ARTICLE IV — COVENANTS OF THE GUARANTOR
The Guarantor hereby covenants and agrees with the Trustee, for the benefit of the Noteholders, as follows:
Section 4.01 — Maintenance of Existence
(a) The Guarantor shall preserve and maintain its corporate existence and good standing under the laws of the State of Delaware, and shall preserve and maintain its qualification to do business and good standing in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Guarantor's ability to perform its obligations under this Guaranty.
(b) The Guarantor shall not merge with or into, or consolidate with, any other Person, or sell, convey, transfer, or otherwise dispose of all or substantially all of its assets, or dissolve, liquidate, or wind up its affairs, without the prior written consent of the Trustee, unless (i) the surviving, resulting, or acquiring Person (if other than the Guarantor) is an entity organized and existing under the laws of the United States of America, any State thereof, or the District of Columbia, (ii) such surviving, resulting, or acquiring Person expressly assumes all of the obligations of the Guarantor under this Guaranty and each other Transaction Document to which the Guarantor is a party by executing and delivering to the Trustee a written instrument of assumption in form and substance reasonably satisfactory to the Trustee, and (iii) the Guarantor has received written confirmation from each of the rating agencies (Brindoval Ratings and Pinnacle Rating Services) that such merger, consolidation, sale, or other transaction will not result in a reduction, downgrade, or withdrawal of the then-current ratings assigned to any class of Notes.
Section 4.02 — Ownership of QPF
(a) The Guarantor shall maintain, at all times during the term of this Guaranty, direct or indirect ownership of 100% of the issued and outstanding equity interests of QPF, free and clear of any liens, pledges, encumbrances, or restrictions (other than restrictions under applicable securities laws or organizational documents).
(b) The Guarantor shall not permit QPF to merge with or into, or consolidate with, any other Person, or sell, convey, transfer, or otherwise dispose of all or substantially all of its assets, without the prior written consent of the Trustee and written confirmation from each of the rating agencies (Brindoval Ratings and Pinnacle Rating Services) that such action will not result in a reduction, downgrade, or withdrawal of the then-current ratings assigned to any class of Notes.
Section 4.03 — Financial Reporting
The Guarantor shall deliver, or cause to be delivered, to the Trustee:
(a) within ninety (90) days after the end of each fiscal year of the Guarantor, the audited consolidated financial statements of the Guarantor for such fiscal year, prepared in accordance with United States generally accepted accounting principles applied on a consistent basis, audited by Meridian Ledger LLP or another nationally recognized independent registered public accounting firm registered with the Public Company Accounting Oversight Board, together with a report thereon by such accounting firm that is not subject to any "going concern" or like qualification or exception;
(b) within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Guarantor, unaudited consolidated financial statements of the Guarantor for such fiscal quarter and the year-to-date period then ended, prepared in accordance with United States generally accepted accounting principles applied on a consistent basis (subject to normal year-end audit adjustments and the absence of footnotes);
(c) promptly, and in any event within five (5) Business Days after the Guarantor becomes aware thereof, written notice of any material adverse change in the Guarantor's business, financial condition, results of operations, or prospects that could reasonably be expected to impair the Guarantor's ability to perform its obligations under this Guaranty; and
(d) promptly, and in any event within two (2) Business Days after the Guarantor receives notice thereof, written notice of any change in the Guarantor's credit ratings assigned by Brindoval Ratings (currently BBB) or Pinnacle Rating Services (currently Baa2), including any placement on credit watch or review for possible upgrade or downgrade, or any change in outlook.
Section 4.04 — Compliance with Laws
The Guarantor shall comply in all material respects, and shall cause QPF to comply in all material respects, with all applicable federal, state, and local laws, rules, regulations, orders, judgments, and decrees, including all state insurance and premium finance licensing requirements in all fifty (50) states and the District of Columbia in which QPF is licensed or required to be licensed to conduct its insurance premium finance business, and including all applicable provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the USA PATRIOT Act, and the applicable regulations of the Consumer Financial Protection Bureau, the Federal Trade Commission, and any applicable state regulatory authority.
Section 4.05 — Notice of Default
The Guarantor shall promptly notify the Trustee in writing of:
(a) the occurrence of any Servicer Default under the Servicing Agreement, or any event or circumstance that, with the giving of notice or the passage of time or both, would constitute a Servicer Default, together with a description of such event and the actions being taken or proposed to be taken by the Guarantor or QPF in response thereto;
(b) any breach by QPF of any of its representations, warranties, or covenants under the Sale Agreement, the Servicing Agreement, or any other Transaction Document, together with a description of such breach and the actions being taken or proposed to be taken to cure such breach;
(c) the commencement of, or the receipt of any written threat of, any litigation, arbitration, or governmental or regulatory proceeding or investigation against or affecting QPF or the Guarantor that could reasonably be expected to (i) have a material adverse effect on the business, financial condition, or operations of QPF or the Guarantor, (ii) impair the ability of QPF or the Guarantor to perform its obligations under any Transaction Document, or (iii) challenge the validity or enforceability of any Transaction Document; and
(d) the occurrence of any Guarantor Event of Default or any event or condition that, with the giving of notice or the passage of time or both, would constitute a Guarantor Event of Default.
Section 4.06 — Books and Records; Inspection
(a) The Guarantor shall maintain, and shall cause QPF to maintain, proper books of account, records, and computer files relating to the origination, sale, transfer, and servicing of the Receivables, in each case in accordance with the Servicing Agreement and in a manner that permits the identification and segregation of the Receivables owned by the Issuer from any other receivables originated, owned, or serviced by QPF.
(b) The Guarantor shall permit, and shall cause QPF to permit, the Trustee and its agents, representatives, and designees (including the Back-Up Servicer, Northvane Bank, National Association) to inspect, audit, and examine such books of account, records, and computer files, and to make copies and extracts therefrom, at any time and from time to time during regular business hours upon not less than three (3) Business Days' prior written notice (or without notice if a Guarantor Event of Default or Servicer Default shall have occurred and be continuing), all at the Guarantor's sole cost and expense.
Section 4.07 — Further Assurances
The Guarantor shall, at its own cost and expense, promptly execute and deliver such additional instruments, agreements, and documents, and take such further actions, as the Trustee may from time to time reasonably request in order to carry out the purposes and intent of this Guaranty, to protect the rights of the Trustee and the Noteholders hereunder, and to more effectively evidence and secure the Guarantor's obligations under this Guaranty.
Section 4.08 — Taxes
The Guarantor shall timely file all tax returns required to be filed and timely pay and discharge all taxes, assessments, governmental charges, and levies imposed upon it (EIN: 82-4391067) or upon its income, profits, or properties, before the same become delinquent and before penalties accrue thereon, except where the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves have been established therefor in accordance with United States generally accepted accounting principles. The Guarantor shall not permit any tax lien or other governmental lien to attach to any property of QPF or the Guarantor that could adversely affect the Guaranteed Obligations or the interests of the Trustee or the Noteholders under the Transaction Documents.
Section 4.09 — Limitation on Indebtedness of QPF
The Guarantor shall not permit QPF to incur, create, assume, or suffer to exist any indebtedness for borrowed money, or guarantee, endorse, or otherwise become directly or contingently liable for the obligations of any Person (other than the Guarantor), in each case other than as expressly contemplated by the Transaction Documents, without the prior written consent of the Trustee. For the avoidance of doubt, this covenant shall not restrict QPF from incurring ordinary course trade payables or operating expenses in connection with the origination and servicing of the Receivables, provided such liabilities are not material in amount relative to QPF's business and do not impair QPF's ability to perform the Guaranteed Obligations.
ARTICLE V — EVENTS OF DEFAULT; REMEDIES
Section 5.01 — Guarantor Events of Default
Each of the following events shall constitute an event of default under this Guaranty (each, a "Guarantor Event of Default"):
(a) Payment Default. The Guarantor shall fail to make any payment required to be made by it under this Guaranty within five (5) Business Days after the Trustee shall have delivered a Demand Notice to the Guarantor demanding such payment;
(b) Non-Monetary Default. The Guarantor shall fail to perform or observe any non-monetary covenant, agreement, or obligation set forth in this Guaranty within thirty (30) days after written notice thereof from the Trustee to the Guarantor; provided, however, that if such failure is capable of being cured but cannot reasonably be cured within such thirty (30)-day period, and the Guarantor commences cure within such thirty (30)-day period and thereafter diligently and continuously pursues such cure to completion, the cure period shall be extended for such additional period as may be reasonably necessary to effect such cure, but in no event shall such extended cure period exceed ninety (90) days from the date of the Trustee's notice;
(c) Misrepresentation. Any representation or warranty made by the Guarantor in this Guaranty or in any certificate, report, or other document delivered by or on behalf of the Guarantor pursuant to or in connection with this Guaranty shall prove to have been untrue, incorrect, or misleading in any material respect when made or when deemed to have been made;
(d) Insolvency. (i) The Guarantor shall commence a voluntary case or other proceeding seeking liquidation, reorganization, arrangement, adjustment, winding-up, dissolution, composition, or other relief with respect to itself or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect, or shall consent to any such relief or to the appointment of or taking possession by any receiver, liquidator, assignee, trustee, custodian, sequestrator, or other similar official for itself or for any substantial part of its property, or shall make a general assignment for the benefit of creditors; or (ii) an involuntary case or other proceeding shall be commenced against the Guarantor seeking liquidation, reorganization, arrangement, adjustment, winding-up, dissolution, composition, or other relief with respect to it or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect, or seeking the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, or other similar official for it or for any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) consecutive days;
(e) Judgment Default. A final, non-appealable judgment or decree for the payment of money in excess of $10,000,000 (or its equivalent in any other currency) (net of any amounts covered by insurance where the insurer has acknowledged coverage in writing) shall be entered against the Guarantor by any court of competent jurisdiction and shall remain unsatisfied, unvacated, undischarged, unbonded, and unstayed for a period of thirty (30) consecutive days;
(f) Rating Downgrade. The Guarantor's unsecured long-term credit rating shall be downgraded below BB(cr) by Brindoval Ratings or below Ba2(p) by Pinnacle Rating Services (which event shall also constitute an early amortization trigger under Section 5.07 of the Indenture, triggering the sequential payment waterfall and potentially accelerating amortization of the Notes); and
(g) Ownership Default. The Guarantor shall cease to own, directly or indirectly, 100% of the issued and outstanding equity interests of QPF, or QPF shall cease to be a subsidiary of the Guarantor, in each case unless such cessation results from a transaction permitted by Section 4.01 or Section 4.02 hereof.
Section 5.02 — Remedies Upon Default
Upon the occurrence and during the continuance of any Guarantor Event of Default:
(a) the Trustee may, by written notice to the Guarantor, declare all Guaranteed Obligations of the Guarantor under this Guaranty to be immediately due and payable, whereupon the same shall become immediately due and payable without further notice, demand, presentment, protest, or other formality of any kind, all of which are hereby expressly waived by the Guarantor; provided, however, that upon the occurrence of a Guarantor Event of Default described in clause (d) of Section 5.01, all Guaranteed Obligations shall automatically and without any notice or action by the Trustee become immediately due and payable;
(b) the Trustee may exercise any and all rights and remedies available to it under this Guaranty, the Indenture, any other Transaction Document, and applicable law or equity, including the right to seek specific performance, injunctive relief, or any other equitable remedy;
(c) the Trustee shall promptly notify the rating agencies (Brindoval Ratings and Pinnacle Rating Services) and the Back-Up Servicer (Northvane Bank, National Association) of the occurrence of such Guarantor Event of Default, the nature thereof, and any remedial actions being pursued by the Trustee; and
(d) a Guarantor Event of Default hereunder may also constitute, or give rise to, an Event of Default or Early Amortization Event under the Indenture, as more particularly described therein. In the event that a Guarantor Event of Default triggers an Early Amortization Event under the Indenture, the sequential payment waterfall shall be applied to collections and potentially the amortization of the Notes shall be accelerated, all as set forth in the Indenture.
Section 5.03 — Cumulative Remedies
All rights and remedies of the Trustee under this Guaranty are cumulative and not exclusive of any other rights or remedies available to the Trustee under any other Transaction Document, at law, or in equity. No single or partial exercise by the Trustee of any right, power, or remedy hereunder shall preclude any other or further exercise thereof, or the exercise of any other right, power, or remedy. No delay or failure by the Trustee in exercising any right, power, or remedy hereunder shall operate as a waiver thereof.
ARTICLE VI — LIMITATION ON LIABILITY; NO RECOURSE
Section 6.01 — Limitation on Guarantor's Liability
The Guarantor's liability under this Guaranty is limited solely to the Guaranteed Obligations as defined in and described in Section 2.01 hereof. Nothing in this Guaranty shall be construed to make the Guarantor liable for the payment of principal of, premium (if any) on, or interest on the Notes or any other amounts payable by the Issuer under the Indenture or any other Transaction Document, except to the extent that such amounts arise from QPF's failure to perform the Guaranteed Obligations. This Guaranty is a performance guaranty and not a payment guaranty for the Notes. The Guarantor shall not be deemed to be a co-issuer of the Notes, and no recourse shall be had against the Guarantor for the payment of the Notes or any other indebtedness of the Issuer.
Section 6.02 — No Recourse to SPV Entities
The Trustee and the Noteholders shall have no recourse under this Guaranty to the Issuer (Quorum Receivables Funding 2022-1 LLC) or to QRH (Quorum Receivables Holding LLC), or to any of their respective assets, properties, or revenues. Recourse under this Guaranty is solely to the Guarantor and its assets, and the Trustee and the Noteholders shall look only to the Guarantor for performance of the Guaranteed Obligations hereunder. This Section 6.02 is intended to preserve the bankruptcy remoteness of the Issuer and QRH, and shall be interpreted and applied in a manner consistent with such intent. Nothing in this Guaranty shall be construed to create any substantive consolidation of the assets, liabilities, or operations of the Guarantor with those of the Issuer or QRH.
ARTICLE VII — MISCELLANEOUS
Section 7.01 — Notices
All notices, demands, requests, consents, approvals, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand or by personal delivery, (b) one (1) Business Day after being sent by nationally recognized overnight courier service (with proof of delivery requested), or (c) three (3) Business Days after being sent by certified or registered mail, return receipt requested, postage prepaid, in each case addressed as follows (or to such other address as a party may designate by written notice given in accordance with this Section):
If to the Guarantor:
Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, Connecticut 06901
Attention: Nolan Whitford, General Counsel